Why TitleEase selected franchising over joint ventures

While franchising is common in real estate sales, it is not often used in other parts of the home buying transaction.

For example, Remax got a foothold in the mortgage brokerage space with Motto Mortgage, but no other major companies have followed in its footsteps.

The title and settlement services business also has some franchisors, but it has not been a significant part of the industry's business.

However, TitleEase's management team decided that establishing a franchise model was a better way to expand its reach than a joint venture setup. Based in Providence, Rhode Island, TitleEase is part of the Lincoln Family of Companies, which includes Lincoln Abstract & Settlement Services and Lincoln Appraisal & Settlement Services.

"We really focused on the shortcomings of the joint ventures that we saw out there," said Joseph D'Urso, CEO of TitleEase. “There's a whole lot and a whole bunch of joint ventures out there, and they range from simple types of fee-sharing agreements to full-fledged companies formed for JVs, and some of them, quite frankly, just aren't compliant. "

Those that are compliant are difficult to set up and manage for both parties involved, he continued.

But a franchise model has fewer problems complying with the Real Estate Settlement Procedures Act, particularly in relation to the anti-kickback provisions known as Section 8. TitleEase worked with one of the leading law firms in compliance with Bradley Arant to ensure it was fully RESPA compliant, D'Urso said.

The company had two other considerations in opting for this model over joint ventures.

"First and foremost, because of the way we set it up, both the franchisee and the franchisor have real title work and responsibility within the franchise model," D'Urso said. "It allows the franchisee an unprecedented level of control, whereas with these joint ventures they don't really have control over the process."

The franchisee also has control of the business and can brand it in any way they choose.

"If they later want to sell the franchise, they can do that," he said. "So you have unprecedented control and, as a result, value creation too." You don't have to use the TitleEase name, which sets it apart from many common franchise concepts like those in the food industry.

As part of the compliance focus, both TitleEase and the franchisee are licensed in each state in which they operate. TitleEase will help owners obtain a license.

While anyone can become a TitleEase franchisee, those who are already in the mortgage and real estate business make the more ideal owners.

"They have already expended the time, money and energy to acquire customers and complete transactions," D'Urso said. "So if you're a lender, whether it's a traditional lender or a private moneylender, whether you're a real estate agent or real estate agent, or even an underwriting attorney, these are ideal franchisees because they have direct businesses that they can enforce their franchise."

TitleEase will arrange the underwriting relationships for the franchisees. In the eyes of the four insurers that TitleEase works with, these franchisees are considered branches for this purpose, he explained.

TitleEase must also be licensed as a franchisor in the states in which it operates. It is legal for title work in 28 states, but so far only three states have approved the required franchise documents; States that have reciprocity agreements will allow for expansion into more jurisdictions.

The company started its franchise operations in September. Two were in operation at the end of last year, and a further eight to ten were connected to the grid in the first quarter. It takes several months for the units to be approved and then trained, he stressed.

Among those becoming TitleEase franchisees are Select Realty's Buy904 team in Jacksonville, Fla. as 904 Title; and a collaboration between mortgage lender Northwind Financial and CFSI Loan Management, a lender services company based in Grand Rapids, Michigan.

"It's really remarkable how many people are looking for one of those types of solutions where they have more control over their business and don't have to ship more titles and then worry, 'The settlement is going to be delayed because an outside party is doing it the work for me?'” D'Urso said. Originators or real estate firms "can offer a customer experience that fits seamlessly into their existing process because now they just mix it into their dialogue with the borrower or the buyer or seller."

As a franchisor, TitleEase provides technology and software, as well as training and certain back office functions.

"It's actually different from a hamburger franchise in that way because we don't just train them, tell them where to get the equipment, and then say, 'Okay, now you run your own business,' because we're in each are file," D'Urso said. "We work with each of our franchisees on every title policy that they run within the same system."

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