A title company is an essential but often overlooked player in commercial real estate deals. Although the work of title companies is critical in the due-diligence and closing processes, investors and mortgage brokers often assume bigger is better and gravitate toward a large agency. But there is much to gain from shopping around for title services and ultimately going with a firm that specializes in a particular market.
Finding the right title company for a specific transaction can be the difference between a process free of pitfalls and one where you watch the closing date get pushed back — or worse yet, see a deal fall through. In commercial-property deals, title companies carry out several key functions behind the scenes. The firm researches the title to prove evidence of ownership, and to look for any outstanding debts or judgments that might encumber the property. The firm also provides title insurance that protects the owner from any defects that might later be discovered and could prevent the investor from selling the property.
The title company maintains the escrow account. In complex commercial real estate deals, this account can hold money from several different capital sources. And a title company usually prepares all the closing documents. In ground-up construction projects, the firm is often tasked with monitoring progress for the lender and distributing money to pay contractors.
As you can see, the title company carries out numerous critical duties. Commercial real estate deals are usually complicated and have issues that are unique to the specific project. Thus, it is important for mortgage brokers and lenders to partner with a title company that best fits your client’s project.
Due to the sophistication of commercial mortgage transactions, there are obvious advantages to knowing the individuals on your title team. The title company will frequently interact with each of the key parties involved in the sale.
You will want to be partnered with a personalized closing team consisting of a few key people, which often includes high-level executives. This core group also should be available whenever the client requires guidance or assistance. At some commercial title companies, however, this team can number close to 100 people. That’s a lot of different hands touching a deal and it allows more room for error. It also can be overwhelming for your client and leave them feeling like a number.
Also, many investors will go back to the same title company over and over again. Your client will typically want to work with the same people. The process tends to move more smoothly if the title team knows the investor’s history and has experience working with them. In some cases, however, your client will bring a repeat deal to the title company and, given its large size, will have to work with an entirely new group of people.
It’s also a not-so-hidden secret that some title firms may balk at smaller piecemeal deals if there’s not a guaranteed steady stream of business right behind it. It is important to find a title company that will treat each client the same, regardless of the deal size or the prospects of future business. The firm should know the advantages of building relationships that will earn future business.
Title attorneys and underwriters, for example, should be willing to take time to identify the intricacies of a deal from its beginning to its closing — no matter how long it takes to determine all the implications of an investor selling and waiving any rights of ownership to adjacent property. There’s true value and realized cost savings in being treated as more than another number.
Commercial real estate is a people business at its core. In fact, the collaborative effort between borrowers, brokers, lenders, underwriters and title attorneys doesn’t have to end with the transaction.
Nimble and smooth
A title company should be, in a word, accessible. Knowing the right person to contact when you have a question is a timesaver, as is getting an on-the-spot response. Another important attribute is flexibility. A title team needs to be nimble when the situation requires. An effective title company can switch gears quickly to address obstacles and present multiple options to clients.
Some firms may look at a more challenging deal as a headache not worth the time or energy, especially if it’s a smaller transaction. Depending on a project’s size and scope, there could be endless unknowns and obstacles. But the company should see the challenge as an opportunity.
In a complex commercial real estate deal, your client is likely to have numerous questions. For example, what are the implications of selling and waiving any rights of ownership? Do they have rights to adjoining properties and land parcels? A boutique title firm has more time to explain these issues because there’s less pressure from corporate headquarters to rush through closings and move to the next client. An independent title company also will order decades of parcel records and scrutinize legal descriptions to ensure the deal can proceed. It’s about quality, not quantity.
Commercial real estate is a people business at its core. In fact, the collaborative effort between borrowers, brokers, lenders, underwriters and title attorneys doesn’t have to end with the transaction. A title firm can connect mortgage brokers to the stakeholders it works with regularly to help them grow their business over the long term.
This type of interaction — whether virtual or in person — is something that often gets lost in the shuffle at some title companies. Building a bridge for better interactions among local market leaders, developers, lenders, attorneys and other key stakeholders is important to many title companies. These firms understand that their future business blossoms from their ability to strengthen existing relationships. ●