Agency Today – A Magazine About Growth and Prosperity™

AGENCY

TODAY

Issue 6 | April 2017

A M AGA ZIN E A BOUT GROW TH A N D PROSPER IT Y

TM

STRATEGIC REVENUE GROWTH PLANNING PARTNERSHIPS AND EXCHANGES THREE REASONS TO REMAIN BULLISH ON HOUSING GIVE IT YOUR B.E.S.T.

AGENCY

TODAY A M AG A ZI N E A BOU T GROW T H A N D PROSPER I T Y

TM

Welcome Agency Today is a publication covering a broad range of topics focused exclusively on growing and strengthening

AGENCY

TODAY

Issue 6 | April 2017

A M AGA ZIN E A BOUT GROW TH A N D PROSPER IT Y

your title business. First American Title is committed to providing you valuable content, new ideas and access to the brightest minds in our business.

TM

STRATEGIC REVENUE GROWTH PLANNING PARTNERSHIPS AND EXCHANGES THREE REASONS TO REMAIN BULLISH ON HOUSING GIVE IT YOUR B.E.S.T.

It is my hope this magazine finds a home in your collection of reference materials. As your account representative, it is my commitment to not only help you resolve everyday challenges but to help you achieve new levels of success in your business.

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Agency Today | Issue 6

CONTENTS FROM THE EDITOR All of us at First American Title, thank you for your business and loyalty. It is with great pleasure we bring you this edition of Agency Today—A Magazine About Growth and Prosperity™ produced exclusively for policy-issuing agents of First American Title.

The focus of the magazine is to provide articles that help you “work on” your businesses rather than “work in” your businesses. We hope you enjoy this publication, but more importantly, we hope it provides value to further enhance your organization.

All the best,

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EXECUTIVE SPOTLIGHT

6

GIVE IT YOUR B.E.S.T.

8

HUDDLED MASSES

Andree Ranft, SVP, National Agency Division, First American Title

By: John Hollenbeck, NTP, EVP, First American Title

10

2017 STRATEGIC REVENUE GROWTH PLANNING

13

THREE REASONS TO REMAIN BULLISH ON HOUSING

14

TITLE AGENT TASKS THAT MAKE SENSE TO OUTSOURCE

17

NEW TWIST ON WIRE FRAUD

18

PARTNERSHIPS & EXCHANGES

20

THE TECHNOLOGY RELATIONSHIP

23

THE NEED FOR SPEED

24

AgentNet ® EXPRESS REMIT

27

STATE AGENCY OFFICES

28

USING SOCIAL MEDIA TO ENHANCE YOUR BUSINESS

By: Lou Pontani, SVP, Sales and Marketing, Agency Division, First American Title

By: Mark Fleming, Chief Economist, First American Financial Corporation

By: Prashant Kothari, Founder and CEO, String Real Estate Information Services

Louis Pontani SVP, SALES AND MARKETING AGENCY DIVISION

AGENCY TODAY STAFF EDITORIAL Louis Pontani EDITOR SVP, SALES & MARKETING

Lynn Lewis EDITOR/LEAD COPYWRITER

ART AND DESIGN Sheli Cordero DIRECTOR, MARKETING & COMMUNICATIONS GRAPHIC DESIGNER

Danielle Aguilar GRAPHIC DESIGNER

SMS ADVERTISING Elizabeth Sarber FAPRES/SMS

Agency Today – A Magazine About Growth and Prosperity™, published by First American Title Insurance Company.

First American appreciates the articles contributed by independent vendors and the statements contained therein are solely those of the vendor and are not attributable to First American.

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By: Michele A. Green, SVP, Senior Business Counsel, Agency Division, First American Title

By: Mary Kay Kennedy, National Operations Manager, First American Exchange Company

By: Randy Noll, VP, Finance, Agency Division, First American Title

By: Lou Pontani, SVP, Sales and Marketing, Agency Division, First American Title

AGENT SPOTLIGHTS

Bailey & Slotnick, PLLC Foundation Title and Escrow Series, LLC

Security 1st Title Grand River Abstract & Title Co.

Agency Today | Issue 6

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Executive Spotlight

Andree Ranft SVP, NATIONAL AGENCY DIVISION QQ What was your first job in the title industry, how did you get there and what were some of the biggest steps along the way?

A My first job right out of college was with a law firm, but my position was “made redundant,” and I found myself looking for work. I applied for a position advertised in the local newspaper and, to my relief, was hired to work in the claims department of Chicago Title in Tampa, Florida. I was married to an Air Force officer, and we grew accustomed to moving around the country quite a bit; this afforded me the opportunity to work in all sorts of jobs within the industry. My background included multi-state experience as a title examiner, closer, agency account representative, underwriter, builder division manager, direct manager and commercial manager. The perspective I gained from each of those positions gave me the tools I needed to manage a national agency group. I learned, from being asked to fix broken operations and successfully doing so, that sometimes one has to challenge the status quo to achieve a better end. This is not always popular or easy to do.

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Agency Today | Issue 6

QQ How does the National Agency Division overcome the challenges of maintaining effective business relationships and providing services to multi-state agents?

A The key is adjusting the approach to clients based on their individual needs and not asking them to adjust their business around our structure. We built the National Agency business model to support large multi-state agents, also known as national agents, as by and large they operate under a centralized title and closing model.

We created a niche region within the Company to reflect that model. There are cultural, regulatory and compliance differences with agents across the country, so we must be flexible enough to adapt to their specific needs.

QQ What resources did your team use to guide agents through the TILA-RESPA Integrated Disclosure (TRID) rule changes?

A National Agency used the training resources offered through the First American Eagle Academy ® TRID Hero program. Three individuals went through the program

and were actively involved in delivering insight and education to our agents across the country. Our three TRID Heroes were able to provide agents with answers to their questions about the new regulation using the Eagle Academy resources.

QQ Can you provide information about technological and operational advancements to help agents and their customers?

A We are constantly refining our strategies to enhance the level of service we provide to our agents. One area of focus is defining e-closing/e-notarization terminology and identifying acceptable underwriting practices for these types of transactions. Our agents are seeking approval to use electronic options for signatures, notarizations, recordings, and closings, as their lender clients are interested in moving forward with these new technology changes to improve customer service.

