Think about your brokerage’s relationship with your title company. Does it feel lopsided? Do you feel like you’re doing a lot of work for little in return while someone else pockets the title commission? If so, you’re not alone. There is a better way, and it can be achieved by creating a joint venture (JV). JVs are a great way to generate value for both real estate brokerages and title companies, as well as a more streamlined experience for your clients.
Affiliated Business Agreements
Real estate brokerages and agents are permitted to own an interest in a service company such as a title company, provided the real estate brokerage/agent follows a few critical steps.
- When a client is referred to the title company, the relationship with the joint venture company must be disclosed;
- You cannot require the client to use the joint venture title company as a condition for the sale or purchase of a home; and
- You do not receive any payments from the joint venture company other than a return on your ownership interest in the company.
The JV title company must be a bona-fine, stand-alone business with separate employees, office space, and capital to perform services associated with its industry.
How it works
A title company JV is created when two companies – a title agency and a real estate brokerage – come together to form a company. When a brokerage partners with Expetitle, Expetitle creates a new and fully legal LLC, hires a full-time title agent, and then both the brokerage and Expetitle put up capital to get the JV up and running. Then, the brokerage owns a portion of the entity. This allows the brokerage to share in the net operating profits of the new title company while Expetitle does all of the title work.
Revenues gained from this arrangement can be significant. For example, let’s say your brokerage closes 50 transactions over a month that represents $100,000 in title fees generated. Normally those fees stay with the title company. With a JV, a portion of those title fees gets sent back to the brokerage. Using a 10% profit margin as an example, that’s $10,000 left on the table in one month alone.
How brokerages benefit from JVs
Outside of the monetary aspect and sharing in the title premiums and closing fees, brokerages benefit from JVs in several other ways. The title company handles the management of the title company so you can handle your business. From marketing to real-time updates of transactions to profit sharing, you’ll have more control over your closing process.
What to consider
When considering whether – or with whom – to enter into a title joint venture, the selection criteria should focus on a few key items.
- Has the title company demonstrated a track record of joint venture success?
- Do you share similar expectations for working together?
- Does the title company have multi-state expertise if you plan to scale your business regionally or nationally?
- Does the title company have a proven technology platform ready for digital real estate closings?
Expetitle has introduced a better way to close, thanks to its completely digital closing experience. Clients and brokers can view the latest status in a simplified and organized process with up-to-the-minute updates they can ‘see’ on their phones. It keeps communication clear, offers transparency, and ultimately helps the transaction close faster.
Title companies and brokerages have a common goal of winning more business. Starting with a home title joint venture can help you generate more value for yourself, and not for someone else.