Title Insurance Competitive Commodity

November 18, 2005
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GRAND RAPIDS — On a tour of Sun Title’s recently renovated headquarters it becomes apparent that the business of title insurance is in the midst of a cultural shift.

The historic brick building was honored by the Neighborhood Business Alliance at its annual award ceremony last month for Best Interior Renovation. There is a space set aside for SpongeBob SquarePants and video games, directly in front of the full-glass wall of an adjacent conference room. It’s routed with Wi-Fi Internet for all visitors, has ample parking and a cooler of beer in the lobby.

By all respects — with the exception of the title and escrow service itself — it seems the 1410 Plainfield Ave. NE site has more in common with a hair salon than the real estate closing process.

“Usually, when you close a deal, you go to a 1,000-square-foot suite in a strip mall somewhere, and you sign everything in a white-walled conference room,” said Sun Title CEO Thomas Cronkright II. “The closing is an afterthought. Most people don’t even remember it. We thought, ‘What about asking for a different experience?’”

Cronkright and his partner, President Lawrence Duthler, are both practicing attorneys — Cronkright at Corporate Advisors PLC, and Duthler at Warner Norcross & Judd LLP. Through their legal work, the two became familiar with the title insurance market, and spotted an opportunity.

During the refinance boom, Realtors and lenders were happy just to close. There was more than enough work to go around, and a number of start-ups launched to take advantage of the market.

When the two law school classmates were considering entering the market, however, the boom was already at its tail end. As far back as January 2004, Mortgage Banking magazine was already reporting that order counts had dropped 40 percent over the prior year, with title insurers citing revenue decreases of up to 60 percent.

“A lot of people would say we’re crazy for starting a company right now,” Duthler said. “This is an extremely crowded market, but one where many companies aren’t used to competing for business. We’re taking advantage of that.”

All title companies are required to file rates with the state insurance commissioner; as such, the rates are virtually identical. Title companies are left to compete on service — and relationships become all important. In their practices, Cronkright and Duthler built relationships with many potential clients, but know they will only get one shot to forge a working relationship.

“We’re not looking to displace other companies,” Cronkright said. “But if your title company isn’t able to service you, we want to be your first choice.”

Each company has its own shtick. Most will close anywhere at anytime, whether hosting a client with children in tow or on the hood of a car during a third-shift lunch break. If a client needs to close in 24 hours, he will.

“With the refinance business dropping off, we’re all competing for a somewhat smaller pool of business,” said Jessica Back of Chicago Title. “We’ve become a completely service-driven industry.”

Chicago Title provides clients with ancillary products, including marketing materials, computer software and discounted rates with vendors such as Fed-Ex and Nextel. LandAmerica provides supplies to survey engineering companies.

“It gives you a deeper penetration into that office for transactions when they do close,” said Thomas Host, vice president of LandAmerica in Grand Rapids. He noted the cutthroat market for qualified professionals in the title industry. LandAmerica has a dedicated commercial department, he said, staffed by its most seasoned, senior employees.

“When they’re working to get their projects onto the market, they know we have a class-act operation,” Host said.

David Kuritar, president and CEO of Unified Solutions Group LLC, prides his company on not only its exhaustive support services, but also its social responsibility.

“I believe in the American dream,” he said. “Competition is good. Competition will keep service at a high level, cost at a minimum. But there are a preponderance of title companies affiliated with real estate firms, lenders, builders — it will be really interesting to see what happens over the next few years.”

His former employer of a decade ago, First American subsidiary Metropolitan Title, was recently fined $150,000 for kickbacks to Realtors in Michigan.

“There is a gray area in the law now, and it’ll be interesting to see how it turns out,” Kuritar said.

Also, his company is locally owned and operated, and he has vowed not to send any of its 80 jobs overseas.

The two largest title brands in West Michigan, LandAmerica and First American, have a joint venture in the Philippines for that purpose.

“As a cost savings measure, many companies have outsourced (work) to companies that have outsourced all over the world,” Host said. “It’s purely a matter of cost.”

Currently LandAmerica has outsourced only components of its title research overseas, primarily data entry work. First American has escrow packages generated there.

“They used to have employees right here in town, and it’s now all being done in the Philippines and India,” Kuritar said. “I’m surprised more people aren’t concerned with buying local in this industry (real estate). … We think of off-shoring as only hurting manufacturing …” 

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