Back office production and Agency Solutions include: • Improving quality, price, and turn time of existing products • Increasing flexible, scalable capacity and improving the customizable full service offerings • Developing and leveraging existing technology to better monitor third-party vendors • Providing better order status reports to our agents and improving work-flow efficiency • Better integration between First American production systems and our agent platforms Other areas of focus include improving and expanding third-party integrations with AgentNet and adding the ability to view and pay Agency Solutions invoices in AgentNet. It is all about stickiness with the customer as we continue to build services our agents need to run their businesses.

QQ Tell us about the National Agency team culture.

A Client focus is not just a catch phrase to us; we make it part of our cultural DNA from day one on the job. The customer is key, and we work hard to make sure we do not forgot that point. Bottom line, you get on board with the idea, or you don’t sign up. This culture mirrors the First American internal approach which differs from our competitors and frankly, is the reason many of us joined and stay with the Company.

QQ What is one characteristic you believe every team member should possess?

A Integrity, hands down – all day, every day.

QQ What changes do you forsee over the next 3-5 years?

A Consolidation within the agency base will continue, technology improvements along with changing state regulations will continue to evolve the title and closing experience as we begin to see e-closings take shape and become the norm, rather than the exception. Cyber security is a top concern and not going away, so we will continually develop new tools and provide eduction to assist in assessing and combating these threats.

focus is not just a “ Client catch phrase to us; we make it part of our cultural DNA from day one on the job.

”

QQ What are the most important decisions you make as a leader of the National Agency Division?

A It really doesn’t matter if the decision is large or small, important or unimportant; if you always keep in mind what is best for the customers, the shareholders and the employees then decisions are made more clearly.

QQ What is the best piece of advice you were ever given?

A You are only as good as your word and a handshake on a deal means all that matters. My dad shared that advice with me, and he is well respected as a man of tremendous integrity.

Agency Today | Issue 6

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GIVE IT Y O U R

B.E.S.T.

How to get the most out of your 15 minute meeting with a prospective client.

BE PREPARED Do your homework to ensure you have the most updated information about the customer and their company. You have a better chance of making a connection if you spend some time learning about their values and understanding what is meaningful to them.

ESTABLISH VALUE Present the best features of your organization and how it is uniquely suited to meeting their needs. Your preparation research will allow you to ask personalized, industry-related questions that uncover the prospect’s most urgent needs, position you as expert and help build your credibility. Being able to clearly define the problem and solution from the customer’s point of view is a critical step in the process of establishing value.

SOLVE THEIR PROBLEM The marketplace is continually evolving and with change comes the possibility of new problems. Are you able to provide a solution to an issue that has immediate consequences if not addressed? Without your solution, will the prospect stand to lose business or possibly suffer damage to their reputation? Anticipate objections and be ready to quickly and efficiently minimize objections in order to move the conversation forward so your prospect can see why your product or service is a good fit for them.

TIMING IS EVERYTHING Your prospect is busy, overloaded and yet, still kind enough to give you 15 minutes of their time. This is not the time to wing it! A clear, concise and compelling presentation enhances your professionalism, shows them you respect their time and demonstrates your gratitude for the opportunity to earn their business. Finally, there are lots of ways to close a sales presentation, a million books written on the subject and one fundamental truth: if you don’t ask for the business, you won’t get it.

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Agency Today | Issue 6

800.854.3643 q www.firstam.com

Agency Today | Issue 6

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Huddled Masses By: John Hollenbeck, NTP Executive Vice President First American Title 2015-2016 ALTA President

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Agency Today | Issue 6

“...Give me your tired, your poor, your huddled masses, yearning to breathe free...”1 The Statue of Liberty is perched on Liberty Island, located about 1.6 miles off the tip of Manhattan in New York Harbor. Given to the United States as a gift from the French people in 1886, the statue illuminates the American ideals of freedom and liberty.

Even closer to Manhattan is Ellis Island, about a mile from Battery Park. Between 1892 and 1954, over 12 million immigrants—the huddled masses—were processed there, gaining access to a new land full of opportunities, freedom and hope for a better life.

When many of us think of all those millions of people who immigrated through Ellis Island, we think of New York. The immigrants passing through certainly understood Ellis Island to be part of New York. That’s what they were told, and that’s what was written on their papers. New York was the melting pot of melting pots. Immigration is deeply embedded in the culture and history of that city.

While jurisdiction for Ellis Island rested in the State of New York, title to the island itself was acquired through condemnation by the United States of America in 1908. The federal government used the 3-acre island for military purposes for more than 80 years. But, in 1890, Congress selected the site to serve as an immigration station.

It was at this point, or shortly thereafter, that the island started to grow, quite literally. What was once a 3-acre island, eventually grew to more than 27 acres. That growth was artificial, of course, occasioned by adding rocks and soil to enlarge the land. As the land was enlarged, buildings were added.

In 1993, the State of New Jersey sued the State of New York seeking to establish that the vast portion of Ellis Island is located within the State of New Jersey and within its jurisdiction.

New Jersey won!!!!!!

The States of New York and New Jersey have disagreed over their boundary line in the Hudson River since the Revolutionary War. New York argued that it had jurisdiction and control over the entire waters owing to boundary lines set by the original proprietors of New Jersey. New Jersey, on the other hand, felt entitled to jurisdiction to the center of the river as a coequal state emerging from the revolution.

Skipping forward a bit, the dispute was temporarily resolved in 1834 when the two states agreed to, and Congress approved, a compact that set the state boundary line at the center of the Hudson River.2 This agreement contained a provision that specifically dealt with Ellis Island. Notwithstanding that Ellis Island is physically located on the New Jersey side of the river’s centerline, the compact provided that New York would retain its present jurisdiction over Ellis Island. Further, it was agreed that New York would maintain jurisdiction over all of the waters between the two states’ shores. The jurisdiction of the waters

by New York was subject, however, to New Jersey’s “rights of property in and to the land under water” on its side of the state line.

