You’d think price matters but when buying a home it doesn’t.
At least the title insurance does not.
On Acquisitions Anonymous, the crew looked at a title insurance company with one million in sales which serves residential real estate clients. One aspect host Bill D’Alessandro wondered about was deal flow. Does the business get clients through advertising or does the owner have specific relationships? If the latter the acquirer must inquire.
But advertising doesn’t really exist for title insurance, “the customer does not shop for these services, you can’t really advertise to the consumer,” Bill observed. And there’s no advertising for two reasons.
First, it’s hard to compete on price because of framing. Framing matters a lot. We see framing in ‘always buy two new cars‘, in making better predictions, and the impact of Covid. Title insurance cost is framed against the price of the house. Saving a few hundred dollars while spending a few hundred thousand isn’t part of our mental accounting.
Second, the fear of being wrong. People switch to avoid loss, the loss of a title snafu is much greater than the loss of the cost of insurance. The JTBD of title insurance is protection. Switching from the default company to another introduces psychological discomfort if something goes wrong. I can only imagine telling my wife, “no, no, I saw an advertisement on Facebook for this cheaper company.”
How much a buyer can unleash a business’s potential is TBD, and dependent on the answer to this deal flow question.