Tagged: clear title
September 21, 2015 at 10:26 am #380Kevin RhatiganParticipantSeptember 21, 2015 at 10:26 amPost count: 107
Do you ever get a title report or title rundown on a parcel that you want to buy?
I understand the part about verifying ownership with the county and verifying any taxes owed.
But is there any possibility of there being additional liens on the property such as by a credit card company, IRS, etc.? Or is that not possible since it is vacant land?
Seth WilliamsParticipantNovember 23, 2015 at 10:35 amPost count: 12
I was actually wondering about this same thing @kevinrhatigan @jilldewitt @stevenbutala
Maybe I missed it somewhere in Disc 8, but if you’re not using a title company to close the deal, are you doing any kind of title search before buying the property, or are you only looking at the most recent deed to verify that it’s owned by the correct person (i.e. – the seller)?
Seems like there would be a high potential to miss some title issues if you’re not doing a standard title search – but again, since this type of closing process is only happening with deals under $5K, I also know from experience that most of these end buyers don’t do their own title work anyway… so if there was a problem, they probably wouldn’t catch it either.
Maybe I’ve always just been overly cautious about this, but it seems like a lack of due diligence to avoid the title search altogether. Was I seeing this right? If so, how do you guys get comfortable with all the potential unknowns?S. Jack ButalaParticipantNovember 23, 2015 at 11:33 amPost count: 120
Great question. Thanks for chiming in, Seth. Because you are so versed in this business model, I’ll explain this in great detail. I’ve answered it in other channels for Kevin.
The birth of this concept for us began when we were a tax deed company back in the early 2000s. We were buying tax deeds at sales which cleared any and all liens, with very few exceptions. The main exceptions are IRS and Medical Liens and the small chance the property was named as an asset in a bankruptcy proceeding (during the proceeding). During that time we purchased several thousand properties at these sales and researched a ton of them.
Not once, did we come up with a cloudy title. In the 15,000+ transactions we have completed, not once has a buyer come back to us, as the seller, and made us aware of a cloud in the title chain.
Many times over the years, we have purchased assets using this direct deed concept and a few years later the current owner wanted title insurance. Title contacts us and we review and execute the documents they request us to sign. Again, no material issues.
Naturally, after thousands of deals, we stopped incurring the time and expense.
To make an informed decision, I created a “self insurance” model. The general concept is this: in the extreemly unlikely event that a buyer wants a refund or needs compensation related to a cloudy title, we have made some much money, that writing a check would be way cheaper than buying title insurance on every property we buy and sell.
And it worked.
On occasion, we sell a property to a buyer who wants title insurance and they want to go through escrow on a property we did not purchase with title insurance or through escrow. My answer is always “yes” we would be happy to do that. Buy you have to pay the full fee, not the typical pro ration because our property is priced at rock bottom. All (100%) of the times we have done this, the title plant comes back squeaky clean.
Which makes me think this? Is title insurance the mastermind of lenders or is it really necessary? What’s the worst thing that could happen. Title disputes usually come from the heirs of estates. They make claims that they really own a portion of a property that someone else has improved. The assets we are involved in here from a value stand point, don’t usually warrant a claim and they are usually not improved with high dollar structures etc…
All this adds up to “not necessary” in my mind. So we came up with the $5,000 rule. If we buy it for more than $5K, send it over to title. And it works great.
It’s this kind of experienced based advice that we provide at Land Academy. I’m not saying its the only way to do this successfully, but it’s the way we do it successfully every week.
Hope this helps.Seth WilliamsParticipantNovember 23, 2015 at 12:01 pmPost count: 12
Thanks for your feedback @stevenbutala – that makes sense to me. I actually thought it was quite reassuring to hear how many deals you’ve done with no title issues.
I’ve always known that title issues are extremely rare (it’s probably the lowest risk insurance in existence, because the problems almost never come up), but I’ve never known anyone else who has done THAT many deals, and to hear those kind of statistics (0 for 15,000) brought new clarity to the issue for me.
Thanks again for the thorough explanation!
Luke SmithModeratorNovember 29, 2015 at 10:40 pmPost count: 1345Chaz AlbrechtParticipantMarch 25, 2016 at 12:51 pmPost count: 120
- This reply was modified 51 years ago by .
My first deal was just about to go through, and the guy calls me to ask about the type of deed. I explained what a special warranty deed is, and he went on to tell me how he bought it from a tax sale and the previous owners want it back. So there is something wrong with the title and it cannot be insured until 10 years or so?
