Cost containment is critical in a down real estate market, and as we look ahead to a muted market in 2024 and the uncertainties related to the Federal Reserve’s intentions with regard to interest rates, it is imperative that title agents take a hard look at their expenses.
Evaluating costs in each department can help you determine if there are places that you can save money in this belt-tightening year ahead.
Here are three objectives to consider in taking on a cost analysis for your agency
Benefits of a cost evaluation
There are benefits that go beyond the immediacy of today’s market in evaluating the cost structure of your agency, including sustainability. What you learn in your evaluation could set the stage for being much more profitable when the market improves as interest rates come down again.
A second advantage is that it allows for a much more realistic approach to forecasting and budgeting. As more buyers and sellers come back into the market, you will be better prepared to ramp up your agency if you have a handle on where you are able to invest more to meet an increased demand and where you can remain conservative.
Types of expenses
As you launch into your evaluation, you will want to consider direct costs, indirect costs, fixed costs, variable costs, and external factors.
- Direct costs are those expenses incurred as a result of the services you provide
- Indirect costs are overhead expenses such as rent and utilities or the personnel department
- Variable costs change based on, for instance, the number of title orders you process in a month
- Fixed costs remain stable, such as your annual insurance fees, lease payments, or IT expenses
External factors are also a hugely important category for title agents. Taking into consideration the economic conditions of your market, the potential for interest rate adjustments (up or down) in 2024, and potential expenses likely to be incurred due to increasing regulations – such as FinCEN’s proposed rule extending the reach of the Geographic Targeting Orders (GTOs) nationwide – are all factors that should be considered in a cost evaluation.
Time to trim
Once you have a handle on your costs, you can quickly identify those expenses that can be trimmed and those that cannot. Here are some questions to ask:
- Are there costs, no matter how minor, that can be eliminated entirely?
- Which contracts can I renegotiate in light of reduced use of a service?
- Is there an expensive process or technology that could be outsourced more cost effectively?
- Can I reduce payroll expenses without losing staff, such as unpaid time off or reducing hours?
- What discretionary expenses, such as travel, can be curtailed or eliminated altogether?
If you decide to outsource a few of your processes, Network Transaction Solutions (NTS) can help. We offer several services that can ease the workload of your staff, including eClosing with RON, municipal lien searches, association estoppels, mobile closings nationwide, post-closing services, mortgage payoff ordering and tracking and more.
And finally, in the process of evaluating your costs, take into consideration any long-range plans you have for your agency. Whatever decisions you make today should be made in concert with your overall goals for the coming years.
At NTS, our flexible solutions give you the freedom to streamline and simplify your operations. Contact us today to learn more about our à la carte or bundled service offerings.