Progress is never easy or fast, but the rewards are well-worth the effort (and patience)! With the advent of new inventions, innovations and technology, we are continuously improving the quality of our lives and the freedoms we enjoy – both in our personal and business lives, which are inextricably intertwined.
Did you know that the audio-visual technology that makes it possible for families and friends to stay in touch across the globe, as well as the video-conferencing platforms that enable employees to work at home while remotely collaborating, took root from an idea to transmit images and audio over wire that was conceived by Bell Labs in the 1870s? Step by step, that idea became a reality over time, eventually giving rise to the smartphones and smartphone apps with video conferencing in the 2000’s, and then given a catalytic push in 2020 by the Coronavirus pandemic and the need for videoconferencing to allow workers to safely isolate while still conducting business remotely.
Similar to the evolution of videoconferencing, the development of the U.S. money rails has had a profound effect on the way we live and do business. I remember my mother saying how she thought the invention of the credit card was life-changing during her youth! In the U.S., the financial system has been relatively slow to evolve, but within the last 10 years it has picked up speed and there have been some amazing technological advances, such as Real Time Payments (RTP) and FedNow, the Federal Reserve’s version of RTP, which is on the cusp of being publicly rolled out. These newer payment rails, along with the convenience of modern payment methods – like PayPal, Venmo, Apple Pay and others – hold great promise for transforming the real estate and title insurance industries, and we want to share some special insights with you.
If you’d like to see where we’ve come from, and get a good idea of where we may be headed, then be sure to read the white paper, “Moving Money in a Real Estate Transaction.”
When trying to assess the economy these days, the word that comes up for a lot of people is “uncertain.” During times like these, businesses naturally look to revisit departmental budgets and find new ways to control costs.
While frugality is never a bad idea, things can get complicated when addressing your IT spend. For many companies, the technology stack is one of the biggest drivers of productivity and profitability, which makes haphazard budget cuts the equivalent of shooting yourself in the foot. You also must carefully consider how any cuts may affect your ability to protect your company’s data, ensure customer privacy and maintain regulatory compliance.
Here’s how you can address your IT costs intentionally, strategically and most of all safely.
Start simple
Begin by looking at your existing IT processes, procedures, solutions and systems. Then, ask yourself some hard questions and answer honestly. Which are value-adds and which are value-drains? Be as thorough as possible while doing this inventory. Remember to consider not only the up-front cost of a given software system, but also associated training and maintenance expenses.
Find low-cost alternatives
There is no doubt that software solutions streamline business processes and drive new efficiencies, but they also carry costs that can add up quickly. One potential remedy here is to seek out lower cost alternatives.
Yet when considering lower cost software, always keep that old expression of “You get what you pay for” in mind. One potential downside of a less expensive product is that it may not offer the same sort of robust protections for sensitive data flows or mission critical infrastructure. That’s why you should only deploy this strategy for software that is not involved with securing valuable company assets and does not need to comply with intensive legal regulations.
But that doesn’t mean there still aren’t numerous areas where you could find potential savings! From scheduling assistants to word processors to graphic design platforms, there is no shortage of cost-effective software solutions just waiting to be leveraged online. We even put together an entire blog on the topic where you can get more information.
Consider the cloud
You’ve likely heard a lot about the cloud over the past few years, especially the positive way it can impact your business. When you look at the benefits, it is easy to see why.
Transitioning IT systems to the cloud has been shown to enable a more productive and nimble workforce. You reduce the costly and cumbersome hardware systems you are responsible for. You can also add or remove resources on an as-needed basis. System updates and maintenance are typically handled by the cloud provider following a transition to the cloud.
Of course, transitioning to the cloud can carry some security risks. To mitigate these, carefully vet third-party providers. Ask pointed questions about how they ensure compliance and what they can do to protect data while it is in-use, in-transit or at rest.
If you want to learn more about the benefits the cloud offers to users and businesses, check out our previous blog.
