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ALTA® Abstracter-Agent Survey Shows Average Revenue Near $1 Million

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January/February 1998 - Volume 77, Number 1

By Richard W. McCarthy, ALTA® Director of Research and Mark A. Bilbrey

The American Land Title Association®, under the direction of the Abstracter-Agent Research Committee, conducted a survey of member abstracter and title agent operations during July and August, 1997. All ALTA® members who are title agents and/or abstracters were invited to participate. This article is a summary of the detailed survey results. The full report describes staffing and types of business activities and breaks out average and median revenue, operating expense and other operating statistics, based on several measures of company size and by geographic region. Ratios that include operating expense as a percent of revenue, and personnel cost as a percent of operating expense, are also reported.

ALTA® plans to periodically conduct this survey. Future results will be directly comparable to the current report. The large response - - one third of ALTA®'s members participated - - ensures accurate and reliable information on the topics covered.

ALTA® mailed survey questionnaires to its 1,675 title agent/abstracter members in July and followed up with a postcard reminder encouraging participation. All unusable responses are included in this report. Survey responses were returned anonymously to Fetzer-Kraus, Inc., an independent research firm that tabulated the results and prepared the final report. Fetzer-Kraus assures participants that the confidentiality of each response has been maintained at all times and that only grouped data have been reported.

Survey Results Type of Company and Types of Business Activities- - approximately one half of the 524 companies that responded to the survey are C corporations. Another 40 percent are Subchapter S corporations. Only 8 percent are sole proprietorships and only 3 percent are organized as partnerships. One fifth of companies with 1-2 full-time employees or with 1996 revenue less than $151,000 are sole proprietorships. Sole proprietors and partnerships were most prevalent among states in the West North Central region. More than 90 percent of the businesses responding are title agents: 59 percent are both agents and abstracters, 32 percent are title agents only. Relatively few respondents, 9 percent, are abstracters only. Almost 30 percent of respondents commented that their business also provides closing/escrow services. Table 1a and 1b summarize these results.

The largest group of respondents, 39 percent of the 524 companies, wrote business for only one title insurance company in the past year. More than one half of the smaller companies, those with $150,000 or less revenue, wrote business for only one insurer. Almost two thirds of all respondents wrote business for only one or two insurers. Seven percent of all companies, but including 17 percent of the companies with $1 million or more revenue, reported they wrote business with five or more insurers. More than 80 percent of the companies in the Pacific states wrote business with only one insurer.

The one half of all surveyed companies that wrote title insurance business with more than one insurer typically placed the majority of their business with the primary insurer for whom they write business. On average, companies writing business with two or more insurers placed 64 percent of their business with their primary insurer. Generally, the smaller the company, the more likely that it wrote business with only one insurer. However, companies in the Pacific states, most of them larger than average, were more likely than companies in other regions to write business with only one insurer.

Only 2 percent of respondents (12 of 524) reported that a title insurer has an ownership interest in the company. Nine of these 12 respondents reported 1996 revenue of $1 million or more. Among all 12, average ownership interest of an insurer was 66 percent.

Seven percent (36 of 524) of the abstracters and agents participating in the survey reported that they are affiliated with another real estate service provider. Almost one half of these affiliated real estate firms provide lending and financing, 42 percent provide realty and/or brokerage services, and 22 percent were builders-developers. Only 14 percent are involved in property management. More than one third of these affiliated providers offer services such as escrow, surveying, and legal. Tables 2b and 2b report these results.

One half of the companies responding to the survey conduct business in counties in which they do not have an office. Although business in the non-office counties is 10 percent or less for one half of those reporting, it is substantial for some companies and averages 19 percent of all business among the 256 companies that reported they do business in counties in which they have no office.

The large majority of companies in the Mountain and Pacific states conduct business only in counties in which they have offices.

Staffing Characteristics One half of the 515 companies that reported full-time employees have six or more employees. The number of employees ranges into the hundreds - - with the survey average of 16 full-time employees skewed by the larger companies reporting. Companies that reported $1 million or more revenue reported an average of 38 full-time employees. Three-fourths of the surveyed companies also have one or more part-time employees. Larger companies average four or more part-time employees.

Respondents also reported their full-time equivalent staff, full-time employees plus the equivalent full-time staff, accounted for by part-time employees. Among the 521 companies that reported one or more employees, full-time equivalent staff averaged 17.1 people. One-half of these 521 companies have seven or more equivalent full-time employees.

One fourth of responding companies reported that they have one or more people on staff who have a master's degree. Larger companies average three or more employees with a master's degree or higher. Sixty percent of respondents reported an average of three people on staff who have a four-year degree. Companies with more than 20 full-time employees reported an average of eight staff members with four-year degrees. Approximately 40 percent of the surveyed companies reported an average of three people on staff who have a two-year degree.

