Meridian Title's John Clikeman talks about AfBA success

BrokerIPTV: Welcome to Broker IPTV and today we are going to be talking about affiliated business arrangements and I have got an expert here by the name of John Clikeman and John, welcome to the show.

John Clikeman: Thank you.

BrokerIPTV: So, John tell us a little bit about yourself.

John Clikeman: I have been a practicing real estate attorney in Colorado since 1972 and I have been involved in the AfBA business in Colorado title insurance businesses since the mid '90s.

BrokerIPTV: Wow. So, I am sitting with an attorney today.

John Clikeman: Yes, you are.

BrokerIPTV: Okay. Well, 36 years on a bar. That's a long time.

John Clikeman: It's a real long time.

BrokerIPTV: So, tell me about your business model for affiliated business arrangements in Colorado title insurance field.

John Clikeman: Our basic business plan is to form joint venture arrangements under a limited liability company entity with different real estate offices. My holding company that I own goes in and forms the entity and then we service it, manage it. The real estate broker is in the office, become actual members of the entity and the theory is that by them becoming owners in their own title company, that they would obviously refer business to that entity and potentially profit from being a member.

BrokerIPTV: Right. So, tell me about some of the things that you do and in this case, say for Meridian Title and Escrow, you are in fact the back office, you are the plant for the title company, right?

John Clikeman: We provide all the title services from our office that includes the production of the title commitments, the title policies, recording the documents after closings, and basically just overseeing the whole title operation to make sure everything runs proper.

BrokerIPTV: So, I think a lot of real estate brokers in Colorado have heard of ABAs or AfBAs as it is properly known as, affiliated business arrangement; what's the difference for a lot of brokers out there or even consumers that are looking to see between say a traditional title company without broker ownership and an AfBA where you have real estate brokers as the primary owners?

John Clikeman: Well, the main difference is the fact that we can operate on a much more, what I would call efficient and economical basis than the what I refer to as traditional title companies. That means we don't have the need for a sales force. We do have need for followup and public relations with our owner brokers, but we don't have the expenses that a traditional title company would have and that allows us to function what I believe is much more efficiently.

BrokerIPTV: Another question I get a lot of brokers asking me is the legalities of an AfBA in the Colorado title insurance field. I mean how long have they had ABAs or AfBAs here in Colorado?

John Clikeman: Since probably about the mid '90s is when they came forth in Colorado. They have been in the US in other states for a lot longer than that. The concept was not born in Colorado by any means. Basically, Colorado law now does recognize the validity of AfBAs. They have to be in compliance with the Colorado regulations as promogated by the Division of Insurance.

BrokerIPTV: And then distributions, I mean there could be distributions based on profitability. How are those handled and how do they work with RESPA?

John Clikeman: One of the guidelines of RESPA in Colorado law is that you can only be compensated according to your ownership percentage in the company, in other words, you cannot be compensated under volume of business criteria, which would say one guy gets x amount of money because he sent x amount of orders.

BrokerIPTV: Right.

John Clikeman: It has to be based solely on the profitability if there is profitability and then the distributions are based upon that specific ownership interest of the individual.

BrokerIPTV: Great. Well, keen insight John. I appreciate you sharing the concept of AfBAs here in the ownership of real estate brokers in Colorado title insurance companies. Thank you.

John Clikeman: Thank you.

Posted on October 14, 2008 05:14:06 by Blog Author