Your Referral Partners Are Under Siege: How Title Ownership Wins the Agent Relationship Back with Scott Oakley of TitleEase

Welcome and meet Scott Oakley 00:00

David: Listeners, we’re in for a treat. I’ve got Scott Oakley here. He’s a seasoned executive with 29 years of experience in real estate, prop tech, and fintech. He currently serves as executive vice president of sales at Title Ease, a title and escrow franchising company that we’re going to be talking about. This is a must-listen podcast if you’re a lender looking to increase revenue, and who isn’t these days? Scott’s background in prop tech and fintech is pretty impressive. Scott, welcome to the podcast. It’s good to have you here, friend.

Scott:  Thanks, David. Appreciate it. I’m glad to be here.

David: You’re also the founder of MoveGuru. Tell me about that.

Scott:  That was my fifth prop tech startup, and my last one. The company is still doing very, very well. We connected utilities for moving consumers, and we also did insurance, trucks and moving vehicles, all kinds of things for moving consumers. I had it for about eight years, and then I handed the reins off to someone who was a better operator than I was. I’m good at startups. I’m not the best operator, so I handed it over to someone who could operate it.

David: I relate to that so well. It’s so important to understand what you’re good at, make the adjustments, and hand things off at the appropriate time. I love that you’re doing a heck of a job at Title Ease. We’re going to post Scott’s full resume and background in the show notes, folks. You’ve got to check this guy out. I was really impressed with all the accomplishments. Kudos to Joe for getting you on board. I want to get into what’s happening in the brokerage world right now that I’d say lenders don’t fully appreciate.

A perfect storm: why every brokerage should monetize the whole transaction 02:31

Scott:  It’s an interesting time right now, David, because there’s a perfect storm of chaos going on in the industry, whether you’re on the real estate side or the mortgage side. The last four to five years have just been chaos. I go to a lot of conferences and listen to analysts who dive deep into the numbers in the industry, and it’s a little bit scary.

At the last conference I was at, the Inman Blueprint conference, the speaker was giving some startling stats. He was like, “Guys, if you own a real estate brokerage or a mortgage brokerage, why aren’t you incorporating ancillary revenue into your service portfolio? Every single brokerage out there should have real estate, mortgage, insurance, and title.” I’m sitting in the back listening, going, “Yeah, yeah, yeah. I’ve been preaching that for years.” If you already have the consumer captured, why not get revenue on all five sectors of the real estate transaction? Most people take one and say, “I’m glad for it.” But there are five of them out there.

David: Which is so short-sighted, especially in a market like this. We should all be maximizing every opportunity, wringing the towel to get every dollar of revenue we can out of every great consumer transaction. It also increases stickiness back to us. That’s something you and I have talked about numerous times when we look at the sales funnel.

Rocket, Redfin, and Compass: consolidation 04:08

David: Rocket now owns Redfin and Mr. Cooper. What does that kind of vertical market integration mean for independent lenders, in your opinion?

Scott:  You’ve got a lot of consolidation in the industry. Everyone talks about Rocket and Redfin because it’s huge, and Rocket is the largest lender out there. But you also have to look at what Compass is slowly and quietly doing. Everyone knew Compass bought the Anywhere brands: Century 21, Coldwell Banker, ERA, and so on. What people don’t realize is that very quietly, in the background, Compass is buying up mom-and-pop mortgage and title operations all over the country. They have the same playbook Rocket does, just at a mom-and-pop scale.

An interesting stat from last year: with Redfin, they doubled the conversion rate. Before the acquisition, 27% of Redfin customers were converting to a mortgage. Now it’s 47%. So 47% of Redfin customers are attached to a Rocket mortgage.

David: Wow, I did not know that.

Scott:  And you have Compass doing this, buying up the small title companies and the small mortgage brokerages, very quietly and sneakily doing what every brokerage should be doing, which is monetizing the entire transaction.

