by John D. Haviland and Richard W. McCarthy
In addition to information on operating results, the recent survey looked at computer software used by title companies and their level of satisfaction with them.
Abstracter/Agent Survey Focuses on Computer Software
In 2003 ALTA®'s Research Committee conducted the seventh survey of operating statistics and other characteristics of abstracter and title agent members. The information developed in these annual surveys helps in tracking operating results, in comparing one company with another, and in evaluating changes in the industry. All abstracter and title agent members of ALTA® are invited to participate. The representative sample of ALTA® members that participates in these surveys make the results a credible and reliable snapshot of abstracter and title agent company characteristics. Participants receive a complimentary copy of the results. The sample in the current survey increased to 387 companies from 286 in the previous survey, primarily due to an increase in ALTA®'s membership.
Each survey focuses on a topical issue in addition to operating results. The current survey covers the types of computer software used for title-related activities and the level of user satisfaction with these computer applications.
How Responses Are Reported
Gross annual revenue is the primary demographic characteristic of surveyed companies. Answers to survey questions are reported by four categories of 2002 annual revenue. The chart below shows the percent of respondents in each revenue category in the current survey and in the two previous surveys.
|Less than $500,000||60%||51%||54%|
|$1 million-$3 million||14%||19%||20%|
|More than $3 million||10%||9%||10%|
Responses to the survey are also reported by the number of orders received in the preceding calendar year. The chart below shows the percent of companies in the current survey and in the two previous years (based on orders received in 2002) for each of the five categories.
|Fewer than 500||20%||13%||16%|
|5,000 or more||9%||11%||10%|
Based on number of full-time employees, companies participating in the current survey are similar in size to companies that participated in previous surveys. There is an average of 16 full-time employees among all participants. In 2002, there was an average of 18 full-time employees. Employee compensation and benefits, the topical issue explored in the 2002 survey, was probably most appealing to larger employers.
One-half of the companies reporting to the current survey have six or more full-time employees, as did one-half of participants in the 2002 survey. The percent of survey participants in each staff-size category the last three years is:
|More than 25||9%||14%||15%|
Average number of full-time employees varies greatly by size of company. Companies with less than $500,000 revenue reported an average of four full-time employees. Companies with revenue of $500,000 to less than 1 million reported an average of 11 employees, those with revenue of $1 million to $3 million reported an average of 19 employees, and the largest companies, with revenue in excess of $3 million, reported an average of 83 full-time employees.
Operating Characteristics of Surveyed Companies
As in previous surveys, gross revenue and number of orders received are highly correlated. Among companies that received fewer than 500 orders in 2002, 75% reported that their gross revenue was less than $250,000. One-half of companies that received 500 to 1,099 orders reported revenue of $250,000 to $499,999. Fifty-seven percent of companies that received 2,500 to 4,999 orders reported revenue of $1million to $3 million. More than 60% of companies that received 5,000 or more orders reported revenue in excess of $3 million. Although the sources of revenue vary relatively little among companies of different sizes, the largest companies, those with more than $3 million in revenue, receive a higher proportion of their revenue from title insurance and less of their revenue from abstracts. For the companies reporting, revenue from title insurance accounts for an average of 64% of all revenue. Although revenue from abstracts accounts for an average of 39% of total revenue, only 191 of 387 companies reported revenue from abstracts. Revenue from abstracts ranged from an average of 49% of total revenue among companies with less than $500,000 revenue, to an average of 17% of the total among companies reporting more than $3 million revenue.
Revenue from escrow/closing functions accounts for an average of 24% of total revenue, with 286 of 387 companies reporting. Revenue from escrow/closing functions is similar among all company sizes. Only 21 of 387 surveyed companies reported revenue from a law practice, with 17 of these 21 companies in the "less than $500,000" revenue category. Among these 17 companies, revenue from law practice averaged 32% of total revenue.
Seventy-four companies reported revenue from other sources. Typical other sources of revenue, volunteered by respondents, included searches and miscellaneous document preparation. These other sources of revenue averaged 14% of total revenue among the 74 companies reporting. Sixty-eight of the 387 surveyed companies reported that one or more full-time employees regularly telecommutes at least one day a week. The 16 companies with more than $3 million revenue reported that six employees, on average, telecommute at least one day a week. These telecommuting employees perform almost all jobs in a typical company, ranging from research and searches to marketing and closings and back- office functions such as bookkeeping, accounting, and typing.
