Protect your acquisition with a thorough review of underwriter agreements, referral networks, escrow compliance, and state licensing before you close.
Acquiring a title and escrow company requires scrutiny far beyond standard financial due diligence. The value of the business lives in transferable underwriter agency agreements, diversified referral relationships with realtors and lenders, clean escrow trust accounts, and licensed staff who can operate independently of the seller. A single undisclosed claims shortfall, a non-assignable underwriter contract, or a referral network concentrated in one broker can collapse deal value post-close. This checklist walks buyers through the five most critical due diligence categories — giving you the tools to validate what you're paying for before wiring funds.
Title insurance underwriter agency agreements are the operational backbone of the business. Confirming transferability and compliance is non-negotiable.
Request all title insurance underwriter agency agreements and confirm assignability with written consent from each underwriter.
Non-assignable agreements can void the business's ability to issue policies post-close, eliminating core revenue.
Red flag: Any underwriter agreement with a change-of-control clause that has not been pre-approved or is pending approval.
Review volume commitments and minimum production thresholds in each underwriter contract.
Failure to meet minimums post-acquisition can trigger contract termination and loss of issuing authority.
Red flag: Volume minimums that exceed the trailing 12-month order count by more than 10%.
Confirm the company is not in breach of any underwriter audit findings or compliance requirements.
Outstanding audit deficiencies can result in agreement suspension before or after closing.
Red flag: Any open underwriter audit with unresolved findings or required corrective action plans.
Assess whether the business has relationships with multiple underwriters or relies on a single carrier.
Single-underwriter dependency creates catastrophic risk if that agreement is terminated or repriced.
Red flag: More than 80% of premium volume placed with one underwriter with no active alternative relationships.
Title company revenue is only as stable as its referral network. Quantify dependency on top sources before pricing the deal.
Obtain a referral source report showing closed order volume by realtor, lender, and builder for the past 3 years.
Identifies concentration risk and validates whether revenue is genuinely diversified or owner-dependent.
Red flag: Any single referral source representing more than 20% of annual closed order volume.
Confirm whether top referral relationships are tied to the owner personally or to the business entity.
Owner-held relationships may not survive transition without a structured introduction and handoff plan.
Red flag: Top three referral sources have no documented relationship with any staff member other than the seller.
Review the mix of residential purchase, refinance, and commercial transaction revenue over 3 years.
Heavy refinance concentration means revenue is highly rate-sensitive and will collapse in rising-rate environments.
Red flag: Refinance volume exceeding 50% of total revenue with no commercial pipeline to offset rate cycle risk.
Request any written referral agreements, marketing service agreements, or preferred vendor arrangements with top sources.
Documented agreements signal formalized relationships that are more transferable than informal personal ties.
Red flag: No written agreements with any referral source despite multi-year volume history with the same partners.
Escrow shortfalls and unreconciled trust accounts are the single fastest way to inherit a regulatory and legal nightmare.
Obtain independent reconciliation of all escrow and trust accounts as of the most recent month-end.
Unreconciled accounts signal potential shortfalls, misappropriation, or compliance violations.
Red flag: Any escrow trust account with an unresolved reconciling item older than 30 days.
Review 3 years of audited or reviewed financial statements with revenue segmented by transaction type.
Validates reported EBITDA and exposes any revenue normalization issues or owner-benefit add-backs.
Red flag: Financial statements prepared on a cash basis only with no supporting transaction-level revenue detail.
Confirm E&O insurance, surety bonds, and fidelity coverage are current and transferable to new ownership.
Coverage gaps at closing expose the buyer to immediate uninsured liability for prior errors or fraud.
Red flag: E&O policy with coverage limits below $1M per occurrence or surety bond not meeting state minimums.
Request a complete title fee schedule and compare net revenue per file against industry benchmarks.
Compressed fee-per-file metrics may indicate referral fee arrangements or undisclosed revenue sharing.
Red flag: Net revenue per closing file materially below market average without a clear volume or discount explanation.
State-by-state licensing requirements and active claims exposure can delay or derail a deal if not identified early.
Confirm all state title insurance agent licenses, escrow licenses, and business entity registrations are current.
Lapsed or non-transferable licenses can halt operations in specific markets immediately after closing.