Assess your software licenses
Once you start adding software systems to your business, you can quickly lose sight of how many licenses you are paying for if you are not careful. Any assessment of your IT stack and its associated costs must include a rigorous inventory of who is using what and for what purpose. After you’ve compiled this information, take steps to reduce licensing costs for unused or underutilized applications.
Apply a critical eye to cut IT waste
Operating a lean business and seeking out cost-cutting measures can be a good idea in business, especially in times of uncertainty and upheaval. But when it comes to your IT stack, you need a scalpel − not an axe.
Indiscriminate cuts can set your company back – not move it forward, and not just in terms of lost productivity. Fines, fees, breaches and reputational damage can all result from cutting back on IT solutions that secure your business’s critical systems. The potential consequences of skimping on IT security far outweigh any savings you might achieve.
But by using these tips, you can free up valuable resources to drive greater business growth and innovation without compromising your existing setup.
As if there wasn’t enough uncertainty coming into 2023, the failure of three banks in March has darkened the outlook for an economy that otherwise seemed to be holding its own in the first quarter.
The banks affected had significant exposure to technology and cryptocurrency, and included:
Silvergate Bank (cryptocurrency) announced on March 8 it was winding down due to losses in its loan portfolio
Silicon Valley Bank (technology-start up lender) taken over by California regulators after experiencing a run on the bank due to its failure to raise needed bank capital
Signature Bank (cryptocurrency) closed by bank regulators, citing systemic risks
Although state regulators, the FDIC and the U.S. Treasury Department all stepped in quickly to attend to the failed banks and reassure the entire banking system, there were plenty of investors, industry pundits and business owners with the jitters in the weeks that followed.
The question for the housing industry is, how might the banking industry problems affect the long-term outlook for real estate sales in general and interest rates in particular?
Credit tightening
The most immediate concern highlighted by many industry analysts is that nervous banks may tighten their credit standards, affecting every aspect of lending, from consumer credit and auto loans to residential and commercial mortgage loans.
Susan M. Wachter, Wharton professor of real estate and finance, said bank investors are anxious about real estate lending because commercial real estate lending has become “unattractive” due to rising vacancies.
Speaking on the Wharton Business Daily radio show that airs on SiriusXM, Wachter said, “Banks are likely to respond to their investors’ distress by lending less, and this is not a good thing for real estate.”
But she quickly qualified her remarks by noting that an “economy-wide credit crunch” would most likely be avoided, given the federal government’s quick response that quelled fears within the banking industry.
The real estate industry is also keeping its eye on what this all means for the economy in general and further potential interest rate escalation.
Looming recession
Responding to stronger-than-expected economic data, Fannie Mae’s Economic and Strategic Research (ESR) Group revised upward its first quarter 2023 GDP forecast in its latest monthly commentary, projecting a modest recession to begin in the second half of 2023, rather than in Q2 as previously forecasted.
“While uncertainty has risen following turbulence in the banking sector, the ESR Group noted that bank failures often foreshadow economic downturns,” Fannie Mae stated. “As such, the ESR Group believes that the recent events may act as the catalyst that tips an already precarious economy into recession, primarily via the combination of tighter lending standards among small and midsized regional banks and weakened business and consumer confidence.”
In its March 2023 release, the Conference Board mirrored Fannie Mae’s outlook, saying U.S. GDP growth defied expectations in late 2022, and early 2023 data has shown unexpected strength. The Conference Board said this is due to the fact that consumers have resisted the dual headwinds of high inflation and rising interest rates.
In light of this, they upgraded the Q1 2023 forecast to 1 percent growth. However, they also continue to forecast that the U.S. economy will slip into recession in 2023 and expect GDP growth to contract for three consecutive quarters starting in Q2 2023, largely due to persistent inflation and Federal Reserve hawkishness.
Minutes from the March Federal Open Market Committee (FOMC) meeting released on April 12 also indicated that the potential economic effects of the recent banking-sector developments would most likely result in the economy falling into a mild recession starting later this year. But given the underlying economic fundamentals, the participants saw this as short-term, with a recovery over the next two years.
