Minnesota’s crackdown on gifts is unsettling the title industry
Happy hour at Cowboy Jack's. Dinner at
The perks were an essential part of the marketing strategy at Liberty Title, an
One attendee at
But the party may be over.
In a crackdown that is provoking an industry uproar, the
Related: Many don't realize they have a choice of title firm
"We want to make sure that the market is fair and that people know they have a right to choose their own title companies," Commerce Commissioner
The investigations have opened a window on an often overlooked part of buying a house. Title companies charge hundreds of dollars to make sure a property is free of liens or other legal problems, and title insurance is required by lenders in most real estate transactions.
But most buyers don't shop around for closing services. Instead, they typically take the recommendation of a real estate agent or loan officer, and those referrals drive the business. As a result, buyers often overpay for coverage, according to consumer advocates.
"We're selling a commodity," said
Since 2007, the
Wining and dining can violate federal laws prohibiting kickbacks if regulators can prove such favors resulted in even a modest increase in business. But executives at some of the title companies that have run into trouble say it makes it tough to compete if they can't buy someone lunch once in a while.
In
On the other side of the market are independent companies such as Entitle and Liberty.
"It is very difficult for our salespeople to get in front of people who could recommend our services to their customers, especially agents who work for real estate brokers who own their own title companies and who pressure their agents to use those companies," Zweifel said in a written statement to the
"It appears ironic that some companies apparently take the position that they must violate the law in order to compete,"
No title company has been more generous to the local real estate community than
Between 2013 and 2015, the company spent more than
To avoid further trouble with regulators, Zweifel is chopping his marketing budget by about 75 percent this year. There will be no big parties, no ballgames and no expensive dinners at out-of-state real estate conferences. Free lunches will be greatly reduced but not eliminated.
"We can't stop marketing," Zweifel said.
Liberty isn't the only company to cut back. Several title companies have quit taking real estate professionals on free boat trips in the wake of a 2015 licensing action against TitleSmart, which was fined
"The guy at Commerce told me he wanted to level the playing field for the little person," TitleSmart owner
Some industry veterans don't understand why the
In the past decade, just three people have been fined by
"If they want to make it stop, they should fine the Realtors," Yardley said.
Some title agents say the investigations have taken the fun out of a hot market. An executive with Entitle said she has seen competitors snap photos of her agents in what they hope will be compromising positions, such as having lunch with a real estate agent.
"Certain title companies are doing that in order to put their competitors out of business," said
A handful of other states, including
Executives with
"If it is such a great advantage, why don't they start their own real estate company and stop whining about it," said
Collopy said his title company usually captures about 60 percent of the closings generated by his real estate agents.
"We don't do any steering," Collopy said. "The consumer is going to ask: Who do you use the most? And so you answer honestly."
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