Title Companies Diversify, Adopt ‘Plan B’ to Combat Market

[NJBIZ]

Title Companies Diversify, Adopt ‘Plan B’ to Combat Market
Industry Report: Title Companies
By Martin C. Daks
8/4/2008


As the pace of housing activity slows to a crawl, title companies—which validate and insure the ownership of real estate prior to a sale—are being hammered, says Leonard R. Rossetti, president of Fidelity Title Abstract in Cherry Hill.
“It’s tough to increase cash flow in this market,” says Rossetti, past president of the New Jersey Land Title Association based in Freehold. “Companies are carefully watching their overhead.”

Besides cutting costs through layoffs and attrition, some companies have adopted a “Plan B” to stay afloat during tough times.

At Direct Title & Closing Agency, an 18-employee company in Freehold, the volume of transactions is down about 70 percent compared to a boom period three years ago, according to Jacob S. Elkes, the company’s president and founder. So now, besides traditional title work, the company is training real estate agents to shepherd homeowners through the complicated short-sale process. In a short sale, a bank agrees to close out a mortgage for an amount that may be thousands of dollars below the face value of the debt.

“In previous downturns, when banks usually held the mortgages they had originated, a bank would be much more willing to work with homeowners who needed to sell their residence at a fire-sale price,” says Elkes.

Today, he says, many banks will not pre-negotiate a settlement amount with a defaulting borrower. Instead, the borrower must first put the house up for sale and get a written offer from a potential buyer. At that point the bank will decide if the offer is good enough.

“It scares some buyers off, since they have to spend hundreds of dollars for a home inspection without knowing if the bank will accept their offer,” he says. “We hold seminars that show real estate agents how to work with these new buyers, who may be looking to pay rock-bottom prices.”

Elkes does not charge for the training sessions, but says real estate agents who do close deals using his tactics are more likely to select his firm for the title search.

Other companies, like Toma Services in Lakewood, stay afloat by diversifying.

“Besides offering title services, we engage in real estate brokerage, commercial development and real-estate related tax services,” says Yehuda Ungar, chief operating officer of the company. He says Toma was spun off from a larger company in March and is helmed by his wife, Renee.

Ungar says a specialty of Toma’s real estate brokerage division involves matching clients in tax-free exchanges of similar properties. Known as 1031 exchanges, the transactions are named after the section of the Internal Revenue Code governing like-kind exchanges.

A seven-employee firm, Toma also works with clients to develop space, such as a retail and office strip mall in Lakewood that has a groundbreaking planned for June 2009. Ungar is also working with a client on a residential community in the Catskills region of New York.

“We service clients in a variety of ways,” says Ungar. “You may only need certain services, but we may be able to provide them to you in a synchronized fashion.”