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What Realtors Don't Know About Opening Their Own Title Company

everybody wait vander waal I'm here

dc:title guide today's video I want to

talk about what Realtors don't know

about opening their own title company so

I don't see this a lot of the field go

on occasion they do I'll meet with the

team and or I'll follow up with somebody

they'll say hey wait I love all the

services love what you're talking about

but you know what we're just gonna open

our own title company meaning we're

gonna bypass you we don't need you and

we're gonna go start our own title

company because it's so easy and we're

just gonna make it rain with cash on top

of us helping people buy and sell houses

we're going to just keep that money for

ourselves we don't need you thank you

very much there could be some issues to

that okay it's not that simple

if it was that easy everyone would have

a title company every real estate

company would have their own title

company there'd be much more title

companies that there that there are and

everyone would want to jump in and get

all his cash okay it's not all sunshine

and rainbows yes we make money that's

our jobs but also there's issues there

because we are an insurance company we

sell insurance we are in the risk

business so if you're a real estate

agent or have a team and you want to

open your own title company just

remember you're entering the insurance

risk business okay so you can make money

you can also lose money understand too

that you have to go find an underwriter

somebody who actually will take you on

and underwrite your title policies

because you're just a settlement agent

and it's not going to be one of the big

boys like Stewart or first American or

fidelity because you're not big enough

of a company and proven to them yet that

they would actually take you on and and

assume your risk okay you're going to

get probably a second tier underwriter

so take you on and you're gonna have to

go from there also you gotta have a

bunch of money the bank okay to start to

have a company of no money you gotta let

me know you have reserves to pay claims

okay again you're the insurance business

so hopefully you have a bunch of money

set aside from your real estate company

to pay those claims okay you also need

to hire good abstractors what's an

abstract or abstract or somebody who had

does all the grunt work in the back they

search the do the sixty year title

searches and they are the ones that give

us the the clear title that say hey you

know what we did the work and it looks

like everything is good to go here you

can issue the commitment to the buyer

and let them know that closing we're

going to provide them with a title

Sherman's policy letting them know they

have clear title to their house so you

know these are people you don't see but

that's a lot of work that they do if you

don't hire good abstractors they might

miss stuff okay and if they miss stuff

liens judgments other issues on the

title that that could turn into again

title claims that you have to pay right

which is a big problem so if you want to

share in on the profits you also have to

be willing to share in on the losses as

well so I wrote a blog up a couple month

ago about a deal we had in March where

the seller was selling a home and there

was a sixty thousand dollar judgment on

the title it wasn't the seller it was a

seller before the seller but when the

guy bought the house they missed it and

there was a sixty eight thousand dollars

how to claim right there for one of our

competitors they had to pay it it was a

complete claim so imagine your real

estate business all of a sudden out of

nowhere you don't know anything

oh your abstract or miss something

titles being transferred all of a sudden

you get hit with a sixty eight thousand

dollar bill what are you gonna do right

what if wire fraud which is a huge part

a huge thing in our business right now

your sellers proceeds are wired away to

a faulty account that could be a hundred

thousand could be $400,000 dollars now

you're on the hook for that you're gonna

get suit you gotta pay it you know do

you have the cash reserves to do so so

think about all these moving parts if

you're really good at selling real

estate that's great but do you want to

jump into the risk business you know and

take on all that liability so the last

thing I want to talk about is are you

really neutral so a title company we are

a neutral disinterested third party in a

real estate transaction we don't

represent the buyer the seller or

buyer's agent listing agent we represent

the contract of sale okay so if you are

an agent and you work for a real estate

team and you have a buyer they go around

they go there write an offer and they

want to ratify in a house and the

listing agent knows that you work for

this real estate company and you're

sending it to the title company that the

real estate team owns could you really

be neutral right what if there's an

earnest-money dispute what if there's a

contract dispute what if there's a

closing dispute what if somebody doesn't

want to close

you know whose side are you on right the

listing agent it's not gonna think

they're gonna get a fair shake and that

and if you're in multiple offer

situations even if you have the highest

and best offer the listing agent might

not want to take your offer knowing that

they're bought the third that they're

going to a title company owned by the

real estate company okay so think about

that that could be an issue as well so

you know at the end of the day I'm not

trying to tell you not to do that I just

want to make you aware that it's not

just hey let's open a title company

because we're gonna just make it rain

and we're gonna make all this extra

money because there are things you need

to be aware of you gotta find an

underwriter you have to have cash in the

bank you have to have good abstractors

you have to be willing to share on the

profits and the losses and pay claims

when a claim comes up and generally when

a claim comes up at a title it's not 100

bucks it's in the thousands generally

okay and also figure that could it

affect your real estate business if

you're not really neutral so that's my

take today on opening your own title

company if you have any questions feel

free to reach out to me four eight zero

two zero three six four five to fill out

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day