Whether you believe the worst market conditions are now behind us or that the coming months will remain turbulent, there’s no doubt that title related businesses will need a combination of thrift, ingenuity, innovation and persistence to be successful for the foreseeable future.
And yet, it’s during times just like these that tomorrow’s leaders and success stories often emerge. More often than not, the small firms that become big, or the mid-cap businesses that eventually make a public offering, can explain their growth by using a new technology, business model or even product in a way that not only differentiates them during market turbulence, but positions them for sustainable success when the tide turns.
While settlement services businesses are somewhat hamstrung when it comes to introducing new products or pricing, there’s still a lot of room for growth and innovation in the title industry. Fannie Mae forecasts $1.6 trillion in origination volume this year. While that’s nowhere near the over $4 trillion in origination volume we experienced in 2021, it still signals ample opportunity for the firms willing and able to find it while separating themselves from their competitors.
Don’t grow the geographic footprint alone
One tried and true strategy for title businesses that are seeking to build revenue when order counts slip is growth. Because the title and settlement services business is closely regulated at the local level, a title firm needs to have some kind of presence or capability within the geographic footprint it serves.
Accordingly, title businesses may seek to cover more territory — preferably in a cost-effective manner — to increase their own revenue during times when origination volume declines. There are a number of ways by which they can do this, including affiliated arrangements, work share agreements or even less formal forms of partnership.
That said, simply entering a new market takes more than a new office and a marketing campaign. This is especially true if the growing title firm has little experience in the new footprint. It might be one thing for a title agent to add a few new counties in its home state, or some just across the state line. But it’s another matter entirely when a title businesses seeks to expand into multiple states or even “go national.”
Perhaps the most important element of building a growth strategy is compliance. Compliance isn’t a topic most owners approach with enthusiasm. It can be expensive, and if the approach fails, serious and expensive consequences can occur.
But the patchwork of state, county and municipal requirements — in addition to federal rules and regulations — demands that a growing firm have access to an attorney or legal resources deeply familiar with the industry, as well as the region in which that firm intends to grow.
As is usually the case in market cycles similar to this, it seems Realtors, lenders and title agencies are scrambling to form new joint ventures or affiliated arrangements on a daily basis. This can be a profitable strategy.
But far too often, these JVs are formed without enough effort in determining what’s required — not only to stay compliant, but to be cost-effective. Additionally, JVs are garnering increasing regulatory scrutiny as their number (and the number of improper ventures) grows.
If you’re seeking to build or join an affiliated arrangement, be sure your resources are familiar with the sometimes unclear requirements for a compliant venture. Cutting corners is not an option. Start by squaring away expert compliance resources.
Expand your service offerings, but do it the right way
New lines of business and the appropriate marketing to announce them are another great way for title firms to grow revenue in down cycles. Title firms are, of course, limited in the type of transactions they can perform.
However, a title agency that lacks a commercial real estate capability, or which relied primarily on refinance volume in years past, has the option of growing. Again, just hanging out a shingle — especially for commercial closings — won’t get it done.
The old saying that one has to spend money to make money is particularly true when a title firm seeks to grow its service offerings. This cannot be a temporary initiative, although far too often we’ve seen agents start to offer things like REO services, only to be outdone by their lack of planning and expertise.
Growing new lines of business is not a quick-fix approach — not if it’s to be sustainable. Again, it’s important to invest in compliance resources as well as deep expertise from within the service area to even begin to formulate a solid strategy. Many times, a well-regarded veteran from the new area of expertise can be a good place to start, and they likely have a number of strong relationships that can give the new division a boost when its launched. These kinds of resources don’t come cheaply, however.
That’s why title firms seeking to grow their service offerings should also take a good, hard look at their own operations and workflow.
Have you “automated everything automatable” yet? Do your various technologies work seamlessly, or do you still have too many staffers spending far too much time doing things like data entry or stare-and-compare tasks?
Similarly, does your existing technology match what is needed in the new service offering? Will it work well with your new clients in that market segment? The answers to these questions will invariably play a major role in how well your new offering performs.
Get the message out
As in industry, we talk a lot about marketing. Far more often than not, however, we mean “sales” or “development” when we say it. Both sales and marketing are necessary, especially when looking to establish a new geographic presence or service offering.
It’s best not to delegate these tasks to people with other roles in the business. Not all experienced sales executives are good marketers and vice versa. And even a great marketer can’t build great marketing if they’re also constantly attending closings, managing a team of escrow assistants or performing other tasks unrelated to marketing.
It’s worthwhile to make the investment, whether using or hiring internal resources or bringing in outside experts.
As to the form your marketing should take, that’s really a secondary question. In today’s world, it’s important to have a crystal clear message that accurately describes what you offer and why it stands out from other offerings. This will usually need to be conveyed through numerous methods — social media, direct email marketing, public relations, conference attendance and digital marketing — to stand out from all of the other messaging your prospects are deluged by on a daily basis.
But it’s the messaging and how it resonates with your target market that will ultimately determine whether or not your prospects learn that you’re now in their market or offer commercial real estate, or whether they move on to your competitor.
We’ll eventually be talking about a market spike — be it in refinance or purchase transactions. All down cycles come to an end.
However, we’ll probably also be talking about some new names when we talk about who’s the most successful in our industry. Some of those names might even be old names that have found new ways to reach the next level.
Now is the time to position your firm for the next up cycle. But it starts with how much time and investment you are willing to make in order to make it happen.
Scott Kriss founded Kriss Law/Atlantic Closing & Escrow in 2008. He quickly grew the full service title and settlement services firm into a national provider. Today, Kriss Law/Atlantic Closing & Escrow is licensed in 30 states and partners with mortgage lenders of all sizes, nationwide.