To summarize, at the time of the 1834 compact, New York maintained control and jurisdiction all of Ellis Island and the waters of the Hudson, but New Jersey maintained whatever rights of property that existed in submerged lands on its side of the freshly agreed to state line.

In its May 26, 1998, decision, the United States Supreme Court held that the artificially created land did not accrue to the interest of the State of New York. The court pointed out that the original compact ceded sovereignty to New York for the land that comprised Ellis Island that existed at that time. I won’t go into the long list of reasons the Supreme Court rejected New York’s claims. However, if you are interested, the court’s opinion can be found at https://supreme.justia.com/cases/federal/us/523/767/.

It’s only 66 pages.

Following the decision, then Governor George Pataki said, “Ellis Island will always be part of New York in the hearts and minds of the millions of immigrants who came to America seeking freedom and liberty.” New York Attorney General added, “Her future belongs to all Americans.”

For title insurance, this piece of Americana holds an important lesson: Remember that lands near bodies of water like oceans, lakes, or rivers can be shifting sands (or so to speak). Fancy legal doctrines like accretion, reliction, and avulsion can result in unexpected consequences!

For me, Ellis Island is clearly a national treasure, and part of American history shared by two great American states. Thank you New York and New Jersey.

1 Words taken from The New Colossus, a sonnet written by Emma Lazarus, appearing on a plaque on the Statue of Liberty.

2 The word “compact” in the context is a fancy word for “contract” or “agreement.” The United States Constitution contains a “compact clause” which permits such agreements between states.

Agency Today | Issue 6

9

2017

Strategic Revenue Growth Planning

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Agency Today | Issue 6

Many title agents, both large and small, struggle with strategic planning. Month-end transaction volume and the high dependency of outside parties to complete transactions make strategic planning and execution of a revenue plan difficult. However, in order to grow organically and exceed the overall market, title companies need to adopt some form of strategic planning.

How much you grow and how your company performs in 2017 is up to you. The questions below are designed to help you build an executable company revenue growth plan that is simple and straightforward.

By: Lou Pontani SVP, Sales and Marketing Agency Division First American Title

WHERE AND WHO DOES MY BUSINESS COME FROM TODAY? Who are my customers, are they lenders or real estate professionals? How many transactions did they send last year? What are the average sales prices and loan amounts for the transactions they’ve sent?

WHO HAS MORE BUSINESS TO OFFER? The answer should provide you with a target list of referral sources so you can concentrate the most effort. For example, if Richard the real estate professional sends you all of his transactions, then he might not be at the top of your business development plan.

That doesn’t mean he gets ignored; he becomes more of a client maintenance function and less of a growing your business function.

WHO SHOULD I BE WORKING WITH THAT I AM NOT? You don’t want to work with every referral source. Resources are not unlimited, so is makes sense to work with the most-profitable, volume-producing, going-to-be-in-the-business-forever referral sources. Begin by determining who the top agents and loan officers in your service area are, who they do business with currently and what type of business is their area of focus. Although the research is time consuming, the answers to these questions will bring sharper focus and yield larger results in the long run.

WHAT DO I NEED TO BE DOING TO GET THE BUSINESS? What highly effective and compliant sales activities can you incorporate to begin or advance the relationships on your target list?

Pick activities that you do well. If you have a sales force, are the best practices for that activity documented and communicated? If your sales people are hosting a seminar (where local regulations permit such activities), are they all following the same procedures outlined in the plan? If you have something that works, continue on that course. Consistency is the key.

HOW IS SUCCESS MEASURED? Once you’ve established a target list, what you select to be success criteria and how far into your plan you place metrics should be based on what you feel you can manage realistically, the experience of your sales team and what you can easily pull data for. At a minimum, each target should have an annual forecast of transaction units. (SEE EXHIBIT 1) (Exhibit 1)

20%

Referral Growth Type Sales Person Target Name Source

ACTUALS

Total Year 1 Transactions Transactions Available Capture Jan Feb Mar Apr May Jun Received Available Transactions Goal

Jul

Aug Sep Oct Nov Dec Plan

Total Actuals

Plan Delta

Wallet Share Lou Pontani Martin McHill Agent

60

15

45

9

2

5

6

8

5

24

26

2

Wallet Share Lou Pontani Roxanne Gill

Lender

50

25

25

5

3

3

3

5

5

30

19

-11

Wallet Share Lou Pontani Jim Durham

Builder

50

30

20

4

7

8

8

9

10

34

42

8

New Client

Lender

65

0

65

13

0

0

0

0

5

13

5

-8

Lou Pontani Hugh Grant

New Client

Lou Pontani Bob Leaveck

Agent

75

0

75

15

0

0

0

0

6

15

6

-9

New Client

Lou Pontani Don Smith

Comm.

Attorney

45

0

45

9

0

0

0

0

4

9

4

-5

55

12

16

17

22

35

125

102

-23

Louis Pontani

Whether you are leading yourself or a national sales team, growth starts with you, the leader, and every leader needs a plan. Before you start developing your plan, you need to get answers. Regardless of the size of your company, answering these questions on a weekly, monthly, quarterly or yearly basis brings consistency to your sales leadership. Taking the time to answer the right questions first will pay big dividends in 2017 and in the future.

Agency Today | Issue 6

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100%

0% Salt Lake Los Charleston, Nashville, City, CA Angeles, CA SC TN

Spokane, Provo, WA

UT San Jose, CA

Honolulu, HI

Austin, TX

Baton Rouge, LA

Midland, TX

Odessa, TX

200%

100%

0% Kingston

12

Morgantown Grand Forks Gadsden, AL Manhattan

Agency Today | Issue 6

Florence, AL

Walla Walla Ithaca,

NY

THREE REASONS TO

REMAIN

BULLISH

I look forward to the next 12 months in the housing market because I believe the fundamentals are sound and the desire for homeownership remains strong. Will there be challenges? Of course, but when it comes to housing, there are some built-in market advantages – you can’t outsource it and everyone needs it.

In my opinion, three main themes will dictate the story for the real estate market in 2017: •

•

ON HOUSING

•

By: Mark Fleming Chief Economist First American Financial Corporation

@mflemingecon

The First American Economic Center is the home for First American to share Mark’s perspectives and economic research with real estate professionals across the country.

firstam.com/economics

First, and most important, is the continued demographic transition of economic power from Baby Boomers to Millennials.

