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Don’t be piggish or sheepish: There is a fair financial return for you. If you go in with too aggressive an approach your competition will easily steal your clients but don’t give it away. Troon can convince your potential partners that you too must be compensated fairly.
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(215) 441-5500
info@troonmanagement.com
Address
25 W Moreland Ave, Hatboro, PA 19040
Hours
Mon – Fri: 9am – 5pm
By Appointment
Guiding advantageous business relations to success.
Anne Anastasi and her team of knowledgeable title insurance industry professionals have guided AfBA relationships toward the successful and compliant growth of their ventures. Meet the team behind the solutions and discover how we can help you achieve your goals.
How do you determine if the initial capitalization is “sufficient”?
One of the factors used by investigators in determining if the venture is bona fide comes from HUD’s Statement of Policy 1996-2 containing 10 testing questions (the 10-point test). Test question #1 discusses the sufficiency of initial capital and net worth “to conduct the settlement service business for which it was created”. It goes on to query whether or not the entity is undercapitalized to “do the work it purports to provide.”
In opening a title insurance agency revenue will not be generated until 30-60 days after the first order is received however start-up expenses such as rent, salaries, insurance premiums etc. are due months before revenue is generated. We typically calculate the capital investment which must be in the form of cash (not the promise of cash or an old copy machine) to be 3-4 months of the annual operating expenses of the venture when it is operating at the anticipated capacity. That capital fund is retained, not distributed and if any portion of it is used during down months, the original capital fund is always replenished before any distribution of profit is made. Please note, there are some state statutes that dictate the amount of capital required.
How do we remove non-performing members
Coca Cola® cannot remove shareholders just because they do not drink Coke®, non-performing investors in affiliated business arrangements must be treated the same way. We include only a scant few very serious triggers in our operating agreement which will require members to withdrawal from ownership but the lack of supporting the entity or anything remotely similar cannot be one of those events. It is important to choose your partners well and have very frank discussions with them before you open the venture. As a part of Troon’s service, we have very open and direct discussions with your potential partners about support and fairness.
How many members/investors should we have?
The answer to this question comes down to volume therefore the answer is can range from 1 investor to 499. You need enough volume in geographical areas to carry the overhead expenses required by the compliance rules such as rent, salaries, insurances, benefits, etc.
Do we need to capture business apart from our member investor’s business?
In some states it is a state requirement that the venture transact a certain percentage of its business referred to it from sources other than its investors (or people under the influence of an investor). Even if you are in a state that does not have such a requirement, within the federal Statement of Policy 1996-2, test question #9 suggests that an investigator review the venture’s efforts to secure outside business.
What settlement service providers make the best partners?
You have to look at your state’s rules to see if any segment of the real estate population is prohibited from being an investor member. Some state bar associations see ownership in a title agency as a conflict of interest and prohibit attorney membership where an attorney will send his or her own clients. Some real estate companies have contracts with their agents that prohibit the agents from joining, investing or associating with an affiliated business provider. If you get passed the legal and contractual hurdles, you then need to look for potential partners who are active on the side of the real estate transaction where the consumer typically selects the title provider.
Frank conversations with potential partners, however, is imperative and that is where Troon Management can help. We know the three steps to take so that we can get to honesty when it comes to business projections and the partner’s intentions when it comes to his or her loyalty to the venture.