Red flag: Any state license with a pending renewal, disciplinary action, or change-of-ownership approval requirement.
Request a 5-year claims history report from each underwriter showing loss ratios by policy year.
Elevated loss ratios can trigger underwriter repricing, agreement termination, or buyer liability exposure.
Red flag: Any policy year with a loss ratio exceeding 15% or any open claim above $50,000 without resolution.
Review all state regulatory correspondence, examinations, and any consent orders or sanctions in the past 5 years.
Undisclosed regulatory actions can result in post-close license suspension or financial penalties.
Red flag: Any outstanding consent order, cease-and-desist, or regulatory fine not disclosed in seller representations.
Confirm compliance with RESPA, TRID, and state-specific settlement service disclosure requirements.
RESPA violations involving kickbacks or undisclosed fee arrangements carry federal penalty and reputational risk.
Red flag: Any marketing service agreement or desk rental arrangement with a referral source without documented legal review.
Licensed closers and title examiners are the operational engine. Retention risk and system gaps can erode value immediately post-close.
Obtain a staff roster with license types, tenure, and confirmation of all current license statuses.
Licensed escrow officers and title examiners cannot be quickly replaced — attrition disrupts operations and referral confidence.
Red flag: More than one key licensed closer with no employment agreement or non-solicitation covenant in place.
Interview senior escrow officers and title examiners to assess retention intent and transition receptivity.
Staff departures triggered by ownership change can cause referral partners to redirect orders immediately.
Red flag: Any senior staff member who has already been approached by a competitor or is actively interviewing.
Review the title production platform (e.g., SoftPro, RamQuest, Qualia) and assess integration and data quality.
Outdated or poorly configured software creates post-close data migration costs and workflow disruption.
Red flag: No formal title production software in use — operations run on spreadsheets or legacy paper-based systems.
Assess the seller's transition plan for introducing referral relationships to new ownership over 6–12 months.
A structured handoff plan is the single greatest predictor of revenue retention post-acquisition.
Red flag: Seller unwilling to commit to a minimum 6-month post-close transition with documented referral introductions.
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Yes — and this is often the longest lead-time item in a title company acquisition. Most underwriter agency agreements contain change-of-control or assignment clauses requiring written consent before a new owner can issue policies under the existing agreement. In a stock purchase, the agreement may transfer automatically, but underwriters often still require notification and approval. In an asset purchase, formal assignment is almost always required. Start the underwriter approval process as early as possible — ideally at or before LOI — because some underwriters take 60 to 90 days to respond, and a delayed or denied consent can collapse the deal or require a costly bridge arrangement.
The most reliable method is to ask the seller to facilitate warm introductions with top referral sources — realtors, lenders, and builders — as part of the due diligence process. Pay close attention to whether those sources express willingness to continue sending business after ownership changes, or whether their loyalty is explicitly to the seller personally. Review 3 years of order volume by referral source, look for diversification across at least 10 to 15 active sources, and ask whether any referral partner has a written preferred vendor or marketing service agreement in place. A seller who is unwilling to facilitate any pre-close introductions is a significant red flag.
The most common structure is a stock purchase, which preserves existing underwriter agency agreements, state licenses, and vendor relationships without requiring formal re-application. This avoids the assignment friction of an asset deal but transfers all historical liabilities to the buyer — making thorough due diligence on claims history and escrow accounts essential. When a stock purchase is used, buyers typically negotiate a 10 to 20% seller note or earnout tied to referral volume retention over 12 to 24 months to protect against post-close revenue erosion. Asset purchases are used when specific liabilities need to be excluded, but require underwriter and licensing re-approval, which adds 60 to 120 days to the close timeline.
Start by segmenting the trailing 3-year revenue into purchase transactions, refinance transactions, and commercial closings. If refinance volume exceeds 40 to 50% of total revenue, the business carries significant rate sensitivity — as demonstrated by the sharp volume contractions many agencies experienced in 2022 and 2023. A healthier acquisition target will show a strong purchase market base, a growing commercial title component, and ideally some revenue from default or loss mitigation closings that perform counter-cyclically. When building your acquisition model, stress-test revenue at a 30% and 50% volume reduction scenario to confirm the business remains cash-flow positive and can service any acquisition debt at trough conditions.
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