Millennials are an increasingly important economic force and a growing source of homeownership demand that will gradually become more and more influential to our housing market.

Secondly, the rise of mortgage rates. The odds are higher than ever that 2017 is the year we say goodbye to 30-year, fixed-rate mortgages with rates below 4 percent. This will usher in a new market era, where higher mortgage rates mean less refinance activity, and more reliance on the first-time homebuyer, magnifying the influence of Millennials I mentioned above.

Finally, the housing market will still thrive in these conditions.

Higher rates reduce consumer house-buying power and reduce affordability. However, the reason rates rise is because of faster economic growth and inflation, which usually increases wages, and can offset the impact of higher rates. My research also shows that rate increases reduce the pace of house price growth more than they cut demand. When you examine all these factors together, the result is homes will remain more affordable than they have been in recent memory.

Every month ALTA hosts timely and insightful webinars on issues important to title insurance professionals. In early January, I participated in the 2017 Housing Market Forecast and Homebuyer Trends webinar hosted by the American Land Title Association (ALTA).

Jessica Lautz, a consumer research expert from the National Association of Realtors, and I discussed how the real estate market is changing and what we can expect. We tried to answer the question posed in the title of the webinar, “Has the Game Changed?” The webinar in its entirely may be accessed at www.alta.org/education/webinars.cfm.

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Title Agent Tasks That Make Sense to

OUTSOURCE By: Prashant Kothari Founder and CEO String Real Estate Information Services ppkothari@stringinfo.com www.stringinfo.com

It is clear that technology has and will continue to make it easier for companies to collaborate, regardless of their physical location. Advances in hardware, software, information security and telecommunication make it possible for two parties half a world apart to collaborate as easy as if they were in the same office.

For the real estate industry, with its data and document intensive requirements, and specifically for the title agent closing the transaction, this trend presents many opportunities. The ability to collaborate and outsource closing-related tasks to business partners across the country or across the world can greatly reduce processing expense and collapse time-frames. Two results that benefit not only the title agent, but the home-buying public. Below are a few areas where outsourcing may be beneficial to title agents.

TITLE SEARCHING Title searching used to be a very localized process. Searches had to be conducted in person at the Registry, abstracts were often handwritten and hard copies had to be made on the Registries’ copy machine. With more and more registries digitalizing their land records and making online access available, an on-theground presence is no longer a requirement and conducting searches remotely is a growing reality. Outsourcing may provide searches in a much faster timeframe, which would allow more time for review and analysis of the search and possible shorten the closing cycle.

TITLE COMMITMENT AND DOCUMENT PREPARATION Data entry and document preparation are processes that have been outsourced for decades. Whether through a direct 14

Agency Today | Issue 6

integration, web service or VPN, outsourcing this type of work to a business partner is both secure and easy.

Having commitments, closing disclosures, closing documents and final policies prepared by a reputable outsourcing company allows agents and their staff to focus on core business processes. Using the additional time gained by outsourcing to address the needs of customers is a much more profitable and worthwhile task.

QUALITY CONTROL AND REVIEW The increase in regulation and oversight of our industry has placed a premium on accuracy. Title agents not only have to assure all the correct documents and disclosures are included in the closing package, but those documents are also true and accurate. By collaborating with an outsourcing business partner on quality control and document review, the title agent adds another level of protection to assure their closing package is complete and accurate.

At String, we develop detailed, quality control checklists for each of our customers and they are used in conjunction with the lender closing instructions. Every closing package is reviewed using the checklist and the applicable closing instructions to assure the closing package is complete and accurate.

CORE BUSINESS COMPETENCIES When it comes to collaborating with a business partner and outsourcing your processes, it helps to have a highly-defined understanding of your core business. What is it that you provide to your customer? What more can you offer them? With these questions answered, you can more readily determine which processes, while likely critical to the overall service you provide, are not core competencies and should be candidates for outsourcing.

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ALTA PILLAR #2 TRUST ACCOUNTING TrustLink™ provides daily 3-way trust account reconciliation with electronic access and approval; along with our unclaimed property service, you can rest assured your trust accounts are in line with best practices.

YOUR SUCCESS IS OUR PRIMARY MISSION. That’s why we offer First American agents more Best Practice solutions than any single provider.

800.767.7832 sms-sales@SMScorp.com firstamsms.com ©2016 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE:FAF

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ALTA PILLAR #3 SECURITY OF NON-PUBLIC PERSONAL INFORMATION From clean desk practices to secure electronic document delivery, our electronic office management system secures your customer’s data with all the cost saving benefits of working without paper.

Exclusively for StreamLine™ and GreenFolders® users, SMS Vault™ is our online data back-up service that integrates seamlessly with your business and makes backing up your data a snap.

ALTA PILLARS #4 SETTLEMENT PROCESSES / #5 POLICY PRODUCTION Our release tracking and title clearing service gives you confidence that all documents needed to clear liens paid off at closing are correctly recorded with the appropriate jurisdiction, allowing you to issue a final title policy in a timely manner.

Our StreamLine™ title production platform takes the guess work out of premium rate calculations.

And with customizable workflow processes, you can keep everyone on track and quickly prepare and deliver title policies.

TitleExpress® has customizable workflow and event management to help track title policies and recordings quickly and efficiently. From a robust rate and premium calculator to document preparation, TitleExpress® allows you to streamline your process and prepare policies with speed and accuracy.

NEW TWIST

ON

WIRE FRAUD Over the past few years, First American Title has communicated with its settlement professionals that they are targets for fraudsters due to the large sums of money they are responsible for disbursing in the course of closing real estate transactions. These fraudulent schemes to divert funds continue, and losses to the parties involved are often devastating.

By: Michele A. Green SVP, Senior Business Counsel Agency Division First American Title

In the classic scheme, the closing professional receives an email that provides disbursement instructions regarding the seller proceeds or loan payoffs. These emails appear to come from a party in the transaction, but are actually from fraudsters who have hacked into the email traffic associated with the transaction. Most settlement professionals now employ call-back procedures to confirm any instructions received via email, but mistakes are sometimes made and funds are lost.

