into title business
The state's top real estate
brokerage is launching escrow
and title divisions
Coldwell Banker Pacific Properties, Hawaii's largest real estate brokerage, will soon launch its own title and escrow divisions in a move aimed at simplifying the home-buying process for its customers, but which could take revenue from settlement companies that now depend on Coldwell Banker for a significant share of their business.
Coldwell Banker filed an application with the state's Division of Financial Institutions yesterday to establish two new companies, Pacific Access Escrow and Pacific Access Title.
Along with Coldwell Banker's existing mortgage arm, Pacific Access Mortgage, the new companies will allow Coldwell Banker to potentially handle each step of a real estate transaction, from the time a home is shown by one of its brokers to the day the buyer is handed the keys.
"A real estate transaction is so complicated, with so many parties involved, and customers increasingly want all of this in one place," said Scott Bradley, Coldwell Banker Pacific's co-managing director.
The two new companies will be set up through 50-50 joint ventures with Santa Ana, Calif.-based First American Title Insurance Co., which already underwrites a significant portion of local title insurance with offices on Oahu, Maui and the Big Island. It has been involved in more than 300 similar joint ventures around the country.
The move reflects a trend seen on the mainland toward consolidation in the real estate business as brokerages seek to streamline the currently disjointed home-buying process in which buyers may need to engage the services of several different companies to complete a transaction.
But Bradley indicated that Coldwell Banker's evolution into an increasingly self-contained real estate entity was also due in part to the desire to keep more of a transaction's paperwork -- and the fees that it generates -- in-house.
In a typical transaction for a $500,000 home, both the buyer and seller will pay between $2,000 and $2,500 in title, escrow and related fees.
"What really raised this idea for us was watching the mainland trend and seeing companies that have been able to diversify their business at a time of growing pressure on margins," he said.
The move means that Hawaii's handful of existing title and escrow firms, now led by Title Guaranty Escrow, will face a potentially formidable competitor, and Bradley said he expected some "friendly competition."
Title Guaranty, which was founded in 1896 and is the oldest and largest locally owned independent escrow company in Hawaii, issued a terse statement when informed of Coldwell Banker's move.
"We believe they will discover that the escrow business is very complex and challenging," said James Pietsch, the company's chief operating officer.
The potential loss of any of Coldwell Banker's title and escrow business could be significant.
Coldwell Banker Pacific has consistently been Hawaii's market leader in the number of residential sales transactions and total sales volume since it was formed in 1995 by a merger of Coldwell Banker McCormack, Dolman Associates Ltd., Bradley Properties Ltd. and Conley Dew Ltd. Wade Realty Ltd. was added later.
Coldwell Banker last year led the state with 3,951 closed transactions worth a total $1.39 billion, according to a report by real estate research firm Real Trends Inc., followed by Century 21 All Islands at 1,717 transactions.
Prudential Locations, typically Hawaii's No. 2 brokerage, did not release figures for the Real Trends report and declined to provide them yesterday.
Bradley said Coldwell Banker customers will not be required to use the title and escrow services of its sister companies. Likewise, the new entities would seek business from outside Coldwell Banker Pacific.
But he added that the "primary focus" in establishing the new divisions was to "internalize" the title and escrow business generated by its real estate sales.
That could hit Title Guaranty hard, said Jeffrey Samuels, a former Coldwell Banker agent who is now one of the state's highest-selling brokers through his own firm. "(Coldwell Banker) has been their largest client. They run a huge portion of their business through Title Guaranty. That's millions of dollars a year that (Coldwell Banker) will be putting back into their own pockets," said Samuels, who has his own plans to open an escrow division by next spring.
Samuels said the motivation for diversifying into the title and escrow realms stems partly from the poor performance of some of the state's existing title and escrow companies in processing transactions in a timely manner, which can endanger a sale.
"Some don't shuffle the paperwork as well as others and things are getting lost in the cracks," he said. "This is a better way to keep things under control."
Bradley also said that quality concerns were a factor in Coldwell Banker's move, saying that some of his agents have reported problems in closing transactions, especially as the market took off recently to record volume levels.
"There has been some strain on capacity with the title and escrow companies," Bradley said.
Officials with the state Division of Financial Institutions gave no indication how long approval of Coldwell Banker's application might take, but Bradley said he hopes the new firms could be in business within 30 days.
Coldwell Banker's joint-venture partner First American Title Insurance will serve as the managing partner of the two new companies.
Bradley said Coldwell Banker is responding in part to surveys showing that most homebuyers would prefer working with just one company on all aspects of a home transaction. He added that the company is considering further rounding out its offerings by adding a homeowners insurance division.