The title insurance company industry is booming, reaching $56.8 billion in 2022. It is estimated to have a compound annual growth rate (CAGR) of 11.3% from 2023 to 2032. For those looking to invest in your own title company, now is the time to get started.
When starting a title business, you assist homebuyers and mortgage lenders by researching property records and facilitating real estate closings. This involves identifying any issues with the property title or liens attached to it that could impede a sale.
This guide will walk you through the key steps in how to start a title company. Topics include market research, competitive analysis, sourcing equipment, obtaining professional liability insurance, applying for an employer identification number (EIN), and more.
1. Conduct Title Market Research
Market research is essential in the insurance and real estate industry. Understanding general insurance concepts is key while developing a business plan for a title company. Market research helps with this, along with understanding your target market, local market saturation, and trends in your industry.
Some details you’ll learn through market research into title insurance principles include:
- Housing inventory shortages have slowed purchase volume growth, however, mortgage rates have declined recently driving an uptick in refinances.
- Title businesses need to work with the county clerk. Getting to know the state’s department helps you better understand those in charge in your area.
- A title company may need to obtain a surety bond depending on the circumstances.
- In addition to transaction volume, the average price per transaction also determines market size.
- The average fee charged by title businesses ranges from $700-$1,800 depending on the state, providing meaningful revenue per closed deal.
- Appreciating home values also increases the pricing power of title businesses.
- Barriers to entry in the title insurance business are low relative to other financial services.
- Startup costs range from $20,000-$100,000 depending on factors like offices, software, training, and marketing.
- Regulatory requirements also vary by state but emphasize fiduciary responsibility for handling client money.
These details and other information you learn through market research help solidify a title agency’s net worth by making you an authority in your field.
2. Analyze the Competition
When launching a title company, conducting competitive analysis is crucial to positioning your business strategically within the local market. This involves evaluating established title firms on factors like service offerings, marketing reach, customer reviews, and pricing models.
For brick-and-mortar businesses, try these competitive analysis methods:
- Drive the neighborhoods where you plan to operate and simply observe the visible presence of competitors.
- Identify signage on office buildings and note where rival companies sponsor events or advertise.
- Talk to real estate agents to gain direct referrals for the incumbent title services they prefer to work with.
- Scrutinize the strength of their websites by assessing site traffic via tools like SimilarWeb.
- Check online review platforms to gauge customer satisfaction ratings.
- Search title company names on Google to analyze organic and paid search visibility.
- Monitoring social media engagement also shows how effectively they reach consumers digitally versus offline.
Combined, these low-cost evaluation strategies produce actionable competitive intelligence to differentiate your title startup. You can uncover service gaps, expose reliance on traditional channels versus digital, and formulate penetration strategies accounting for existing brand loyalty.
3. Costs to Start a Title Business
Starting a title company requires an initial investment to cover legal formation, office setup, software, training, and pre-revenue operating expenses.
Typical start-up costs often range from $20,000 to $100,000. Let’s break them down to better understand where these expenses come from.
- Filing formal business organization papers like articles of incorporation averages $100-$800 depending on the state and entity structure.
- Complex partnership or LLC agreements can run up to $2,000.
- Trademark registration is recommended for branding at around $275 per class of goods/services.
- Leasing an office in a storefront location costs $15-$30 per sq. ft. in most markets, equating to $1,500-$3,000 monthly for a 1,000 sq. ft. unit.
- Purchasing commercial space requires 20-30% down financing but builds equity.
- Expect at least $10,000 for furniture, supplies, decorating, and moving expenses when signing a lease.
- Paying fees to approved educational entities for the licensing exam.
- Title production software costs approximately $5,000 initially for a localized system, then adds $50-$150 per month for upgrades and tech support.
- More advanced SaaS platforms run from $1,000-$4,000 monthly with additional transactional fees.
- Allocate $3,000-$5,000 for onsite server and networking equipment plus IT configuration services if running an independent system.
- While not mandated, errors & omissions insurance provides vital protection when handling large client fund transactions, costing $3,000-$5,000 annually.
- General business liability coverage adds another $500-$1,500 depending on property size and policy scale.
- Hire a licensed attorney for $150-$300 per hour to develop compliant contracts, agreements, and disclosure forms.
- Title examiner training or professional development courses range from $200-$600 per person. Plan for $2,500 in licensing and regulatory fees.
- In the first year, budget $36,000-$45,000 in employee salary expenses including the owner/operator. Add commissions up to 20-30% of revenue for sales staff.
- Payroll processing and compliance administration can cost $1,000-$2,500 annually.
- The monthly recurring overhead totals around $5,000-$15,000 factoring expenses like software subscriptions, advertising, professional memberships, utilities, accounting, and other core operating costs.
