Welcome to another insightful episode of the Real Estate Power Hour. Today, we have Randy Ramirez from Patton Title with us to break down everything a real estate investor needs to know about working with a title company. Whether you’re flipping houses, wholesaling, or delving into double closings, understanding title issues is crucial. Let’s dive right in.
Why Title Companies Matter for Investors
As a real estate investor, knowing which title company to work with can make or break your deal. Title companies ensure that a real estate transaction is clear of any title issues, providing peace of mind to both buyers and lenders. Patton Title, for example, is an investor-friendly title company that navigates through various complexities specific to investor deals.
Understanding Double Closings
A double closing involves two separate transactions:
- The investor (middleman) closes on the property with the seller.
- Immediately after, the investor sells the property to the end buyer.
Why Some Title Companies Avoid Double Closings
Many title companies shy away from double closings due to the risks involved, such as potential non-funding from the end buyer. Patton Title, however, accommodates these deals but emphasizes the importance of transactional funding.
Risks and Mitigations
While double closings can be lucrative, they come with risks:
- End Buyer Non-Funding: Ensure your end buyer is reliable.
- Regulatory Issues: Some title companies won’t do pass-through funding due to risk aversion.
The Intricacies of Assignments
Assignments are more common and often simpler than double closings. Here’s what you need to know:
- Separate Closing Statements: To keep the seller unaware of your profit margin, title companies like Patton Title provide separate closing statements.
- Key Details: Always include “and/or assigns” in the contract to make the assignment process smoother.
Navigating Complex Title Issues
Dealing with Multiple Heirs
Investors often run into properties with multiple heirs. Title companies can guide you through preparing airship affidavits and other necessary documentation to clear the title.
The Importance of Title Searches
Before diving into deals like tax liens, performing a title search is crucial. It’s a small investment that can save you from big problems down the line. Companies like Patton Title can provide a thorough title search within 24 to 48 hours.
Subject-To Deals
A subject-to deal involves buying a property subject to the existing mortgage. While these can be attractive, they come with a risk: the lender can call the note due at any time. Patton Title ensures both the buyer and seller are aware of this risk before proceeding.
Common Pitfalls and How to Avoid Them
Financing Issues
One of the most common reasons deals fall through is financing. Make sure your lender can perform in a timely manner to avoid last-minute chaos.
Property Liens and Encumbrances
Issues like unpaid taxes or city liens can delay or kill a deal. Be proactive in addressing these potential problems early in the process.
Working with a knowledgeable and investor-friendly title company like Patton Title can significantly streamline your real estate transactions and help you avoid common pitfalls. Understanding the complexities of double closings, assignments, title searches, and subject-to deals is essential for any real estate investor.
By being proactive and ensuring clear communication with your title company, you can navigate these challenges effectively and close your deals with confidence. Whether you are a seasoned investor or just starting, having a reliable title company in your corner is invaluable for your success in the real estate market.
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