Almost one third of all companies, including one half of the larger companies, have an attorney on staff. Most of these attorneys are full-time employees. Companies in New England, the South Atlantic, and the East South Central states are most likely to have an attorney on staff.

Employee Benefits Two thirds of the companies surveyed provide health care insurance or the equivalent. Among companies with more than $500,000 in revenue, this employee benefit is almost universal. Only 28 percent of companies with one or two employees report this benefit. Most companies, including more than one half of the smaller companies, provide paid vacation, typically 11 days a year. Two- thirds provide paid sick leave, typically allowing employees to accrue and use seven days per year.

Almost one half of respondents provide life insurance for employees. One third provide dental care insurance. Companies in the Pacific states are most likely to provide health care insurance and paid sick leave.

Annual Revenue Among the 461 companies that reported 1996 revenue, one half had revenue of $394,000 or more. Average revenue was almost $1 million, pulled upward by average revenue of $2.7 million among 126 larger companies. Average revenue was highest, at almost $1.7 million per company, among companies in the Pacific states. Revenue is directly related to number of full-time employees. For the four breakout categories of full-time employees, revenue per employee (the ratio of average number of full-time employees to average revenue within each category) was:

1-2 employees $54,000

3-5 employees $60,500

6-20 employees $69,636

21 or more employees $53,627

Title insurance accounted for almost two thirds of total revenue among the 439 companies that reported the percent of revenue received from this source. One half of the companies in this group reported that title insurance accounted for 70 percent or more of their revenue. Among 329 companies reporting, abstracts accounted for one third of total revenue, although one half of these 329 companies derived 20 percent or less of their revenue from abstracts. Among 370 companies reporting, closing/escrow functions accounted for an average of 19 percent of total revenue. Relatively few companies reported any other major sources of revenue. Chart A reports average and medial revenue for each region.

In other charts in the report, independent variables (orders received, full-time equivalent staff, population of counties served, and the rest) are divided into five approximately equal groups of respondents to illustrate the relationship, or lack of a relationship, between the independent variable and annual revenue.

Orders Received Among the 433 companies that reported orders received in 1996, one half received 1,200 or more orders. Among companies that reported $1 million or more revenue, one half received 3,000 or more orders. Among smaller companies, those with 1-2 employees or revenue of $150,000 or less, one half received fewer than 350 orders.

Operating Expense With 411 companies reporting, average operating expense in 1996 was $839,000. One half of these companies reported operating expense of $320,000 or more. Results in the report suggest that operating expense averages 80 to 85 percent of total revenue regardless of the size of the company.

Personnel cost averages 53 percent of operating expense among 404 companies reporting. One half of these companies reported personnel costs that are 52 percent or a smaller proportion of operating expense (and one half reported personnel costs that are 52 percent or a higher proportion of operating expense). Average and median personnel costs, as a percent or operating expense, vary relatively little by size of company and appear unrelated to company size.

Title Plants Eighty percent of respondents maintain a title plant. Smaller companies, as measured by revenue, are as likely to maintain a title plant as larger companies. Among companies that maintain a title plant, 63 percent maintain a complete daily take-off title plant from sovereignty. Another 88 percent maintain a partial daily take-off tittle plant. Typically, these in-house title plants cover the last 50 years. Other companies work from a variety of title plant types and methods, including starter files (back title plants).

The majority of the 419 companies that maintain a title plant have not automated their plants. Forty percent, including more than one half of companies with revenue greater than $500,000, do have automated title plants. Among the companies that maintain automated title plants, only one third use CD-ROM technology for storage and retrieval.

Office Automation Although two thirds of companies with revenue greater than $500,000 report that the public records to which they need access are computerized, only 40 percent of companies with revenue of $150,000 or less report that public records are computerized. Among the 275 companies that do have access to computerized public records, only 37 percent are equipped to take advantage of this access by on-line connection (computer and modem) from their own offices. Two thirds of the larger companies have this on-line access in comparison with only 17 percent of the smaller companies. Only 16 percent of all companies surveyed reported they have an office in the county recorder's office.

Closing systems are automated in almost two thirds of all companies surveyed. Almost 90 percent of the companies with revenue greater than $500,000 have automated closing systems.

Liability Insurance More than 80 percent of surveyed companies have errors and omissions (E&O) coverage. Smaller companies (89 percent) are more likely to have E&O coverage than larger companies (80 percent). Larger companies (92 percent) are more likely to have workers compensation coverage than smaller companies (59 percent). Almost 80 percent of all companies have an office package policy and one half have fidelity or surety insurance coverage or bond. Other liability coverages were reported by relatively few companies. Approximately 15 percent of the companies with revenue greater than $500,000 have an employment practices policy.

A copy of the full report is available for $125 to ALTA® members and $175 to non-members.

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