He wants to make sure the special warranty deed doesn’t hold him liable after the sale (he wants to do a quitclaim deed). It’s in Colorado and I’m paying 1500..S. Jack ButalaParticipantMarch 25, 2016 at 1:13 pmPost count: 120
Good work, Chaz. This is pretty typical banter from a seller. This is worth looking into for sure. Get the whole story and find out if the previous owner (before the tax sale owner) has any stake in the property via filing a lien. You can ask the county recorder. They will tell you or tell you where to find out.
A special warranty deed does hold him responsibile so I would push for it. If the deal is really great, I would try to close via title and pay for the whole thing.
If there’s no lien and the previous to tax sale owner is all talk and no action and you only expect to double your money on the deal, accept the Quit Claim and sell the property fast for $3K
Let us know how it goes. Excellent work.Chaz AlbrechtParticipantMarch 26, 2016 at 7:15 amPost count: 120Chaz AlbrechtParticipantMarch 29, 2016 at 1:04 pmPost count: 120
So I went to the county website and found a Deed of Trust in the previous owners name. Then the purchase from my seller, then an “action to quiet title” filed by my seller. It was not granted. But there isn’t anything filed by the previous owner either. Should I just move on, or would it be simple to just buy it and sell it quick?S. Jack ButalaParticipantMarch 29, 2016 at 4:22 pmPost count: 120AdamParticipantJuly 12, 2016 at 4:13 pmPost count: 5
Very interesting! So to clarify. If your purchase price is <$5K, you do ZERO title research aside from getting the vesting deed. What about breaks in the chain of title? I’ve found these quite prevalent. Wouldn’t this be a cloudy title and a deal you should pass on? You are also assuming involuntary liens, judgments, bankruptcy, IRS/medical liens virtually never happen so why look into it? Am I understating this correct? Thanks
On a side note. I heard you say in one podcast that if your buyer will likely build on the property you should buy with title insurance. What if my purchase price is <$5K, and how am I supposed to know if my buyer will build? Most of my financed deals have been purchased for <$1K so I have done my due diligence in house and most of my buyers have verbalized wanting to build…Again, thanks for any help.Luke HarrisParticipantSeptember 2, 2016 at 6:34 pmPost count: 146
I wanted to see if I could get some clarification on this post. If your purchase price is less than $5000, you do ZERO title research aside from getting the vesting deed? What about breaks in the chain of title? Wouldn’t this be a cloudy title and a deal you should pass on? You are also assuming involuntary liens, judgments, bankruptcy, IRS/medical liens virtually never happen so why look into it? Am I understating this correct? ThanksLuke SmithModeratorSeptember 2, 2016 at 8:02 pmPost count: 1345
It’s a business decision. This kind of worry is how title insurance companies still sell title insurance in this information era we are in. Sure you can buy it. Does your buyer want to pay for it? At these price points the cost of doing title is staggering. Do you price it in or eat the cost so you can sleep at night? I think it is cheaper and easier to own assets in companies to ringfence the getting hit by lightning freak events that are sure to happen some day. Most all of these problems can be fixed with paper. Collecting signatures on paper. It might be hard to get all the signature but that is the usual solution, not truck loads of cash or baseball bats to the knees.Chaz AlbrechtParticipantSeptember 5, 2016 at 6:24 pmPost count: 120
@lukeharris The county I work in has an online doc search. You can actually type in the property and see its entire history. Like Luke said, I may miss something one day and have to eat it, but it’d be pretty rare. If there is something sketchy in the chain of title, I usually run. Most of them have been people who bought in the 70s and just want to get rid of it.Luke HarrisParticipantSeptember 5, 2016 at 6:46 pmPost count: 146Luke SmithModeratorSeptember 6, 2016 at 8:32 amPost count: 1345
Try TitlePro247.com you get some free deeds there as a member here. Then try CoreLogic, they are more expensive per deed but well worth it to close deals. Check both in that county. Sometimes Title Pro is old info. Look at their update dates and compare them to Corelogic for your county. Then you will know which one you can use.
Some counties are not on there either. Then you have to call the county. Some will email, some will fax, some will mail. Some ask for money first. Some ask for money after they send it. You got to figure out your county.
If you are picking a new county to start out in I think it is a good practice to pretend you got a deal from Robert Jones or some such common name and do the research to figure out how that county works. Do each step and see if the data is there like GPS numbers, deeds, recording fees that you can understand. Who signs what. Tax forms etc. Then when you mail it or if you mail it after seeing how hard or easy of a county it is you know they process when you pick up the phone to accept a deal. Seller you are going to sign this and that. Notary, you are going to get this notarized and this signed or whatever the process is for that county. Make yourself the expert.
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