by Sandra Bell
As part of ALTA® 's public awareness campaign designed to educate various audiences about the value of title insurance, a series of focus groups and telephone interviews was done with consumers who had recently purchased or refinanced a home. The research findings were critical in determining not only what consumers know and don't know about the title process, but also what messages will most resonate with them as we move forward with various ways to reach consumers with our messages. The results of these studies have already played key roles in the determination of message points being integrated into ALTA® marketing materials.
A series of focus groups was held among consumers who had purchased a home or refinanced within the last six months. Respondents ranged from young first-time buyers to retirees who had purchased several homes over their lifetime. The participants came from 21 different states across all four time zones.
The study was carried out as a moderated, open-ended question forum. It was designed to find out the following:
Consumer Knowledge and Perceptions About Title Insurance
As anticipated, participants generally had little awareness or understanding of title insurance. When asked about their perceptions, most tended to think of title companies and the title search process only in terms of the insurance that is issued. Some did have a basic understanding of the insurance component and agreed that its purpose is to protect homeowners from challenges to their right of ownership that are not discovered during the title search.
Most participants had little or no awareness of the potential problems that title insurance covers. In fact, many saw title insurance as just another fee they have to pay to purchase or refinance a home.
As a result of their participation in the focus groups, many of the consumers are now more aware of the risks of not having title insurance and indicated that, in the future, they'll be likely to ask more questions about title insurance and shop around to ensure that they are getting the best price.
Key Influencers in the Recommendation of Title Insurance
Given that many consumers don't have a lot of experience in buying a home, most participants indicated that they relied on a number of advisers to help them through the financial and legal maze surrounding a home purchase.
The real estate agent remains the most frequently mentioned of the advisers. We know that while the primary role of the real estate agent is to help the buyer select and make an offer on a home, many also provide guidance throughout the homebuying process. Of those queried, most were satisfied with the performance of their real estate agent.
“I used the realtor and relied on her. The realtor was able to guide us to find the right locations that fit our price range. Additionally, she did all the things I expected her to do. She was enormously helpful.”
“We relied upon our realtor. He was very conscientious. While we had some problems with this house, he shepherded us through.”
Lenders were also a frequently mentioned adviser. Similarly, a few reported that a mortgage broker helped guide them through the homebuying process.
“Most of my help came from my lender. It's a credit union that I've dealt with for many years. First thing I did when I was deciding to buy a home was get preapproval, and I just let her walk me through the system.”
“My mortgage broker really helped me out....she took care of everything, and said these are the options that you have.”
Attorneys were found to play a much bigger role in the homebuying process on the East Coast than throughout the rest of the country. The attitudes toward the value of attorneys in the transaction process varied, however.
“I did buy my first home using an attorney. And by the time the title search was done months later, I almost didn't want the house. They really cannot do anything more than a real estate agent can or another service.”
“We were mostly guided by our legal adviser. In terms of the selection of the site, the realtor was excellent and got us in contact with the title folk. But any questions we had, we worked through our legal adviser.”
“We've owned houses on the East Coast, and there it's mandatory that you have an attorney. You sit down at a long table, and you go through all this stuff. That is not so on the West Coast.”
Few participants reported using the Web to find information to help them with their home purchase. While some expressed interest in finding info-rmation on what is required in buying a home, most participants only use the Web to locate property or loans.
“On the Web I looked around and got a lot of information. I was looking at houses here in Florida . Also, I was looking for information on what is required to buy a home in Florida . I went to Realtor.com, and I think I branched off into other ones.”
“We built this house so we dabbled with Lending Tree for a while. For me personally, it was a little too on the strange side to wait for the offers and deal with people that were three or four or seven states away from me.”
Concerns That Homebuyers Have About Getting Clean Title
Most of the participants did not have much awareness of the types of legal ownership problems that homeowners can incur when they purchase a home. Similarly, they didn't have much knowledge of the financial consequences of not having clear title to their property.
“Legally, I believe that if the title company gives you title and something comes back to bite you, that's their headache, not yours. If you have a legal battle, it isn't your battle; it's their battle.”
“I have always pretty much trusted that when they did the title search and say the title was clear, that it was. I haven't worried a whole lot about it. Maybe I should have.”
Of those that did have concerns about title, the most common problems discussed were disputes over easements and shared property, third-party liens, and the presence of deceased individuals or ex-spouses on a deed. A few also voiced concern over homes or additions accidentally built on a neighbor's property, long-lost owners returning, and rights of way for gas and mineral rights.