Within 12-24 months, an efficiently run title firm can achieve $500,000 in revenue and 20-30% profit margins. You may also pay for other expenses in title work, including a background check here or there, surety bonds, closing process fees, and more.
4. Form a Legal Business Entity
When establishing a title business, the legal structure you choose impacts everything from personal liability to taxes owed. The four primary options each have advantages and drawbacks to weigh.
Sole proprietorships offer simplicity for one-person operations, but assets and liabilities are not separated. This exposes personal finances to legal claims or judgments against the business. Annual revenue flows directly to personal tax returns as well, lacking corporate deductions.
Forming a general or limited partnership splits ownership between two or more individuals. However, at least one general partner retains unlimited personal liability. Limited partners enjoy liability protection but cannot participate in management without shedding that legal shield. For title companies, information errors could still financially devastate general partners.
A corporation shields owners from legal and tax liabilities. Shareholders, directors, and officers are generally not responsible for company debts. Corporations can raise investment capital through equity offerings and deduct many business expenses.
Limited Liability Company (LLC)
Establishing a title company as a limited liability company (LLC) balances liability protection with operational flexibility. LLC owners cannot lose more than their capital investments, ideal for high-risk real estate transactions. Profits and losses pass directly to members as with partnerships, avoiding double taxation.
5. Register Your Business For Taxes
An Employer Identification Number (EIN) serves as a federal tax ID that identifies business entities for tax purposes with the IRS. Legal business registration is necessary to operate any company in the United States.
Sole proprietors can use their Social Security Number instead when filing business taxes. However, establishing an EIN is recommended for title companies planning to hire employees or form legal entities like LLCs and corporations.
Obtaining an EIN is necessary to legally pay contractors and employees. The EIN opens access to business bank accounts, establishes firm credibility for financing, allows registering for state/local licenses, and enables submitting tax documents like W-2s and 1099s.
The process of applying for an EIN with the IRS is straightforward and free through their online application portal. Here are the basic steps:
- Gather personal identifying details including name, SSN, and address. Have the business name, entity type, and ownership details ready as well.
- Access the EIN Assistant on IRS.gov and select the option to “View Additional Types, Including Tax-Exempt and Governmental Organizations.”
- Choose the entity type that matches the formal business structure. For title companies, common options are Sole Proprietor, Partnership, or LLC.
- Complete sections with business information, ownership specifics, and reason applying. Sign and submit digitally to instantly receive the EIN confirmation notice.
In addition to the federal EIN, title businesses must track sales tax obligations in their particular state. Register through the State Tax Authority to collect, file, and remit owed sales taxes each period. The process and costs vary by location but typically involve nominal registration fees.
6. Setup Your Accounting
As a title company, meticulous financial recordkeeping and reporting are imperative when handling real estate transactions. Even minor errors could expose the business and owners to substantial liability claims or IRS penalties. Implementing robust accounting ensures financial stability.
Using small business accounting software like QuickBooks automatically tracks income, expenses, account reconciliations, and taxation obligations. The system integration with bank and credit card statements saves tons of time on manual data entry. This helps produce financial statements and streamlines tax preparation with just a few clicks.
Hire an Accountant
Partnering with an accountant optimizes oversight of the company ledger and maintains full compliance. Typical fees range from $150-$300 per month for comprehensive bookkeeping services up to $2,000 annually for specialized needs like audits/reviews, tax planning, payroll filings, and year-end support.
Open a Business Bank Account
As a registered business entity, separating personal and company finances is vital. Open dedicated small business bank accounts named under the title company’s legal name. Never co-mingle holdings to simplify expense and income categorization.
Apply for a Business Credit Card
Applying for a business credit card also bifurcates purchases. Business cards weigh factors like company revenue, assets, and credit score. They offer higher limits than personal cards but still require a personal guarantee from the owner. Have incorporation paperwork or EIN confirmation prepared when initiating applications.
7. Obtain Licenses and Permits
Before operating a title business, properly acquiring a business license is crucial. Licensing regulation varies between federal and state licensing requirements. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state laws and city requirements.
There are many legal requirements when dealing with a property’s title. At a minimum, register as a title agent or title agency with your State Department of Insurance. This oversees market conduct, reviews policy forms and rates, mandates fiduciary accounts, and may require professional bonding/title insurance levels. You may also need to take a pre-licensing course.
Depending on location, additional professional licenses may apply to owners and staff conducting core business functions. Title searchers/abstractors who compile property reports from public records typically need licensure. States also often require title escrow closing agent testing and approval to oversee real estate settlements.
Seeking state bar membership further elevates credibility, although direct legal counsel should be outsourced to affiliated attorneys. Voluntary professional designations like the Certified Land Closer (CLC) demonstrate niche competencies as well.
