realonomics

The title industry has long opted to sell directly to intermediate influencers while ignoring end users. The industry incorrectly assumes it’s product to be information. The misconception was spawned by an inexplicable affinity to remain physically and emotionally distant from consumers. The title industry, in fact, sells only credibility and the absence of consumer-centric title models proves that this nuance is not generally perceived.

The arcane concept known as reverse competition has created tiers of imbalances within markets as well as structural inadequacies within the industry itself. The greatest of these issues: The title industry and the consumer know very little about the other. In markets with expectations of honest and continuous business chatter, the self imposed seclusion of the title industry has fueled a public suspicion of skeletons in the closet. The paradox: a retail industry of the store front variety that has never met its customer.

Brick-n-Mortar Mentality

The contemporary model encouraging title company ownership by real estate companies will soon face economic challenges. Income streams produced by internally processed title orders will lose velocity when confronted with heightened scrutiny by consumers and governmental agencies.

The lucrative profits currently used to finance a “brick and mortar mentality” among corporate executives are also needed to lubricate a false sense of security and high percentage commission splits for real estate agents. As the model’s machinations de-accelerate, effective and appropriate business models will elude the title industry’s grasp due to the anonymity of the consumer.

2007 promises to be a deconstruct fest for the underlying tenets of an industry lacking definitive form, function, and identity. Title companies have complacently assumed every transactional role imaginable to appease influencers while ignoring consumer expectations. To date, all “things” title related in public perception have been filtered through the needs and whims of the real estate community. A possible tool for the title industry to employ when creating a need-based identity is the negative database currently popular among brand managers. Essentially a database is developed listing everything that a product or service is not. The remaining elements are sifted and extracted to present a model based on the emotional and functional needs of end users.

A Consumer-Centric Axis

During the past several months, a number of title insurers have severed loyalty connects to title agents by introducing consumer directed products. The bold move indicates a possible desire by oligopolistic title insurers to adopt models similar to those used pre-1960 before title agents existed on an appreciable scale. The only safe assumption is the uncertainty of the consumer’s cerebral response when ultimately introduced to the title industry.

Future discussions of title related business models will embrace the following posits:

• Traditionally stable real estate markets are now subverted by unpredictability due to the consumers’ desire for constant communication.
• Business communication = personal communication = advantaged consumers. Corporate culture has no boundaries.
• Real estate markets are not local.
• At present, transparency does not exist in title insurance markets.
• Future real estate models will closely resemble asset management models. The concept, first pioneered in REO markets, will have application globally when consumers lose confidence in housing value sustainability.
• The future role of the title industry in real estate markets will contain organic elements of transaction management.
• Title insurers and title agents are now distinctly separate groups competing against each other for the consumer’s attention.
• Title insurers have a financial and technological advantage over every other player in real estate markets.
• The consumer’s true perception of an enhanced closing experience has yet to be explored.

I would like to express my appreciation for the invitation to contribute to REALonomics. It struck as me as a place where writers and readers could challenge themselves and each other. My future posts will explore the importance of the credibility factor in real estate models, markets, and strategies.

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