WHAT CAN WE DO? Settlement professionals should institute and unwaveringly follow protocols that require verification of all disbursement instructions.

•

• •

THE NEW TWIST The latest evolution in this theft epidemic occurs after a closing professional has already wired funds to a fraudster’s account having relied upon fraudulent wire instructions.

The fraudster then initiates contact with the closing professional and poses as the receiving bank for the wired funds, often using a spoofed caller identification to increase the appearance of legitimacy. The fraudster communicates that the funds were sent to an account flagged as being suspicious – and assures the settlement professional that the funds will be returned within a few days. This assurance tricks the closer into not contacting the true receiving bank to freeze the funds, and provides the fraudster sufficient time to move the funds beyond the reach of the parties.

•

Most settlement professionals require at the very least outgoing call-back procedures utilizing a known, safe telephone number to confirm any instruction received via email.

Incoming telephone calls are not a substitute, due to the known risk of call spoofing.

Closing professionals should also take care to confirm direct contact with the funds recipient where possible.

Funds have been lost when a closer relies on a call-back made to counsel for a recipient, but the confirming contact between the recipient and his/her counsel was via compromised email.

Many settlement professionals now require in-person, wet signature disbursement instructions from parties who have presented valid identification.

AS TO THE NEW TWIST Upon any indication that funds have or might have been misdirected, settlement professionals should initiate immediate, direct, outgoing contact with both the wiring and the receiving bank. Never rely on an incoming call to provide confirmation of contact.

BE CAREFUL OUT THERE!

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17

&

Partnerships Exchanges By: Mary Kay Kennedy National Operations Manager, First American Exchange Company

One of the most common ways to own real estate is through a partnership (including a limited liability company, which is treated as a partnership for tax purposes). When a partnership sells real estate, it can set up an exchange and defer paying tax on the gain.

What if some or all of the partners want to go their separate ways? This poses challenges for several reasons.

First, under the 1031 exchange rules, the same taxpayer who sells the relinquished property must buy the replacement property. Therefore, if the partnership owns the property and is under contract to sell it, the partnership must buy the replacement property. If an individual partner, rather than the partnership, buys the replacement property, there will not be a valid exchange.

Second, partnership interests are specifically excluded from the benefits of a 1031 exchange. In other words, if you sell a partnership interest and buy a partnership interest in another partnership, you will not be able to do an exchange of those interests.

This article is for informational purposes and is not intended as tax or legal advice. You are reminded that each transaction is unique and the information provided may not be complete or applicable to a particular transaction. This article is not intended or written to be used by anyone for the purpose of avoiding federal tax penalties, and was not written to support the promotion or marketing of any transaction or matter discussed herein. You are urged to seek the advice of a tax professional when making any decision regarding tax planning.

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DROP AND SWAP There are a couple of different strategies that taxpayers use to solve these problems. The most common solution is called the “drop and swap.” In a drop and swap, the partnership transfers all or a portion of the real estate to the partners who want to trade separately or cash out. The partners then own the property as tenants-in-common and can act independently.

The partners then sell the property, and some can exchange and some cash out.

Most tax advisors recommend doing the drop portion of a drop and swap before the taxpayer signs the contract. This is not always possible, but some advisors believe it makes it more likely that the structure can’t be challenged.

For example, XYZ Partnership has five partners. Assuming that no partner wants to invest in new property with the other partners, XYZ Partnership will deed the property to the individual partners according to their percentage share in the partnership. If each partner has an equal interest, it will get a 20% tenancy-in-common interest in the property.

Since a tenancy-in-common interest is a direct interest in real estate, each partner who wants to will be able to set up a 1031 exchange and buy replacement real estate independently.

California is a special situation, and the California Franchise Tax Board has been aggressively auditing drop and swap and swap and drop transactions. In 2015, the State Board of Equalization overruled the Franchise Tax Board’s disallowance of an exchange because of a swap and drop. In this case, several taxpayers traded into replacement property as tenants-incommon and seven months after the exchange, formed an LLC and contributed the property to it as required by their lender.

The California Franchise Tax Board disqualified the exchange, and the taxpayer appealed to the State Board of Equalization.

The State Board of Equalization ruled in favor of the taxpayer and held that the swap and drop didn’t disqualify the exchange.

(See Rago Development Corp., 2015-SBE-001, June 23, 2015.)

SWAP AND DROP

LIMITED LIABILITY COMPANIES

Another solution used by taxpayers is the “swap and drop.”

In a swap and drop, the partnership does the 1031 exchange, including selling the relinquished property and buying replacement property. The partnership acquires multiple replacement properties and then, after the closing, deeds each one to a separate partner. This poses not only tax challenges but practical challenges as well. The partnership may not be successful in buying enough replacement property to deed one to each partner, for example.

As previously mentioned, a limited liability company (LLC) is typically treated as a partnership for tax purposes. The exception to this is when there is only one member/owner of an LLC. In that case, the LLC is typically disregarded for tax purposes. For example, despite the general rule that the same taxpayer who sells the relinquished property must buy the replacement property, John Taxpayer can sell the relinquished property and buy the replacement property using a single member LLC of which he is the sole member. That is because the LLC is ignored for tax purposes and it is as if John Taxpayer had bought the property directly.

A variation of the swap and drop is when a taxpayer completes an exchange and then transfers the replacement property to another legal entity that is considered a separate taxpayer. For example, an individual taxpayer may sell relinquished property, buy replacement property and then contribute that replacement property to a partnership. There is a risk in both versions of the swap and drop that the IRS would take the position that the taxpayer did not hold the replacement property long enough to show evidence of the intent to hold the property for investment purposes, which is a basic requirement when doing a 1031 exchange.

Interestingly, there is an IRS ruling that says the purchase by a partner of all of the other partner’s interests in the partnership can qualify as replacement property. (See Revenue Ruling 99-6, 1999-1 C.B. 432.) Although you cannot buy a partnership interest in an exchange, this ruling said that the taxpayer could have a valid exchange because he bought 100% of the partnership interests. At the moment of the purchase, he owned the LLC and was the sole owner, so the LLC was disregarded and it was as if he had acquired the underlying property.