Register for an International Registration Plan apportioned plate to legally dispatch delivery vehicles across state lines. Enroll in state weight distance tax programs that levy trucking activity. Obtain corporate business vehicle registrations and fuel permits associated with fleet operations should this apply.
While not directly mandated, voluntarily pursuing professional certifications illustrates a commitment to excellence. Some options include the Certified Land Title Professional (CLTP), Certified Land Searcher (CLS), and Certified Title Examiner (CTE).
8. Get Business Insurance
As you start a title company, you’re exposed to diverse liabilities from third-party negligence claims to employee dishonesty. Carrying proper insurance limits risk in a real estate transaction. A fidelity bond is a good place to start.
Insurance regulation is part of your job, so it makes sense to have the best products on your side. Whether you offer services as a title underwriter dealing with title exceptions or managing real estate titles in general, insurance is a must.
State insurance requirements vary for property management, title insurers, and other such businesses. Insurance helps protect customers and business owners.
General liability coverage insulates against expensive bodily injury, property damage, personal injury, and advertising injury lawsuits – whether meritless or legally valid. Policies cover legal defense fees and compensation awards, with available limits from $500k up to $5 million or higher depending on the underwriter.
Scenario 1: An employee accidentally damages a client’s pipe and sewer line while conducting a property survey. Without liability insurance, the title company must fully pay for costly repairs from its pocket.
Errors & omissions (E&O) policies exclusively cover service-related mistakes and negligence from the title search itself. Having an E&O plan is generally an industry mandate with minimum limits mandated by state regulators. Payouts assist with monetary claim damages.
Scenario 2: A title examination fails to uncover an existing lien. The buyer sues for the financial losses. E&O helps pay legal expenditures plus any potential settlement awarded.
Employee dishonesty insurance mitigates business account thefts along with losses from forgery, computer fraud, counterfeiting, and other criminal acts by workers. It provides direct reimbursement when internal financial controls fail, with optional coverage from $10,000 up to $500k.
Scenario 3: An employee with account access embezzles $50,000. Dishonesty insurance recovers these stolen funds to prevent the business from collapsing.
9. Create an Office Space
Establishing a physical office presence elevates legitimacy among clients and partners when providing title services. Title specialists work with real estate professionals and mortgage companies. Storefront locations also enable local community engagement but require weighing cost tradeoffs.
Operating initial title operations from a home office minimizes expenses while testing market demand. This works well for sole proprietors but limits growth potential long-term. Expect to invest around $2,000 to properly outfit and furnish a residential space for business needs.
As transaction volume increases, leasing space in a shared coworking environment like WeWork allows scaling to meet workflow needs at around $300 per desk monthly. Coworking spaces offer flexible terms, networking events, and shared administrative resources.
Retail office spaces provide the most visibility and accessibility for client meetings. Average monthly rents run $15-$30 per square foot in most markets, so a 1,000-square-foot unit averages $1,500-$3,000 monthly.
Commercial offices charge by the square foot like retail offices. It’s often regarded as more prestigious and authoritative than a home office but comes with a greater price tag. Commercial office space often involves a lengthy contract.
10. Source Your Equipment
Launching your own title company requires office technology and furnishings, industry-specific software, resources for document processing/storage, and reliable transportation. Balancing new investments versus used goods controls startup costs.
Purchasing new computer workstations, printers/scanners, phones, and basic furniture from retailers like Staples and Office Depot provides contemporary solutions under product warranty protections. Shop multiple vendors through the OfficeXplorer buying service to save up to 40%. Expect around $5,000 total for equipment needs.
Buying quality second-hand office furniture locally from sellers listing items on Facebook Marketplace, Craigslist, and Nextdoor saves substantially on initial outfitting. Budget roughly $2,000 sourcing pre-owned desks, chairs, file cabinets, and shelving from private parties or liquidation sales.
For mission-critical title production software, source authorized new or renewed licenses from centralized marketplaces like Capterra and SoftwareAdvice to compare vendors. Reputable systems cost anywhere from $100+ per user/month for cloud delivery to over $5,000 for one-time onsite installation.
New vehicle leases offer fixed monthly payments including maintenance that scale with business demands. However, used vehicle purchases remove recurring fees and build eventual ownership equity. Target dependable, fuel-efficient models under 50K mileage priced around $15,000.
11. Establish Your Brand Assets
Strategically developing a distinct brand identity fuels recognition, cultivates trust, and conveys professionalism to compete in the title industry long-term.
Get a Business Phone Number
Acquiring a unique business phone number through providers like RingCentral enables listing key contact info across directories, websites, and marketing materials. Toll-free numbers project stability while local numbers build regional community connections. Expect basic plans from $30 monthly.
