Why Every Agent Should Refer Their Clients To An Independent Title Company: Part 1

Guest contribution written by Alex Craig, a real estate agent based in Lansing, Mich.

Affiliated business arrangements and joint ventures are all too common in our industry.

Specifically, it seems like every real estate broker — from small independent ma-and-pa shops to nationally recognized franchisees, like Coldwell Banker or Century 21 — are partnering with a title agency in an effort to drive more money to the bottom line, or profit.

If you’re unfamiliar with this business idea, it’s where two companies partner together and exchange benefits. The most common case is where a title company becomes the “recommended title company” to every agent in a brokerage. In return, the broker is given a share of the profit distribution — through a form of ownership.

The title company is often sold to agents and consumers as a one-stop shop solution. They are sold as being beneficial. It seems like everyone is doing them, so it must be a good idea, right?

Wrong…

In this series I am going to explore 3 reasons why every real estate agent needs to stop blindly using the joint-venture-title company their broker is associated with, and why an agent needs to do their own research to find the best title company for their clients.

Ideally, it’s one without any joint venture or affiliated business arrangements. These title companies are often called independent title agencies.

• You Agreed to a Code of Ethics
• Anything But Independent is Anti-Consumer
• Superior Customer Service and Products

You Agreed to a Code Of Ethics

I remember watching the movie, The Lorax, when it first came out. One of the biggest lessons I took from the movie was just because you can, doesn’t mean you should.

Let me repeat that important point: Just because you can, doesn’t mean you should.

While it’s 100-percent legal for real estate brokers to create affiliated business arrangements with title companies, as long as they follow certain guidelines laid out by RESPA laws, it doesn’t mean that they should.

When we agreed to become Realtors®, we agreed to a certain code of ethics. In the Preamble of the Realtor’s Code of Ethics, it states:

“Such interests impose obligations beyond those of ordinary commerce. They impose grave social responsibility and a patriotic duty to which REALTORS® should dedicate themselves, and for which they should be diligent in preparing themselves. REALTORS®, therefore, are zealous to maintain and improve the standards of their calling and share with their fellow REALTORS® a common responsibility for its integrity and honor.”

I had to write these articles because I see it as my “grave social responsibility.”

I have a need to share with my fellow Realtors® a higher definition of integrity and honor. I want every agent to accept a new ethical standard in our industry. A better standard.

Look, we all know the market has a bad image of real estate agents. They think we are sharks. Sales people. Money hungry. In it for the paycheck. The list goes on about how terrible we are.

If only people really knew how difficult it was to be an agent.

Here we have the opportunity to change the public’s perception. It’s by upholding our Code of Ethics to a higher standard.

The National Association of Realtors wrote this in their 2019 Code of Ethics:

The term REALTOR® has come to connote competency, fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in business relations. No inducement of profit and no instruction from clients ever can justify departure from this ideal.

Being a Realtor® means you’re being fair, you have high integrity, and you’re competent. All of this is built from a lofty ideal of moral conduct.

Unfortunately, I don’t think the term Realtor® has come to mean competency, fairness, and high integrity. At least not in the eyes of the public. They still think we’re evil, in part, because we have been induced by profit.

Want to know what created more joint ventures? The economy tanked. In an effort to fatten the bottom line and be around next season, many brokers banded together with title agencies.

Brokers were induced by the thought of profits. An action that is stated to be against NAR’s Code of Ethics.

When each of us became a Realtor®, we agreed to live out these Code of Ethics. So, how can a Realtor®, for example, who has pledged to represent the best interests of his homebuyer, at the same time refer that homebuyer to a title company because of a pre-existing agreement stating the title company will share a portion of its profit with the referring agent’s company?

These kinds of relationships are damaging to the credibility and image of a Realtor®. They makes us look like we are profit-hungry.

I’m always cautious to argue on moral grounds, so in the next installments of my series, I will give more reasons why you should refer your clients to an independent title agency.

• Anything But Independent is Anti-Consumer
• Superior Customer Service and Products