#CRE – A whole different world of title insurance!

When I was in private practice I would usually end up getting a nice contingency plaintiff’s case every year or two. That was not my primary practice emphasis area but it made for a very nice payday compared to routine hourly work. As I shifted more to a real estate practice and opened a title insurance agency, I realized handling a commercial real estate (#CRE) deal had similar characteristics to the contingency case as to the payout as well as the frequency (unfortunately).

For a title agent that does a great job with residential closings, it can be a shock to the system to take on a commercial deal. Just as you might sail through a routine closing with one hand tied behind your back and blindfolded, #CRE can require near-constant attention start to finish and you are providing a lot of TLC to make the deal work.

So where do you get these great commercial deals? In my experience it is either from your existing book of business and local clients or as a referral from a national office of your title insurance underwriter. There are some common elements of these large, commercial transactions. Mastering this “art of the deal” can create repeat business – which is the best business.

For starters, this #CRE deal is the only deal you’re working on (in the minds of the customer) and they will expect to be treated that way. It’s like when I started doing closings and realized I could no longer allow myself to be on a list for low-paying court-appointed hourly work where I had to be at the beck and call of a clerk assigning me to a random case. The higher-paying work takes precedence sometimes. It will be well worth your while to “drop everything” and deal with anything that comes up in #CRE. This can be from a simple phone call to an e-mail, or a whole string of e-mails that may seem unimportant to you but are very important to the person who sent it. Because these commercial projects tend to be national in scope it may be that you are the only person on the ground that can accomplish something very important for the file, such as visiting the courthouse or inspecting a site in person, or contributing what you know that is off-record about the “lay of the land.” That comes with a lot of power but also a lot of responsibility. Act diligently to convey what you are able; and if you aren’t able to respond quickly always explain why and indicate when you can do it. Staffing it out may also not always be the best answer either (unless your staff is smarter than you, as was my case usually!).

Another national issue is that #CRE can have deals going in more than one state as part of a multi-site deal. The customer may get you confused with someone else or may confuse the law of another state with that of Mississippi. Just courteously remind them when Mississippi is different or explain how it is done locally to get them back on course. Always remember to show them that southern hospitality!

Usually, there will be immediate expectations when an order is placed. Premium and fee quotes, confirmation of due dates, and your file number to name a few. They will be very impressed when you turn small stuff like this around quickly. It proves how much you value their business. Of course, it’s entirely possible you don’t have enough information to begin your work; tell them immediately. Sometimes there will be multiple layers of contacts that must be coordinated to get data. And it may be that you never speak to the actual “customer.” That’s just part of it. Whenever you e-mail be sure to put their file number in the subject line also (if it’s different than yours).

Now it’s time to talk real title. This is where the details really become important. Likely you will forward your commitment and first invoice to the customer. That will either be met swiftly with an “objection letter” detailing all the ways they think your work is wrong, stating emphatically they will not comply with certain requirements, and disputing certain of your very reasonable exceptions; or an email exasperated that you would publish such a ghastly title product! Never fear; this is normal. BIG LAW firms representing #CRE clients always send these title objection letters. And don’t feel like the lone ranger; surveyors are thrown in for good measure with objections on their work product too!

This is where you really have a chance to work your craft. If they ask for a requirement or exception to be removed without furnishing the proper documentation, explain in detail what you need in order to do that. We don’t write letters a lot in the title industry so it’s perfectly acceptable (and likely friendlier) to pick up the phone and call your customer contact on the file to go over things. If they are still pushing back on what you are discussing, just deflect and move on to the next issue or promise to review and circle back. In the meantime, talk to your state underwriting counsel to see what authority might be available to meet the #CRE needs. If you are asked to handle curative matters – zoning letters, assessment letters, special affidavits, etc. – let them know you can do it for an additional fee. They expect this and you’re leaving money on the table if you don’t charge extra. And for goodness sake, never tell them “we don’t do that.” If you truly do not have the capability or capacity, then let them know who can perform the task. Nothing screams poor service louder than “we don’t do that.”

A common misunderstanding arises when the customer or referring office requests a WORD version of your commitment or legal description. Typically it will be acceptable to do this among commonly-branded title insurance offices. Consult your state counsel if you have questions or for confirmation.

One of the things that I was not familiar with back in the day when I first looked at a #CRE title transaction was the idea of a Pro Forma Policy. Different than a Commitment or a Marked Commitment for Closing, a Pro Forma Policy is issued with no signatures, no dates, and in some cases no Amount of Insurance, but reflecting a full copy with jacket, schedules, and endorsements of what the final title insurance policy would look like if all requirements are met. Be careful to print standard underwriter-required disclaimers on every single page of the Pro Forma Policy so there is no mistake about whether it is a binding policy. Moreover, when you issue a Pro Forma counsel for the customer will prior to closing attach the final, agreed Pro Forma to a closing instruction letter that you may be expected to sign stating you are irrevocably bound to issue a policy just like the pro forma. So, even with our disclaimers, you may be unintentionally overriding it. Point being, if you sign such a letter, then you better make sure the requirements are met.  

As Matlock would say, “there is the matter of my fee…” Since Mississippi does not have filed premium rates, some customers will use that as a bargaining tool to get a lower price on their title insurance. That’s not uncommon or disallowed. But don’t cheat yourself. Always start with the published rates of your Insurer and consult your state underwriter management to determine the right pricing. Also, remember if you are not able to get the premium you’d prefer there may be legal fees, search fees, and other hard costs that you can earn or pass along. But the scale is everything so usually the deal will still make for a nice payday. And let’s remember, we do this to feed our families.

If you don’t have commercial business but want it and can handle it, let your state office know. By understanding and following the dynamics discussed here, it should make for a pleasant experience in #CRE and establish your reputation to gain that good, repeat business. I love #CRE title world and would love to hear your stories about working on commercial transactions!