The $638 Million Reason to Choose Your Title Company Wisely
Every day a property sits unrenovated may cut into a fix & flip investor’s potential profits. But in the rush to close deals quickly, are you giving enough thought to a fundamental component of every transaction – the title company? This often-overlooked aspect can significantly impact your long-term success.
The title landscape has seen a surge of innovation in recent years. While innovation is welcome, it's crucial to look beyond headlines that seem too good to be true. The real value of a title company lies in its ability to help protect your investments when things go sideways – and in real estate, they often do.
Consider this: According to the American Land Title Association (ALTA), title insurance companies paid out over $638 million in claims in 2023 alone. This staggering amount highlights the importance of choosing an experienced title company.
Emerging title companies touting advanced technology may lack the experience typically gained only with years of claims management exposure. The financial stability of your title provider may also be a large factor in their ability to honor commitments and protect your investment if title issues arise.
So, what should real estate investors look for in a title company? Here are several factors to consider:
- Financial Stability: Consider whether a title company is backed by a strong parent company or with a proven track record of financial health. This may indicate adequate resources to continue operations even in challenging times.
- Claims Experience: A reputable title underwriter would not search for reasons to deny valid claims or pursue curative litigation that is unlikely to succeed in order to delay a payment obligation. Instead, they should stand behind their policies and promptly accept claims when warranted.
- Customer Service: Responsive, knowledgeable customer service can make all the difference when navigating complex transactions or addressing title issues.
- Potential Cost Savings: Competitive rates, bundled services, and efficiency may offer potential savings.
- Transparent Fee Structures: Unexpected closing costs may reduce your expected profits, especially when flipping properties. Look for clear, upfront pricing.
- Widespread Availability: Using the same providers in various markets can help provide a more seamless experience during closing.
- Underwriting Knowledge: Experienced underwriters can spot potential issues before they become problems, helping to save you time and headaches down the line.
- Technology Balance: While technology can streamline processes, it should complement, not replace, a human counterpart. Look for companies that leverage tech wisely without sacrificing the personal touch.
- Culture of Compliance: Reputable title companies are fully licensed and strive to maintain a culture of compliance with all applicable state and federal regulations.