More importantly, once you have the relationship with the consumer, whether you’re in mortgage or real estate, and it’s a firm, solid relationship, there’s a trust factor. You want to control that transaction from start to close. If you’re involved in title, mortgage, and insurance, you can make sure every piece of that transaction runs smoothly. When you own it, you can make sure that actually happens.

Owning title and the lender–agent relationship 06:13

David: That’s a really good point, especially with the Redfin and Mr. Cooper integration. It’s really happening. On our previous podcast with Title Ease, Joe and Roy talked about how lenders are owning the title. How does title ownership change the relationship between the lender and their top agents?

Scott:  If you’re on the lender side, you want to be partners with your agents and with real estate brokerages, integrating seamlessly so the transaction happens smoothly. You get one-stop shops that are trying to do exactly that. I mean, it didn’t work, but Bed Bath & Beyond tried it. They tried to buy Fathom, and that deal went sideways, but they were really trying to take the consumer from the transaction into home goods. The average consumer spends $12,000 on home goods after the sale. So Bed Bath & Beyond said, “Why don’t we get ahead of that?” What they were trying to do was cement the relationship with the agent.

If you’re a mortgage broker, you want to do the same. You want your relationships with agents and real estate brokerages to be so solid that they always come to you. Same if you’re on the real estate side. You’ve got to have preferred lenders who have relationships with your agents, so that if something goes awry, they know who to call and can get it fixed quickly.

How Title Ease works: you own the agency 07:58

David: That’s so true. One of the things you guys are doing is creating not only this relationship but the income opportunity, which I get excited about when I talk to my clients about additional ancillary revenue. For every mortgage lender listening right now, what does that look like, and how does it work?

Scott:  Before we touch on that, what we do at Title Ease is pretty simple. We help set up a title entity that the owner of the mortgage company or the real estate company owns. It’s theirs. If they want to spool it up and sell it two years down the road, by all means, go for it, because it’s your company.

David: That’s a really good point, Scott, because this is their asset. It’s not a shared asset. This is their book of business. Quite honestly, I was a little surprised by that. I said, “Joe, don’t you want to hold on to a piece of this?” And he said no, that’s not our model. We want to create a real ability for lenders to create a new revenue stream as well as a new equity asset.

Scott:  An equity play. Absolutely.

Why equity beats a joint venture 09:15

Scott:  It was interesting. I was on a call last week with a really big Exit Realty broker with seven offices in the Midwest. I asked him flat out, “Why is title interesting for you?” He said, “I’ve had a joint venture for seven years, and it went great. Revenue was coming in the door. It was perfect. But all of a sudden Compass came in and bought them up. I own an Exit Realty franchise. I’m not giving my revenue and my clients to a Compass agent, because now the title company is owned by Compass.” And because he didn’t have an equity stake in the joint venture… when you have a joint venture, you get revenue, but you don’t own anything.

David: That’s right.

Scott:  So we flip-flopped the whole model. We said, “We don’t want to own any piece of your title entity. You own 100% of it. All we want to do is be your back-end supplier, do the dirty work, get our hands dirty, and make the transaction smooth for you.” Inevitably it’s your company. You own it, you can do whatever you want with it. We work for you.

The economics of a title agency 10:24

Scott:  On the numbers, the average price of a house in the United States, depending on where you are, runs about $420,000. The average title policy on that house costs the consumer about $3,600. If you’re a small to medium-sized real estate or mortgage broker doing 100 transactions a month, that’s 1,200 a year. At $3,600 in top-line revenue on each of those 1,200 transactions, it’s a sizable amount of money. Depending on how you run your business, and again, we don’t own it, we can just help, if you run it efficiently you should be netting about $1,000 per transaction. On 1,200 transactions a year, you’ve just added $1.2 million to your bottom line without gaining one extra customer. It’s huge.

David: That is so significant, especially in the market we’re in right now. When you look at the economics, it’s a no-brainer.

A title company in a box 11:33

David: But a lot of people say, “I’m so busy right now, Scott, I don’t have time to focus on setting up another business.” That’s another piece of your magic: you literally set it up. Talk about that.