“I had piece of property in which the building was built six feet over the neighbor's property line. When I went to sell the property, it turned up, and the new buyer got a title insurance opinion that showed that the building was on the wrong property. It was up to the title insurance company to make that good. Either they had to buy that piece of ground or issue a new title policy guarantying the same situation to the new buyer, which is what they did.”
“We shared a driveway. In order to get out of our driveway, you had to use this turnaround. All of a sudden, we got new neighbors, and they terrorized us. We finally had to go to court, and it cost us $10,000. We got the turnaround back. It was a mutual easement, but it was essentially for our house.”
Features That Most Strongly Motivate Homebuyers to Buy Title Insurance
Participants were asked to rate a variety of the features of title insurance. Most participants rated the feature “Protection Against Unknown Threats To Your Title” as very important and felt it provides protection against a variety of unforeseen problems.
The next most important feature cited was “Defense”, with participants saying that the cost of title insurance is very small compared to the cost of going to court.
When asked to rate how concerned they were about some common threats that homeowners could face in securing clear title to their property, most of the participants weren't that concerned about any of the threats cited. However, property or boundary disputes, undisclosed easements and errors in tax records were the ones they could imagine having a problem with.
Consumer Perceptions of the Closing Process
Despite the confusing array of charges levied at the time one closes on a house, participants believed that people in general don't question most of the charges. While they may question a few items, most soon get overwhelmed and just want to get the process over with. They tend to accept the charges as just another part of buying a house.
However, some homebuyers did actively question closing charges and, among those that did, reported being successful in getting the amounts reduced.
Reactions to the Concept of a Flat Fee Covering All Closing Costs
Few respondents expressed interest in a flat fee option if they couldn't see the various closing charges itemized, even if they agreed to a total fee up front. Those that did find it appealing agreed that to be of value, the fee needs to be comparable across lenders or packagers, the lender or packager has to be legally bound to the fee, and most of all, the option must represent a real savings.
Most agreed that the flat fee is a bad idea because they want each of the individual closing charges to be broken out separately. They agreed that they would feel very uncomfortable if given just one flat fee covering all the closing items for fear they could be overcharged on some or all of the costs.
Generally, and as expected, homebuyers don't seem to know much about title insurance, and most don't know a lot about the reasons why the insurance might be valuable or the types of situations in which title insurance protects them. Even when offered examples of how the ownership of their home might be in jeopardy, most found the examples distant and of little concern. Few are cognizant of the threats. Those who have purchased several homes over time tend to be somewhat more knowledgeable than first- or second-time purchasers.
“Title insurance seems to be just another fee. All the provisions and the conditions in the title insurance policy pretty much relieve the title company of anything that isn't already a legally established and filed kind of thing. There are a whole bunch of exceptions in the title policy that if somebody didn't tell the truth or hid something or hadn't filed anything yet, then the title company would be exempt, and the title policy is essentially worthless. It's just another fee that you pay to buy the house.”
Most participants had no understanding of how owner's and lender's title insurance policies differ. The idea that there might be both owner's and lender's title insurance on the same property seemed redundant and wasteful to them. Obviously, most are unclear as to the separate protections each provides.
“To me, having separate title insurance policies sounds redundant. If they are requiring it and the policy is in my name, I don't know why they need another policy.”
The good news is that those who were not aware or knowledgeable about title insurance were interested in learning more, which clearly demonstrates the potential for marketing efforts targeted toward increasing consumer awareness.
“I was very naïve about it. I would probably dig a little deeper and ask more questions.”
“Knowing that I'm so unclear, I would ask more about it and look at it more carefully.”
“I don't know if I have title insurance or not, but if I ever purchase another home, you have given me additional questions to ask. I don't know for sure whether I would get it or not.”
“The only thing that I would do differently is I might go out and shop title insurance. I would still get it, but I think I would shop around to make sure that I was getting the best price.”
“I'm a first-time buyer, and you said earlier this is the single largest purchase that I will ever make. I could not see how I could go through blood, sweat, and tears and have someone forge a signature or miss something like that. It was really an insignificant cost to get peace of mind.”
A quantitative follow-up to the telephone focus groups was undertaken to further clarify and quantify our earlier qualitative results. Information garnered from this study will also be used as a baseline for comparison to future studies.