Design a Logo
Creating a sleek, memorable logo that evokes reliability and real estate expertise assists prospects in quickly recalling the brand. Services like Looka create logos, style guides, and complementary assets that reinforce visual identity across touchpoints. Expect one-time rates from $20.
Print Business Cards
Printing professional business cards through Vistaprint signals polished capabilities when networking in person with referral partners. For title reps frequently viewing homes and meeting owners, cards enable convenient info sharing to spark future transactions while also displaying logo branding. Bulk orders cost approximately $20.
Like cards, exterior office signage, and vehicle branding from Vistaprint trigger brand familiarity as title agents interact throughout neighborhoods. Estimate $100+ for basic signage.
Buy a Domain Name
Purchasing a .com domain to match the business name cements findability online. Consider using the title agency’s name for the URL. When checking availability, also consider .net and .biz alternatives to reinforce access. Leading registrars like Namecheap offer domains from $9/$12 yearly.
Design a Website
Building a company website through user-friendly platforms like Wix provides control over pages, design, and content to engage prospects. Expect subscription plans from $14 monthly. Alternatively, hiring specialized website developers from freelance marketplaces like Fiverr costs around $500+ for pro coding skills.
12. Join Associations and Groups
Plugging into localized real estate organizations and digital communities accelerates market familiarity and relationship building essential to title company success.
Relevant local associations like city Realtor boards or statewide Land Title Associations offer events, advocacy resources, insider insights, and referral programs. Joining annual fees run $100-500 depending on membership tiers. Philadelphia Board of Realtors exemplifies options in major regions.
Attending regular real estate meetups organized through platforms like Meetup builds connections with fellow professionals. Local investor groups, REIA chapters, and specialized events for title agents/escrow officers enable the sharing of best practices or hearing guest expert speakers. Entry fees are generally under $50 per monthly session.
In addition to in-person networking, participating in niche Facebook groups opens access to crowdsourced guidance from national peers on everything from software tips to marketing advice. An example is the Notaries, Realtors, Loan officers, title/escrow, Insurance, and Investors group with over 1k engaged contributors.
13. How to Market a Title Business
Implementing multifaceted marketing attracts a steady stream of real estate clients to sustain title order volume long-term. While referrals from contacts and satisfied customers remain invaluable, deliberating supplementing promotion expands visibility.
Offering exclusive closing gift cards or restaurant vouchers to clients who recommend new relationships capitalizes on positive experiences. Setting formal referral targets for customers also incentivizes endorsements.
On the digital front, numerous options connect with local home buyers and sellers:
- Launch Google Ads campaigns to appear in searches for related keywords like “title company” to intercept prospects. Expect $2+ per click.
- Run retargeting display ads through platforms like Facebook to follow site visitors with relevant messages across sites. Budget $100+/month during testing.
- Post videos on YouTube showcasing high-quality services or local market insights to build trust and likeability.
- Start an email newsletter with closing tips, real estate trends, and company updates to nurture relationships. Expect 2-3 posts monthly.
- Write blog articles highlighting unique offerings over competitors to boost SEO and provide helpful answers to common questions.
For traditional techniques, focus on hyperlocal community exposure:
- Print flyers to distribute at other real estate offices detailing title solutions and referral rewards.
- Take out print ads in city magazines/periodicals read by homeowners and outline available resources.
- Sponsor booths at county home buying fairs to make on-site connections with prospective movers.
- Run 15 radio spot ads on local stations during drive times to increase repetitive exposure through a popular medium.
- Partner with a direct mail shop to send postcards to targeted homeowner demographics within your desired geographic radius.
14. Focus on the Customer
Delivering exceptional service during the home buying process is pivotal for title specialists operating an escrow company or real estate business. Home buyers and sellers hold immense influence through reviews and word-of-mouth endorsements.
Excelling at timely communications, transparent pricing, and guidance during stressful closing periods are essential to starting a title company. Little frustrations like unclear invoices or delays addressing questions are remembered.
Conversely, smoothing confusion around complicated title requirements or paperwork snags breeds appreciation. Added perks like covering an overnight courier when a signing gets pushed up or extending office hours for urgent signings meet immense goodwill.
Consider a title firm going above and beyond when a tricky title defect is uncovered days before closing. Diligently investigating alternatives and negotiating exceptions to progress the settlement exemplifies resourcefulness. The relieved clients eagerly relay that narrative to their agents and lenders, spurring future referrals.
Another illustration is a title professional supporting elderly sellers stressed over numerous disclosures and financial decisions required to downsize. Patiently explaining each document and providing empathetic reassurance during the transition earn immense loyalty.
Within an increasingly commoditized sector, cultivating genuine customer relationships through quality service differentiates title practices. The positive word-of-mouth and repeat business generated fuels growth.