Inflation and interest rate outlook
Inflation dropped from a high of 9.1% in June to 6.5% in December, but then slowed its pace of decline, easing only a half-percent to 6% over the course of the first two months of 2023. This slower pace did not impress the Federal Reserve, and so in spite of the banking crisis that was evolving during its March meeting, they raised the federal funds rate another 25 basis points.
However, the March numbers were more encouraging, with the CPI rising only 5% over the last 12 months, according to the April 12 release by the U.S. Bureau of Labor Statistics. This represents the smallest 12-month increase since the period ending May 2021, and shows that inflation is continuing to cool off in the wake of dramatic increases in interest rates.
More than half of respondents in Bankrate’s First-Quarter Economic Indicator poll said the all-important federal funds rate is likely to peak at 5-5.25%, indicating they believe the Fed will only raise rates one more time. Slowing inflation, the banking crisis, and recessionary indicators could all play into the Federal Reserve’s decision to put an end to rate hikes for the remainder of 2023.
In that same survey, more than 80 percent of respondents said the Fed was unlikely to make any move to cut interest rates until 2024, in an attempt to give the economy more time to cool down.
Lawrence Yun, chief economist of the National Association of Realtors, said he believed the Federal Reserve would take into account the banking crisis and its overall effect on the economy in considering further rate hikes, opining in an interview for Realtor Magazine, “The Silicon Valley Bank failure, along with a few other banks, means that the Federal Reserve cannot be so aggressive in raising its short-term interest rates. Therefore, mortgage rates will decline.”
In the final analysis
The economy has consistently reacted in non-traditional ways since the onset of the pandemic, constantly surprising pundits with its persistently healthy fundamentals. The unexpected strength in the employment sector in the first quarter of 2023 and the better-than-expected growth in GDP were acting together to moderate recessionary concerns until the March bank failures reawakened those fears.
The same can be said for the real estate industry. In spite of high mortgage rates, real estate sales showed some improvement in February, and homebuilder sentiment has been on the upswing with new permits on the rise.
But the banking crisis has added another element of uncertainty into the mortgage and real estate industry for the foreseeable future. While it could precipitate lower interest rates as Yun suggested, tightening lending standards could well offset any gains realized.
Only time will tell how all of this will play out as the industry continues to keep a watchful eye on how the Federal Reserve handles both the banking crisis and interest rates in the coming months.
Ever have a client who was sure their transaction had to be written on a large underwriter? Hey, I get it. Clients are sometimes drawn to the big title insurers, assuming that there are benefits to partnering with a large organization. They may feel a smaller underwriter won’t be able to meet their needs, and the deal is just too large or important to leave anything to chance.
As an independent title agent, you know the importance of selecting a trustworthy, reliable, and responsive partner to provide title insurance for your clients. In this blog, we’ll dive into the features that matter most when selecting an underwriter, debunk some common myths, and show why bigger isn’t necessarily better when selecting a title insurer. First, let’s consider some of the reasons a client might ask you to ensure a transaction with one of the big guys to see if that request aligns with their interests or if they are simply following a common myth.
If I go with a big underwriter, won’t I get better coverage?
There’s a common misconception that the product of the title insurer – the title policy and endorsements – often varies meaningfully in the terms and coverage between underwriters. It’s just not so.
The truth is that generally the product is the same regardless of who underwrites the policy. In states where the forms are promulgated by law, the insurance regulator determines for the entire industry what language is acceptable, and what terms and conditions will be incorporated into their contracts. In states where the forms are not promulgated, most insurers use either the American Land Title Association forms, or the California Land Title Association forms, with little variation.
Basically, the policy will be the same or similar regardless of the underwriter.
If I go with a big underwriter, won’t I get a better rate?
At first glance, this seems like a very reasonable question. In some industries, larger companies have a natural pricing advantage. But in title insurance, it’s hard for an underwriter, no matter how large, to distinguish itself on rates. In states where the rates are promulgated, the insurance regulator decides what to charge and all insurers must follow the regulator’s set rates. Even in those states where regulators do not mandate rates, there may be a ratings bureau that files rates on behalf of its member insurers – which means that most, if not all insurers, will be offering the same rates. And, in those states where insurers file their own rates, they are typically competitive and therefore very similar.