Scott:  We get about fifty new people a week who reach out and say, “I don’t know anything about title, but I’m interested in title.” I say, “We make it really easy. We have attorneys on staff, so we’re going to do all your licensing and all your compliance.”

David: That’s a significant statement right there. You’re going to do all of the licensing across all the states?

Scott:  We have attorneys on staff, and that’s their job. We bring on new partners every single month, and they need licensing in four states. Great, we’ll handle it. We do all your licensing and all your compliance. In a quick intro call, I tell people we’re basically a title company in a box. We give you the box, you open it, and all of a sudden there are all these goodies inside.

David: And you own it. The mortgage company owns it.

Scott:  The mortgage company owns it. It’s yours. We work for you. You tell us how you want to run your business, and we do the heavy lift on every title transaction. We do the intake, the exam, the curative, the closing docs. We do all of that, but you’re guiding us and telling us how you want it done. Great, we’re here for you.

The movie theater lesson 13:16

Scott:  I like to give an analogy. I’m a big moviegoer, and a Star Wars dork, too. I love the Mandalorian. I equate this industry to the movie industry. When you go to a movie theater, you pay $13, $15, $18 for a ticket. That’s a loss leader. Where they make their money is the popcorn, the Coke, and the Twizzlers. It’s the same in the mortgage and real estate industry. That real estate commission, or that mortgage basis point, is your movie ticket. Where you should be making the money is the Twizzlers. You should be making it on title and insurance, and if you’re in the real estate space, on mortgage. If you’re in the mortgage space, on real estate. You need to get ancillary revenue services and tack them on to the customers you already have.

David: When you say “tack it on,” it’s a separate corporation. You’re adding additional revenue streams in another entity, and you set it all up for them.

Scott:  We set it up.

David: I was explaining this to one of my clients, and you could hear them going, “Wah, wah, wah.” Then I finally said, “You do realize you own this business, and they set it all up.” He started asking a few questions, and the light just clicked on. He said, “This is a no-brainer. Why would I not be doing this? Why would anybody not be doing it?” I think people get caught up in the problems in their face and aren’t looking at the opportunities out there.

Real-world results: Oklahoma and Florida 14:46

David: Give us some examples of people who are doing really well with this.

Scott:  There’s one I’m thinking about in Oklahoma. They’re doing 200-plus title policies a month. And they’re not just doing policies for their own brokerage. They’re going out to other brokerages, and those brokerages see how clean the transaction process is and how they’re closing on time, and they’re starting to use them. I’m really excited about a new brokerage I’m opening in Florida. They’ll start in January doing about 100 a month, and they’re predicting that by June they’ll be doing about 500 a month. They already have the people coming over and the transaction volume. At 500 a month, at $1,000 net per policy, it’s a significant amount of money.

David: Significant. All of a sudden you could run your mortgage company as a loss leader and have this be the cash cow. And not only does it bring in revenue, it’s now an asset, like the MSR value of retaining servicing. You own it, and it’s a tradable asset. I love the one story where a company passed on it and an agent picked it up, said, “I’ll do this, that’s a no-brainer,” and built a revenue stream. I think any business owner listening has no barrier to entry. Yes, you’d like a whole company to sign up, but if your company does it, loan officers can sign up and set this up too, if there’s significant volume. It’s for everybody.

What it costs to start 16:41

Scott:  And David, even more importantly, we’ve taken the barrier to entry for title and reduced it so low that anyone can do it. If you set up a traditional title company anywhere in the United States, minus California, which is a little more expensive, you’re probably looking at between $100,000 and $150,000 to set it up and get it operational with all your licensing. We have this down to such a science that it’s not $150,000, it’s $15,000. For $15,000, maybe $20,000, depending on how many licenses you want and how many states, it’s done. This is all we do all day long. We’ve gotten the cost of entry so low that I don’t understand why everyone isn’t doing it.

Share equity with your top producers 17:34

David: It makes so much sense. We’ve talked about the positive benefits. There’s got to be a downside. Where can this go wrong?