At least 110 of the 387 surveyed companies reported that some work is currently performed by contract workers. The variety of work performed on a contract basis is similar to the variety of work performed by telecommuters, ranging across almost all company functions. Searching, examinations, abstracting, and closing are performed by contact workers, along with bookkeeping, accounting, Web development, and other technical support.
How Company is Organized
The largest number of survey participants, 45%, are organized as Subchapter S corporations. Another 33% are organized as C corporations, including 42% of organizations with revenue greater than $3 million. Twelve percent of responses are from limited-liability corporations, 6% are sole proprietorships, and 2% are partnerships. Table 4 describes the relationships between revenue, orders received, and type of company.
Operating Expense and Payroll
Among the 263 companies reporting, operating expenses averaged $1.16 million. Operating expense ranged from an average of $158,000 among companies with less than $500,000 revenue to an average of $6.6 million among companies with more than $3 million revenue. By number of orders received in 2002, operating expenses ranged from an average of $115,000 among companies that received fewer than 500 orders to an average of $5.2 million among companies that received 5,000 or more orders.
The moral of this story is that hard work, experience, and determination create the magic behind eNotes, not wishful thinking.
Although operating expenses vary greatly by size of company, and even within the various subgroups of similar-size companies, there is a rough equivalence between operating expenses and number of orders received. Typically, operating expenses range from $250 to $350 per order received. Overall, 2002 per order expense was similar to 2001 per order expense. Within each category of orders received, median operating expense per median order received, reported to the last three surveys, is:
|Fewer than 500||$239||$383||$336|
|5,000 or more||$412||$319||$262|
Total payroll in 2002, with 269 companies reporting, averaged $600,000. Payroll ranged from an average of $102,000 among companies that reported less than $500,000 revenue to an average of $3.3 million among companies that reported more than $3 million revenue. One-half of companies with less than $500,000 revenue reported $90,000 or more payroll. One-half of companies with more than $3 million revenue reported, $1,788,000 or more payroll. Among companies that received fewer than 500 orders, payroll averaged $75,000. Among companies that received 5,000 or more orders, payroll averaged $2.6 million. As a percent of operating expense, payroll has accounted for one-half or more of company operating expenses over the last three years:
Payroll dollars per order received typically ranges between $150 and $225. Within each category of orders received, as reported to the last three surveys, median dollars of payroll divided by median number of orders received is:
|Fewer than 500||$161||$210||$234|
|5,000 or more||$213||$130||$147|
Relationship with Primary Insurer
More than one-third of surveyed companies, including 39% of companies with less than $500,000 revenue and 48% of companies that received fewer than 1,100 orders, wrote business for only one title insurer in 2002. Another 26% of companies wrote business for two insurers. Fifteen percent of surveyed companies, including 32% of companies with more than $3 million revenue and 26% of companies that received 5,000 or more orders, wrote business for four or more insurers. Among the companies that wrote all of their business with one insurer, only 21% reported that they had a contractual obligation to do so. However, among companies with more than $3 million revenue that wrote all their business with one insurer, one-half percent reported they had a contractual obligation.
Residential Title Business
On average, residential (single family) transactions represent 82% of the title business of the 359 companies reporting. Among all 387 surveyed companies, the largest number derives 90% or more of all title business from single family transactions. Only 17% of respondents derive less than 75% of their title business from residential transactions
Use of Title-Specific Software
Survey participants were asked to name the specific computer software applications their company uses for each of five major functions: title production, title plant, closing, financial management, and human resources. Respondents were asked to also report the number of employees who regularly use the software, the date the application was installed or last upgraded, and their level of satisfaction with the software. If you are interested in the results of this part of the survey, please see below for information on how to order the full survey.
ALTA® expresses gratitude to the members of the Abstracter-Agent Research Committee for their ongoing guidance and oversight of this survey. The quality of the survey results is ultimately dependent on the conscientious effort of each respondent to report appropriate and accurate information on the topics surveyed, and ALTA® expresses its deepest appreciation to the 387 members whose responses made this report possible.
Order the Full Study
This article is just a summary of the full study. If you have not received a copy and would like to order one, look for the publications order form on ALTA®'s home page under "Publications/Products." ALTA® members can obtain a copy for $130. The cost for nonmembers is $255.
John D. Haviland is chair of the ALTA® Research Committee - Abstracter/Agent Subcommittee. He can be reached at firstname.lastname@example.org. Richard McCarthy is director of research for ALTA®. He can be reached at email@example.com.