So, the rates will be the same or similar, regardless of the underwriter.
If I have a claim, won’t a big underwriter be in a better position to pay?
Again, this question seems reasonable. Title claims can run into the millions of dollars on commercial properties, so a client might think a big underwriter naturally has more resources to pay claims compared to a smaller underwriter. However, two broad factors level the playing field when it comes to paying claims: state regulation and reinsurance.
State regulators take great pains to protect the public by ensuring that title underwriters of all sizes have the resources to pay claims. Statutorily required reserves must be set aside to pay claims. Regulators carefully monitor the financial soundness of the insurers authorized to do business in their states, and title insurers submit both annual and quarterly financial statements. Title insurers have annual independent CPA audits and are subject to financial examination by the regulator, typically at least once every five years. This means that no matter the size of the insurer, there is a financial threshold that each insurer must meet to ensure its financial stability and continued operation. Moreover, many states have single risk limit formulas that cap the amount a title insurer may insure for a particular transaction risk without having to provide reinsurance.
When reinsurance is provided, there are essentially two insurers – the primary title insurer, and the reinsurer who stands behind the reinsured policy amount. So, while it’s true that a large title insurer may retain a larger dollar amount by itself as a single risk, a smaller title insurer utilizing reinsurance for that single risk is giving the insured two layers of financial security at no additional expense to the insured. A title insurer should be happy to provide you with information regarding its reinsurance, and as a customer or agent, you are entitled to ask for it.
At Alliant National, we reinsure high liability transactions up to $20 million with the Lloyd’s of London markets, and that’s one of the reasons we can confidently say: No title insurance underwriter can offer you better protection for your title risk than Alliant National.
So, if the policy and the price are similar, and the capability to pay claims is sound, what are the real differences between those big underwriters and a smaller underwriter like Alliant National? Moreover, what are the reasons a client might want to select Alliant National over a larger underwriter?
We Don’t Compete Against You For Customers
Alliant National does not compete against you for the customers in your market. Our sole focus is to support the independent title agent. Alliant National will never take a transaction or a customer from you. We strive to help you build better relationships with your customers, and to help you succeed.
Fast And Innovative Answers To Underwriting Questions
Underwriting delays put deals at risk. That’s bad for you and your clients. Sometimes big underwriters back-burner underwriting requests to service their company-owned title offices, and they sometimes provide “canned” or “by-the-book” responses when an underwriting challenge arises. Alliant National does not compete with its independent agents, so it’s able to put all of its underwriting resources to work for independent title agents and their clients. As a smaller underwriter, Alliant National also has the flexibility to find innovative solutions for you and your clients when underwriting challenges arise.
Less Friction
At larger underwriters, the agency and underwriting units can often be at odds with each other. There can also be communications breakdowns between corporate, regional, and state-based teams. At Alliant National, however, the absence of a multi-tier management structure gives our agency, underwriting and other teams the ability to work together closely and seamlessly. Everyone pulls in the same direction to deliver the best outcomes for our agents and their clients.
Real Service When Claims Emerge
We already discussed why the big underwriters generally are not “better” when it comes to the ability to pay claims. However, some big underwriters fall short when it comes to the claims process by making it seem like their goal is to pay no claims at all. At Alliant National, we have flipped the script when it comes to claims. We recognize that the claims department is where our title insurance product goes to work. We strive for timely and clear communication with insureds and agents, seeking first to understand the situation from all points of view. It’s a unique and collaborative approach to claims that agents and insureds value.