DO THESE SOLUTIONS WORK?

CONCLUSION

Both the drop and swap and the swap and drop have some tax risk and complications and may be challenged by the IRS. There is case law, however, supporting a taxpayer’s ability to do them.

As support for a drop and swap, see Bolker v. Commissioner of Internal Revenue, 760 F. 2d 1039 (9th Cir. 1985) and Mason v.

Commissioner of Internal Revenue, 55 T.C.M. 1134 (1988). As support for a swap and drop, see Maloney v. Commissioner of Internal Revenue, 93 T.C. 89 (1989) and Magneson v.

Commissioner of Internal Revenue, 753 F. 2d 1490 (9th Cir. 1985).

Although there is always some risk when making ownership changes when a partnership is preparing to sell relinquished property, there are also solutions that have worked for many investors. It’s important to discuss the solutions with tax counsel, since there may be tax issues other than 1031 Exchange-related issues.

Agency Today | Issue 6

19

The

Technology Relationship

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Agency Today | Issue 6

We are in a relationship business. It shouldn't even need to be said. As technology advances, it effects how our relationships evolve. Not only does technology drive change in how we are expected to communicate, but it also drives the content of that communication and ultimately, the expectations within and value of the relationship.

By: Randy Noll VP, Finance Agency Division First American Title In addition to leading our finance and data/analytics groups, Randy oversees all Divisional IT departments.

Prior to working with the Agency Division, Randy spent seven years as the finance lead for IT.

Where a typical discussion between an agent and their First American Title Sales Representative might have once focused on policy jacket inventory or document delivery, the discussion has now expanded to include topics such as network performance, software integration training, and electronic policy reporting. This shift illustrates how our touchpoints with customers that have historically been person-toperson are changing to include an increasing amount person-to-system touchpoints, largely in the name of accuracy, efficiency and reduced risk.

While this may appear on the surface as a shift away from the person-to-person touchpoints, I'd argue it creates an opportunity for more of them. As technology advances, underwriters and software providers are increasingly involved in the facilitation of the agent's workflow. We provide the infrastructure upon which you run your business. In fact, we compete over who can do it most effectively.

This is where the opportunity lies.

We need to make sure we take advantage of this opportunity for increased touchpoints with you, our customer, by establishing a stronger feedback loop to better understand your workflows, your pain points, and how you do business.

In short, we need to continue to ensure the business you give to First American Title is the easiest, most efficient and most profitable business in your book.

In 2017, we are kicking off a new program to strengthen this feedback loop with you. On the front end, we will establish a series of voluntary surveys, focus groups, and individual feedback sessions to understand your pain points better, and help eliminate them. This feedback will directly drive the prioritization of our technology initiatives and the millions of dollars we spend annually to build and strengthen the infrastructure that supports your business. This program will also include increased focus on training and adoption to ensure your team is utilizing the tools as designed and the feedback you give is relevant and valuable.

“ Not only does

technology drive change in how we are expected to communicate, but it also drives the content of that communication and ultimately, the expectations within and value of the relationship.

”

~ Randy Noll

I’m very excited about what First American Title will achieve in the future through our continuing technology investment. We have valuable enhancements in the pipeline for both AgentNet and our integrations with software vendors and a group of extremely passionate professionals working on the new feedback program. Communication about these initiatives will be coming in the next few months. Participation is entirely voluntary, and I encourage each of you to participate to the extent you are able. We are interested in your feedback and will use it to identify opportunities to make our technology, and our relationship, more valuable to you.

Agency Today | Issue 6

21

D I G I T A L

O F F I C E

M A N A G E M E N T

S O L U T I O N

MAKING PAPERLESS A REALITY GreenFolders® empowers title and settlement agents, escrow companies, and law practices to overcome the limitations and hassle of paper files while safeguarding Non-public Personal Information. Intuitive yet robust, GreenFolders is fully customizable and will accommodate your unique workflow. Whether you’re looking to go completely paperless or transition only a portion of your operations to a digital workflow, GreenFolders has a solution to suit your needs.

www.greenfolders.com

801.747.2132

©2017 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE:FAF

22

Agency Today | Issue 6

THE

NEED FOR

By: Lou Pontani SVP, Sales and Marketing Agency Division First American Title

As of January 2017, there are over a billion websites online. Recently, a search of title insurance on a popular search engine returned over 19,900,000 pages, and a similar result of over 21,200,000 pages were returned when searching the phrase title insurance closing services. The numbers get smaller as you further refine your search, but even a county-wide search can return numbers in the tens of thousands.

Your website helps build the foundation of a positive relationship between you and your customers. In a world filled with title insurance choices, what steps can you take to stand out in the crowded online space? Research suggests the competition for customer attention comes down to who is delivering the requested content most efficiently and accurately. User expectations vary, but here are a few minimum requirements most consumers expect.

LIGHTNING-FAST LOAD SPEED We are a nation of impatient people. If a website doesn’t load in 2-3 seconds, most consumers will move on to the competitor whose website is more responsive. Having all the bells and whistles on your website may look impressive, but if it’s slowing down page load time, it may be costing you customers and affecting your bottom line.

RELEVANT INFORMATION Rarely does a consumer enter the query title insurance unless they are considering the purchase or refinance of a property. Website content should engage the customer and provide relevant information that answers their questions. Carefully craft language that clearly establishes your company as an industry expert.

EASY TO NAVIGATE Consumers get frustrated when a website is difficult to navigate, overly complicated or cluttered. If your website is effortless for users, they will stay; make it hard to navigate, they will leave. Don’t make potential customers click their way through your site to find information that should have been prominently displayed on the homepage.

A quick online search will reveal numerous analytical tools to identify problem areas on your website, provide performance evaluations and offer suggestions to optimize and improve performance. Your time is valuable, so if the first site you select doesn’t load quickly, provide relevant information and is difficult to navigate ... move on!

Agency Today | Issue 6

23

AgentNet®

Express Remit Utilizing the Express Remit feature in AgentNet enables an AgentNet User to remit and pay premiums on a file immediately without having to use the My Remittance Reporting module.

