FEATURE ARTICLE, SEPTEMBER 2008
THE CHANGING FACE OF TITLE INSURANCE
Title insurance in today’s market. Eli Cohen
In today’s increasingly competitive economic climate, it is to be expected that commercial real estate buyers are looking for a way to save money in their transactions. This is where the role of title insurer becomes essential to streamline the process of the transaction. While title insurance is a prerequisite for any deal, many prospective buyers wonder, ‘What am I paying for and which provider is best suited for me?’ While chain stores and venture capital groups in particular make up a large part of our business, our clients also include smaller developers and attorneys.
The value of title insurance is revealed through due diligence. The more careful a person is with their due diligence, the more likely the transaction will be completed in a timely fashion. More importantly, the current economic climate makes unfortunate events such as bankruptcy more likely. If the buyer and attorney, with the help of a title company, make wise decisions at the beginning of the transaction, they will avoid reaping the unintended consequences that may result from the failures of other parties involved in the deal.
The typical role of a title agent is to act as the middle party in all transactions; ultimately, we bear the responsibility for the outcome of the transaction. The best strategy is to be responsive and in constant communication with all parties, as well as willing to provide a gentle nudge when necessary to expedite the process for all parties involved.
Lately, title insurers have had to become increasingly flexible in their daily roles and more actively involved in the transactional sides of deals. In fact, we are almost becoming a title insurer, consultant, and broker all rolled into one. As with all real estate professionals, we understand that the market is cyclical, and we must roll with the changes to survive. Today, insurers must add value to their already extensive resources and consistently offer sound advice to navigate the various local real estate customs and regulations that can become costly hang-ups in commercial deals.
So how does one choose a title insurer that is best adapted for their needs? One increasing trend is a local residential realtor or broker specializing in short sales seeking a title insurer. They would be best served by using their neighborhood title insurance agency. However, a real estate attorney, developer or general counsel for a larger company that completes mostly commercial or large, national transactions will need a title provider who has more resources and is knowledgeable about many states.
To become more involved in the transactional side, insurers should try to assume a consultative role for their clients that goes beyond transactions and helps them with their day-to-day operations. Examples of these everyday needs include understanding the client’s business and assisting with strategy, proposals and requests for information, as well as making sure they stay ahead of industry trends and sharing helpful intelligence and information. If there is a way to make introductions among clients and serve as the point of origin for a deal, then I would consider that a success.
A common rule of thumb to keep in mind is that for the most part, no two states are identical in its rules. This also applies to the pricing and availability of endorsements. There are many other quirks concerning land records, jurisdictional matters, and so on. No two deals are alike, so a well-informed buyer or seller has the best chance for a smooth transaction.
Buyers and sellers involved in large, national transactions need to remember that title insurance rates and regulations vary widely from state to state, which can get complicated without the aid of a professional. For example, in certain states such as Pennsylvania or New Jersey, premium rates are filed and non-negotiable, while other states allow for more wiggle room. When buying an asset from another state you want someone on the ground there with expertise.
A preferred title insurance firm is more technologically advanced and tends to be the trendsetter in the marketplace. First American Title Insurance is the leading provider of business information and few real estate transactions in the country occur without our involvement in some capacity, as we also underwrite a number of smaller title companies. We currently have an office in every city and a strong international presence, so I am confident in saying that we offer the best product and service available.
Here at First American, we are able to successfully complete a transaction from start to finish using little to no paper, other than the instruments of recording. The title report and underlying documents can be posted on a secure, shared web site in a matter of a few hours. Additionally, more counties are moving towards electronic filing, which speeds up the preliminary report, document requests and other types of data gathering. This is especially evident on the West Coast. There are also a number of tools that are available to us behind the scenes that link all First American Title Insurance offices, which greatly expedites the transaction process.
A successful title agent will be able connect the buyer/seller parties together, as well as guide the parties through all documents and regulations. At the end of the day, good old-fashioned underwriting is the bedrock of any effective title product.
Eli Cohen is a sales associate with First American Title Insurance Corp. office in Philadelphia.
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