Title company Turnaround
Increasing real estate sales, some new construction contributing to reboundJanuary 17th, 2013
Title companies expect to see continued business growth in the Spokane-Coeur d'Alene area on the heels of a turnaround year that followed a protracted market decline, sources here say.
Anthony Carollo, president of Stewart Title of Spokane Inc., says 2012 was the best year for the agency since 2006 in terms of business volume.
"For our market, revenue and profits were up, and we expect them to be better in 2013 than in 2012," Carollo says.
He attributes the ongoing rebound to an improving real estate market and continued low mortgage interest rates. Title companies also had to become more efficient to survive while the market contracted from 2008 to 2011, Carollo claims.
Stewart Title has 18 employees and hires temporary labor as needed to adjust to fluctuations in the market, he says.
"Our employment is stable," Carollo says. "We haven't lost employees in years."
As economic factors improve or at least remain stable, the surviving companies are enjoying larger market share, he says, noting that four title companies are serving the Spokane market, down from five companies prior to the 2010 merger of First American Title Insurance Co. and Pacific Northwest Title.
Title companies research the legal ownership of property during pending real estate transactions or mortgage refinancings. The research includes checking for unpaid taxes, liens, and other claims against the property. Title companies also coordinate loan documents and sell insurance policies that protect lenders and buyers.
Randy McDonald, vice president of Spokane County Title Co., also says 2012 was a turnaround year, compared with 2011, which was the company's slowest year since 1985.
"2011 was very poor," McDonald says. "Last year was much more normal...more typical."
McDonald says he expects steadybut not stellargrowth in 2013.
"I don't expect it to boom, but it's been getting better," he says.
Growth this year likely will come through increases in sales rather than refinancings, McDonald predicts.
"I think refis will flatten out," he says. "Nationally, they could drop a little because there's been so many already."
The foreclosure volume appears to be slowing, which ultimately is good for title companies.
"We do work on foreclosures," he says. "Lenders want a title report to give notice to everybody. As a title company, it's much better for us to have a normal sales market. That's the bread and butter of our business."
Spokane County Title has 49 employees, up from 38 in 2011. Its offices are located at 1010 N. Normandie, in Spokane, and at 11703 E. Sprague, in Spokane Valley. The company closed a North Side office, at 33 E. Lincoln Road, in 2011.
Rick Brown, president of North Idaho Title Co., says that company's workforce stabilized last year at 22 employees, down from 45 in 2008 at its Coeur d'Alene office, at 601 E. Front.
"We're back into the hiring stage, following a three-year trim stage," Brown says.
The company also operates a small office in Sandpoint.
The real estate market has regained stability since investors and speculators "looking for killer deals have cleansed that part of the market," Brown asserts.
"We're seeing some appreciation," he says, adding, "New construction has started to gain traction."
Brown says North Idaho Title tends to stay away from foreclosures, distressed properties, and short sales.
"With short sales, nobody's happy," he says. "It's a tough way to make a buck."
The upper end of the residential market, which had been hit hardest by the real estate slump, is coming back, Brown says.
"We like it when larger transactions happen," he says. "We're on a sliding scale. The bigger the transaction, the higher our premium is."
Overall, new home production also is up modestly, Brown says.
"At least it's going the right way," he says. "We've hit bottom, and it's coming back up."
Brown says services related to real estate sales are North Idaho Title's core business, although the company has seen an uptick in business related to mortgage refinancings.
"Low mortgage rates are driving that," he says.
Some homeowners are taking advantage of low rates to switch to 15-year mortgages from conventional 30-year mortgages, he says.
Lenders also are loosening their grip on credit restrictions, Brown says.
"I think banks are making better decisions," he says. "They're not quite as conservative."
Stewart Title has seen an unusually high proportion of refinance business in the last year, with 60 percent of its business tied to refinancings, and 40 percent driven by real estate sales, as opposed to a typical year when the majority of its services are driven by sales, Carollo says.
"As soon as rates pick up even 1 percent, refis will go away," he says. "People have been saying for a long time that rates can't go lower, but it seems like every six months we have a new low."
Stewart Title's fees have remained constant for a number of years, he says. On a $200,000 house, for example, the buyer and the seller each pay about $760 plus tax.
On a mortgage refinance, only one party, the homeowner, pays. "Generally on a refinance, our income is about half that of a sale," he says.
Most title companies haven't changed their fees in years, he says, adding, "They are just trying to do more production with less cost and labor."
Carollo says Stewart Title is handling brisk winter business.
"Already in January, we're seeing strong orders," he says. "Usually this is the slow season, and it hasn't slowed down that much so far."
Carollo says he expects the market improvement to continue at least through the first half of this year, as mortgage bankers are projecting interest rates to remain low during that period and to start to increase in the third quarter.