Benefits •• •• •• ••

Remit and pay on a file-by-file basis Easier for operations that require each closer to manage their own remittances Remit and Pay immediately after calculating and confirming accurate premiums in AgentNet Save time by skipping bulk My Remittance Reporting process

The Option Is Yours

Choose to remit per file and manage your workflow from the Rates and Fees tab, or continue to remit in batches and manage workflow using the Queue button to place files in shopping cart of the My Remittance Reporting section.

For more information, visit AgentNet/User Guides Tab, or contact your First American Title account representative.

24

Agency Today | Issue 6

Stay on target with FasTrax™ Release Tracking and Title Clearing services Need help tracking releases for liens

Can’t locate documents needed to

currently being paid off?

clear title defects from prior payoffs?

Our Release Tracking service will help boost

Our Title Clearing specialists will deal with

your profits by eliminating the cumbersome

that aggravation for you. Whether you are

task and expense of requesting, verifying, and

dealing with an unreleased mortgage lien, an

recording your releases in-house.

ineffective release or a missing assignment, we can help.

www.smsfastrax.com

800.767.7832 x1362

©2017 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE:FAF

Agency Today | Issue 6

25

P R E M I E R

T R U S T

A C C O U N T I N G

S E R V I C E S

TRUST THE EXPERTS OVER 40 MILLION FILES PROCESSED OVER $20 TRILLION IN TRANSACTIONS

The TrustLink™ team of experienced accounting professionals provide daily 3-way trust account reconciliations with electronic verification and deliver daily status reports for all your trust accounts.

With our unclaimed property service and 1099 tax reporting, we offer you more trust accounting services than any other company. You’ll gain unmatched visibility into your accounts and the ability to expose potential fraud while maintaining your compliance initiatives.

Assisting companies in building consumer trust for over 40 years. support.trustlink@firstam.com

800.767.7833

©2017 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE:FAF

26

Agency Today | Issue 6

FIRST AMERICAN TITLE

AGENCY OFFICES First American Title Agency Division is committed to providing the resources, services and underwriting guidance our title agents/attorneys need across the country to achieve new levels of success in their business.

State

Phone

State

Phone

State

Phone

Alabama

205.879.1818

Louisiana

504.588.9252

Ohio

614.310.8097

Alaska

206.336.0736

Maine

207.774.6884

Oklahoma

405.706.2008

Arizona

602.685.7085

Maryland

443.741.4540

Oregon

206.336.0736

Arkansas

901.821.6500

Massachusetts

617.345.0088

Pennsylvania

610.265.8440

California

714.250.2178

Michigan

800.399.3003

Rhode Island

401.434.1000

Colorado

303.305.3358

Minnesota

763.416.2093

South Carolina

803.731.4409

Connecticut

860.727.9908

Mississippi

601.366.1222

South Dakota

763.416.2093

Delaware

302.855.2120

Missouri

816.622.3120

Tennessee

615.771.9141

Florida

877.798.7058

Montana

206.336.0736

Texas

281.588.2200

Georgia

404.250.1604

Nebraska

402.697.4646

Utah

801.316.0600

Hawaii

808.206.8420

Nevada

702.855.0837

Vermont

802.764.3065

Idaho

206.336.0736

New Hampshire 603.227.9210

Virginia

703.480.9500

Illinois

866.213.4920

New Jersey

609.528.6860

Washington

206.336.0736

Indiana

800.999.1176

New Mexico

505.881.3300

West Virginia

304.736.1111

Iowa

402.697.4646

New York

212.381.6600

Wisconsin

608.236.1300

Kansas

913.681.0600

North Carolina

336.668.7233

Wyoming

303.305.3358

Kentucky

502.425.7200

North Dakota

763.416.2093

National Agency Division 866.568.0403 Agency Service Center: 866.701.3361 | agencysupport@firstam.com www.firstam.com/agency

Agency Today | Issue 6

27

USING

Social Media

TO ENHANCE

YOUR BUSINESS

Social media marketing is here to stay and continues to evolve at a rapid pace. Originally a way for individuals to communicate online, social media has become an excellent platform for businesses to communicate with consumers and strengthen their brand. In fact, given that two-thirds of internet users research products online prior to purchase, having a social media presence is critical to the success of your business.

Social media has the unique ability to target specific customers and empowers brands by promoting positive word of mouth.

One good closing is worth a thousand words from a happy customer – or at least 144 characters on Twitter. Instead of trying to incorporate every social media site into your marketing strategy for 2017, try experimenting with one or two sites until you’re able to narrow your focus to one or two platforms that work well for your company.

TIPS AND TRICKS •

•

•

•

28

Practical posts about the services you provide will give consumers valuable information and likely gain the most attention.

Provide company information that not only describes what you do, but also why it matters. Include industry experience, longevity, what makes you valuable, and market-specific elements differentiating you from the competition.

Zero in on common pain points for consumers, offer solutions and provide answers to the most commonly asked questions.

Avoid industry jargon and legalese. Use language that is conversational, friendly, easy to understand and most importantly … helpful.

Agency Today | Issue 6

•

• • •

Create a resource/education center where you can post educational documents that reinforce the value of your company.

Use short “pull statements” linked back to material on your website Include linked social media icons in employee email signatures to drive traffic.

Most free social media platforms have paid advertising options for businesses wanting to connect to consumers.

AGENT

SPOTLIGHT Q How is your company utilizing emerging technologies and social media trends to seize business opportunities, connect with your targeted audience and enhance the customer experience?

A

Marc J. Slotnick, Esq. Bailey & Slotnick, PLLC, a member of Bailey & Wyant, PLLC 500 Virginia Street East Suite 700 Charleston, WV 25301 304.720.0750 marc@wvclosing.com www.wvclosing.com

As our primary source of business is in the residential side of real estate, we have utilized social media to promote our services through education. Facebook and Twitter were both used as we transitioned to the world of TRID as a way to pass along important information and educate real estate agents and lenders alike of deadlines as they related to TRID. That photographs posted to social media by real estate agents of their clients completing their closing in our office helps to show our business partners where business is being conducted.