The Courage To Care When it comes to choosing an underwriter, it’s important to consider what really matters: finding a partner who prioritizes your needs and the needs of your clients. Unfortunately, larger underwriters may lack the flexibility and personal touch that independent agents and their clients require. Don’t get me wrong, there are a lot of great people working at large underwriters, but size can lead to conflicts, friction, and a lack of flexibility. At Alliant National, we pride ourselves on being able to deliver customized solutions that meet the goals of the real people behind each transaction. Whether it’s a multi-million-dollar commercial deal or a starter home for a young family, partnering with Alliant National means choosing a team that truly cares about you and your clients.
Forming strong connections with real estate agents is a must in any market
For title insurance agents, few audiences are more important than the real estate agent audience. Without building strong, reliable and mutually beneficial relationships with these companies and individuals, cultivating demand and growing profits becomes much more challenging. But like any target audience, successfully marketing to Realtors requires developing tailored strategies and tactics. Here are a few tips, tricks and best practices to get you started.
Build your Realtor buyer personas
Begin by identifying and building your buyer personas. If you’ve never built a buyer persona before, we have written a blog post on the topic that you can refer to here.
A good buyer persona includes much more than general demographic information. Do not merely focus on things like location or age, but also on psychological factors like hopes, behaviors and pain points. Taking time to consider these factors will make it easier to reach your target audience and connect with them in a profound way.
Remember, the more specific the better. Real estate agents are not monolithic as a group. Segment your audience and build as many buyer personas as you need to run a successful campaign. It may seem like a lot of work, but it will pay off later!
Leverage owned, paid and earned media channels
Once you have a clear idea of who you are trying to reach, then it is time to think about the owned, paid and earned media channels you will leverage to reach your audience. Let’s go through what each of these means:
Owned media: Owned media refers to any media that you own, like your social media channels, email marketing platforms, blog and, of course, your website.
Paid media: Paid media encompasses any media exposure you pay for, including search and social media advertising, as well as sponsored content placements.
Earned media: Earned media includes media mentions that are neither paid nor owned. Some examples are op-eds, press releases and guest blogging.
Meet your customers where they are with research
Understanding your available media channels is just half the battle. You must also supplement this by effectively using research to decide which channels you will use and in what way. Without doing this up-front legwork, your marketing efforts will amount to the old saying: “throw it at the wall and see what sticks.” Here are a few ways that you can start using your paid, earned and owned media strategies in an intentional and impactful way.
The online media ecosystem for Realtors is vast. Take advantage of paid (such as ad placements) or earned media tactics (like writing and pitching an op-ed) by looking into publications that are highly popular within the real estate industry.
Like pretty much every person on the planet, real estate agents rely on Google to find answers to important professional problems. By deploying paid strategies like search engine marketing (SEM), you can put yourself in front of active prospects. This is another area where your potential success with a particular media channel will hinge on research. Be sure to deploy free tools like a keyword planner and check Google Trends for valuable data on keyword search volume.
In terms of owned media, your biggest asset for attracting Realtors is likely to be your website. While nearly every company already has a website, far too many have not incorporated standard search engine optimization (SEO) techniques, which can lead to a loss in potential web traffic. Consisting of both on- and off-page tactics, SEO is a must for anyone looking to attract a specific audience such as Realtors. Refer to our previous blog post on the topic for more information.
Social media marketing is yet another opportunity to reach real estate agents in a strategic, targeted fashion. First, the data shows that 77% of Realtors leverage social media to connect with important audiences such as millennials.[i] Additionally, according to the National Association of Realtors, almost half of real estate businesses agree that the social media channels resulted in the highest quality leads.[ii] Unfortunately, social media is becoming increasingly a “pay-to-play” arena, which we have also written about previously. Yet a minor ad spend can often prove advantageous for those attempting to reach niche audiences, as the major platforms allow you to micro-target through useful criteria like job title, location, profession, industry, etc.
Find the right strategies and reap the rewards
I won’t sugarcoat it: creating successful digital marketing campaigns is not easy, particularly if you are looking to reach a specialized audience. Yet in most markets, the real estate agent audience is too important to ignore. When done successfully, you’ll be able to meet these audiences where they are and create powerful, mutually beneficial relationships on which to build a successful, long-lasting business.