Scott:  Every company is run differently. The very few companies that are struggling, it really comes down to how they put together their ownership. As owners, we’re always like, “We’ve got to retain as much as we can. We’ve got to have 100% control, or 80% control.” I tell people that with title, you really want to spread the wealth a little, because you want your top loan officers and top real estate agents to have value and an equity position so they bring their business to your title company.

David: It keeps them around. We’re all worried about everyone bailing and getting recruited away to another firm, and this is a way to lock them in with an equity interest.

Scott:  I tell every single person, you can take my advice or not, but where I’ve seen it work best is when someone takes a certain percentage of ownership in the title company, whether it’s 10%, 20%, or 25%, and saves it for their top real estate agents and loan officers, so they have a vested interest in getting all of their business into your title company. It’s going to pay off tenfold.

David: There are so many reasons to do this. I can’t think of one not to, other than that you’re not making money, and if that’s the case, what are you in business for anyway?

How to get started, and who it’s not for 19:18

David: How do people get signed up for this, Scott?

Scott:  It’s pretty simple. Go to titleease.io and fill out a form, and someone will get back to you very quickly. We have a great sales and marketing team. Then it’s a 30-minute meeting where you ask all the pertinent questions and we give you all the data up front. We’re a franchise organization, David, so we’re required by law to give you what’s called a Franchise Disclosure Document. It discloses, frankly more than we’d like, every single thing about Title Ease you could ever imagine. It’s federally required. It shows you our financials and everything. We’re an open book, and we’ll tell you realistically what to expect.

David: It actually makes me feel even better knowing that kind of transparency is involved.

Scott:  Of course. We’ll give you honest answers. I was on a call this morning with a new prospect who was a little too small, and I told him it’s probably not worth the time and effort to work with us now. A year from now, if you grow your organization and double it, then it’s the right time. For a title company, unless you’re doing ten title policies a month, you’ll have expenses to run. Ten policies a month is kind of your benchmark. Above ten, you absolutely should have title. Below ten, probably not yet.

David: That’s a low barrier to entry. There are loan officers who can do that.

Scott:  Yep, ten.

Aligned incentives, valuation, and wrap-up 21:16

Scott:  We try to make it as transparent, simple, and easy as we possibly can. The great thing about how we set this up is that we share in the revenue with the owner. We don’t own any of the company, but we share in the title revenue because we’re doing the majority of the work. We don’t make any money until they make money.

David: The alignment, like we’ve said all along, is a no-brainer.

Scott:  We’re completely aligned. The more money they make, the more we make, and everyone’s happy.

David: A pretty exciting business proposition, especially in a market like this. Listeners, you’ve got to check this out. Again, the website is titleease.io. There’s a lot of good information there, and you explain it really well. If you have questions after looking at it, get on the phone with one of the representatives. We’ve had Roy on in the past, and he does a great job. You’ve hired a great team, Scott. They’re very informative and service-minded, and this is something anyone listening to this podcast needs to give serious consideration. If you’re doing ten transactions or more per month, that’s a low barrier to entry. You need to be setting up your own title company, especially when Title Ease does all the work, and you have a growing asset.

Scott:  The average title company right now is selling at about 10x EBITDA.

David: And you’re doing 10x. Wow.

Scott:  10x EBITDA for the average title company. Yep.

David: This flips the model: you use the mortgage company to build the 10x value in this. Scott, thank you so much for coming on and sharing the vision. I love your enthusiasm. Congratulations on 29 years of success in prop tech and fintech and everything you’re doing. Kudos to Joe and the team for having you there. You’re obviously moving the needle, and I’m excited to have you as a sponsor. Thank you for being a sponsor of the podcast. But folks, even if they weren’t a sponsor, this is something every mortgage company should look at, or honestly virtually anyone in the business doing more than ten transactions a month. Thanks, Scott. Appreciate you coming on.

Scott:  Absolutely, David. Thank you for having me. I appreciate your time.

David: It’s an honor. I appreciate the relationship. Say hi to Joe and company.

Scott:  Absolutely.