While as attorneys we have to be careful of ethics in sharing client information, we have found that carefully sharing our personal lives through Facebook has helped to develop those personal relationships with real estate

agents and lenders. When those individuals walk into our offices, we can congratulate them on special occasions in their lives, knowing they are also following our activities and watching our children grow. The ability to make a connection using social media helps them feel like a part of our family.

On the business side, we have developed a website that lays out our mission and provides necessary information for closings in a simple and efficient manner. Websites tend to be a little more static but provide a place to further our brand and allows our business partners and clients to easily find contact information and directions to our offices.

Agency Today | Issue 6

29

Q One of the biggest challenges the title industry will face in the future is recruiting and retaining talent in order to facilitate the transfer of knowledge from one generation to the next. How does your company promote a career in the title industry to prospective and current employees?

A

Chris Cantrell Attorney/CEO Foundation Title and Escrow Series, LLC 277 Mallory Station Road Suite 102 Franklin, TN 37067 615.269.7715 chris@foundationtande.com www.foundationtande.com

There is no greater area of concentration for Foundation Title than that of recruiting, training and placing talented individuals within our company. We have experienced such rapid growth evidenced by our expansion from four offices and twenty-six employees to our current eleven offices and seventy-four employees in a little over three years. To sustain this growth, the old methods of locating experienced escrow officers and convincing them to leave their current employer gave way to a more expansive recruiting mind-set.

The first thing we did was send senior management for extensive training on the recruitment and selection of personnel. What this training revealed to us was every contact, regardless of work background, could be a potential referral source. Instead of focusing solely on title experience, we were taught to look for certain core skill sets and values. With an ever-changing industry, we felt confident in bringing in individuals we could train to our culture rather than someone with bad habits or a reluctance to change.

Additionally, this training reaffirmed our belief in personality profiles. Each candidate completes a survey of questions, and after receiving the results, we share those and review with the individual. It is emphasized that there is no “pass or fail” or even “right or wrong” to these assessments. It has proven to be a powerful, objective tool in discerning the individual’s natural profile as it relates to certain job descriptions. Its core mission is to place people where they will be most productive and ultimately, happiest.

Fortunately, Foundation Title has the ability to train these inexperienced hires at what we dub

30

Agency Today | Issue 6

Foundation University. Rather than immediately pressing a new hire into service at one of our branches, these individuals will undergo a week or more of instruction where they are taught our way of doing things along with other facets of the title industry. They are able to work on dummy files where they can make mistakes without consequences while receiving supportive feedback for improvement.

Although these weeks can never substitute for a seasoned title professional, it opens doors for candidates that otherwise may not have been considered previously, who can eventually become that seasoned title professional.

Finally, we believe in consistent feedback and dialogue with our current team. Just as the hardworking student wants to be rewarded with an outstanding grade, our successful team members want that same accountability conversation. This is a time the “why” of a decision can be discussed at length and also allows that individual to provide their valuable insight of what they see working and what needs improvement. Not satisfied with merely pointing out areas of improvement, the individual is pushed for their solutions to a problem. It is a simple yet empowering moment when someone is asked to take ownership of an issue. This openness allows that person to perform beyond a job description and gives a glimpse of how they could perform in a different setting. More often than not, this leads an individual to be promoted to a position better suited to their natural abilities.

A

I think the title industry provides a great career choice. The foundation of our job is to protect people’s property rights through a unique process of transferring ownership. This process is one of the many things that has helped make our country great. I am proud to be a part of the title industry and to have the ability to share it with younger generations.

Our company, Security Abstract & Title Company, Inc., was formed in 1944 and has been blessed with a strong foundation from our founders. As we’ve grown, many of the acquisitions we made have had a similar history. Our company culture is very much like a family restaurant that passes down recipes from generation to generation. It is important to pass on our knowledge to the next phase of employees for them to become more proficient, make our company stronger and maintain our growth and expertise.

Craig Burns Chief Executive Officer Security 1st Title 727 N. Waco Avenue Suite 300 Wichita, KS 67203 316.267.8371 www.security1stks.com

Recruiting and retaining talent for generations has not come easy. With the continued change in culture through technology, everyone’s perspective of “patience” has changed.

A

Beverly J. Jones President Grand River Abstract & Title Co. 504 W. Krause Jay, OK 74346 918.253.4249

Our company realizes that the key to running a successful business that can sustain longevity in the marketplace primarily lies in the strength of its human resources. We place great importance on finding and retaining strong talent. The majority of our employees have invested well over ten years, and a few have been with us for twenty years or more.

We have a corporate culture that embraces mentorship and leadership. It is our goal to develop teams within each department that are led by an experienced staff member who is consistently investing in the training and development of the team. We believe that

To create a work environment that promotes and encourages the development of all employees, it takes time and patience from all generations.

The phrase, “Don’t judge a book by its cover,” is so true in hiring and retaining great employees.

Security 1st Title has made it a priority to put our employee’s first, provide them with great benefits, and have a diligent human resources group to set and manage the guidelines. These aspects have made all the difference for us in hiring and retaining employees.

At Security 1st Title, we strive to promote from within our current group of employees. We are fortunate to have knowledgeable professionals who work diligently to create added value for our customers. We support and encourage each employee to improve themselves and be engaged in sharing ideas and perspectives which could improve our processes. Over time, great employees develop the skill sets required to be successful. Having the right attitude is infectious, and trying to bring some fun into the day-to-day work activities is a must!

although education and training are vital, it is a combination of mentorship and leadership training that give our employees a sense of ‘career.’ We know much of our success is due to the strength and efficiency of our employees.

Therefore, we take measures to ensure we create an environment where our employees feel supported and valued. At Grand River Abstract & Title, we place importance in continually developing our younger talent, knowing they will be the key to continuity and success in the future.

bevjones@gratitle.com www.grandriverabstract.com

Agency Today | Issue 6

31

FIRST AMERICAN TITLE

Service, Expertise AND Financial Strength MATTER

BECAUSE

A trusted and reliable resource, First American Title is proud to provide valuable products and services for our agents and their customers.

First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.

AMD: 03/2017

Š2017 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF