How many times has someone asked me, “don’t you want to sell me a piece of the Title Company.” This question is asked to me because, together with a person a whole lot more competent to run a title company than I, I own Old South Land Title Company in Niceville and Shalimar. The question is always asked by someone in some field of the real estate business, and always with the theory that they control a whole lot of referrals, and if I would just sell some portion of the business, they would refer all of their business to me. I’d have more business, they would have a return off of “our” business, and we would both make more money. If that is true, why am I not falling all over myself to take in “investors” all of whom control some portion of the referral market?
The answer involves what we all do for a living. Title insurance companies and closing agents are fiduciary officers who have their own distinct responsibilities which, just like real estate agents and mortgage brokers, not everyone is either licensed to do or capable of fulfilling. With those responsibilities come liabilities which go far beyond the amounts of title insurance written in a transaction. If that liability pervades my business, why would another professional want to create a relationship that is nothing more than an invitation to share in my liability?
Wherever there is responsibility, there is liability. That’s exactly the way the law is structured, and for all the obvious reasons. If all of us, including real estate brokers, mortgage brokers, banks, and others involved in the real estate industry have liability for their actions and conduct, why would I form some sort of joint venture by which I would share in their liability?
The problem is worse than that. Because the affected parties will know of our “partnership”, if something goes wrong the perception will be that we colluded to protect our mutual (though disproportionate) benefit from the closing. The very opportunity to do so creates the suspicion that we did. With a business arrangement between closing agent and realtor, (or mortgage broker, banker, developer, etc.) the very moment a buyer finds a termite, an undisclosed easement or any other thing he thinks should have been revealed, his claim becomes a conspiracy theory that ties us both together, even if we were not both responsible.
Every closing agent makes honest mistakes, and sometimes other mistakes as well. We have all known closing agents who left town with somebody else’s money or who just makes stupendous mistakes at somebody’s expense. In a traditional business relationship, we in the closing industry are independent contractors whose liability is a constant concern of our own, but not generally of those for whom we do our work. The very instant we combine forces, the “independent contractor” defense disappears for both of us.
One final thing ought to be said about the subject. I have never had a mortgage company, bank, or real estate agent come to me with a message like, “we should own a part of your business so we can provide a better service to the customer”, or, “so we can do it cheaper”. In fact, we all know that’s not likely. Instead, the express arrangement would be to charge closing costs such that we both benefit. Obviously neither quality of service, cost to the consumer, nor professionalism, would be the driving force behind the choice of a closing agent.
We all know that the security of a disciplined real estate closing benefits the public. Our financial independence also serves all of us who benefit from the industry.