Specific objectives of the quantitative study included learning more about:
· Homeowners' knowledge and perceptions of title insurance and the process behind it;
· Who selects the title insurance company a homeowner will use;
· Homeowners' knowledge of, and attitude toward, the protection that title insurance and its processes offer; and
· Homeowners' reactions to the closing process and closing costs.
Telephone interviews were conducted with 400 homeowners who were aware they obtained title insurance as part of a home purchase or mortgage refinance within the last six months. Of these respondents, 341 were new purchasers and 59 were refinancers. Interviews were conducted with respondents from 32 states and averaged 3 to 5 minutes in length.
Knowledge and Perceptions of Title Insurance and The Process
Most respondents demonstrated a basic understanding of the service that title companies provide for them by agreeing with the statement: “Title insurers seek to find and eliminate title problems before the home is sold.” Nearly nine in ten respondents said they need to have title insurance and also agreed that they need to have owner's title insurance to protect the investment in their home.
When asked about the difference between owner's and lender's policies, most survey participants reported that they knew that a lenders' policy does not protect them (79%), while 13% believed that lenders' title insurance would protect their interests. However, many did not know which type of coverage they had (47%). This suggests that there is little understand- ing of the difference between the two.
When asked about the title searching process and its importance, many believed it to be important, but did not necessarily associate the title company as the entity performing the due diligence. In fact, 57% percent thought the following statement was true: “If there were a problem with my title, my realtor or the seller's realtor would have told me.” This tells us clearly that we must create an awareness of the fact that our industry is the one performing these duties and that this, in fact, represents a large part of our value to the consumer.
Overall, 20% of the participants felt that they did not need the services provided by title insurers. However, the majority (66%) strongly agreed with this statement: “I need to have owner's title insurance to protect my investment in my home.”
Selection of the Title Insurance Company
Respondents typically did not choose the title insurance company they used, either the lender or real estate agent made that selection in most of the cases.
Knowledge Of, and Attitude Toward, the Protection Offered
Survey participants were aware that the title industry is integral in identifying and clearing up title problems. In fact, 84% percent thought this statement was true: “Title insurers seek to find and eliminate title problems before the home is sold.” Most, however, did not feel they would ever encounter a title problem—72% reported that when they bought their home, they were not very concerned about potential title issues. Most respondents who were not concerned at the time they purchased their homes, however, still agreed that they needed to have title insurance. This indicates that even the small possibility of a problem may convince a consumer that they need insurance if the consequences of not having insurance are great enough. Just as consumers might not be very concerned about having a fire in their home, they are concerned about the financial consequences of having a fire without being insured.
When specific title issues were introduced to the survey participants, many respondents said they could imagine having a problem due to forging of documents (54%) or liens (57%). Some said that they could imagine needing a title company to help defend them legally to protect their title (61%), while other respondents could not imagine having such a problem or needing such legal defense (25%). This again suggests that although most respondents said they need title insurance, the reason may be unrelated to fear of having a title problem or needing legal defense.
As previously mentioned, 57 % of the homeowners responding to the study believed they would have been notified about problems with their title by their real estate agent or the sellers' real estate agent. Interestingly, even those who think they would have been notified of problems up front still believe they need title insurance.
Reactions To the Closing Process and Its Costs
94% of respondents said they under-stood what was happening during the closing process, and the vast majority of the respondents said they were not surprised by the costs listed at closing. When asked about packaged closing costs, 92% of the respondents believe that the costs listed at closing should be fully itemized.
The information gathered as a result of this survey has proved extremely helpful in the crafting of messages for our public awareness campaign and, along with the results of the qualitative study, will continue to guide us as we go forward with ways to reach this audience. Of critical importance to the process were the observations that:
× While, understandably, consumers aren't very knowledgeable about title insurance or the protections it offers, once given even basic information, they begin to understand its value.
× Lenders and Real estate agents remain our most important conduit for reaching consumers.
× While a basic understanding of the insurance aspect of title is found in our consumer base, the value of the title search process and due diligence performed is not realized. Therefore, as an industry, we need to place greater emphasis on the title process, rather than on the end product.
Sandra Bell is a principal of Ervin | Bell Communications. Ervin | Bell Communications was retained by ALTA® last year to assist in the organization of a consumer awareness campaign. Ervin| Bell is a national, full-service marketing firm specializing in the title and related industries and is located in Southern California .