Top 10 Things You Can Learn from a Title Company
Top 10 Things You Can Learn from a Title Company
Fix and flip investing is like a sandwich; there are three layers. The rehabbing part is the middle of the sandwich. The two ends are buying at a deep discount and selling at a profit after costs. Any successful investor will tell you that every profitable investment starts with a smart buy. When you’re buying for fix and flip, you’re trying to buy a distressed property at a price that locks in some equity from the first day, no matter Money what the condition of the property.
Buying at the right price is part negotiation, but you don’t know if it’s the right price unless you can manage to come to the true value of the home. And value includes being certain that there aren't things hiding from you that can cause problems. There are pitfalls in real estate that are only found with some real investigation and combing through records at the courthouse.
Many investors have no idea just how valuable a title company can be to them in their business. In most cases, when a property transfers from one owner to another, a title company is involved. They make their money from fees, but mostly from selling title insurance. If you haven’t noticed before, insurance companies don’t like to pay & claims.
Title insurers are really into making sure they uncover every bit of information about a property to reduce their risk from a claim later. In today’s computerized world, once a title company pulls together all of the documents they can find about a property at the county courthouse, they have them stored away for future use. Fix and flip real estate investors can take advantage of this in a big way. Here are the top 10 things you can learn from the title company to help you in your business:
#1. Previous sale price history
Every time the property has changed hands, there is a deed recorded at the courthouse, and in most states there is a record of the sale price. When you’re trying to figure out the value of a property, it’s a big help to be able to see how it has appreciated over time. Historical appreciation isn’t a guarantee, but it can help you to predict future value over time.
#2. Mortgages on the property
All mortgages are recorded at the courthouse, and most of them will take precedence over any claim you have to full ownership, so you want to know about things like 2nd mortgages and home equity loans. They will have to be paid off as part of the ownership transfer process.
In most every state, when a workman, repair person, or contractor does work on a home, they are legally allowed to place a lien for their work value against the property if they’re not paid. Recorded “mechanics liens” as they’re called are another claim against the property that cheap mlb jerseys you can’t get around if you want to buy it.
An encroachment is the presence of a structure or something on a property that shouldn’t be there. An example is a fence that the neighbor built, but it’s six inches onto the property you’re considering buying. Surveys find these encroachments, like a corner of a neighbor’s storage building across the line. They are then named as exceptions in the title insurance policy. This means that the title insurer will not cover the new owner women for damage or claims resulting from something already known at the time of the sale. So, if you buy the home with that building encroaching on the property, you can’t file a claim to pay to have it removed later.
#5. Rights of Way & Easements
Governments often have an easement along property lines that allows space to build roads or streets. Utility companies have easements or rights of way to run electric, water, gas and sewer lines. You need to know where these are, as they may already be there underground. If you build a structure over the easement, they have the right to do maintenance that could damage it in the future. If they aren’t already in place, they can come along and do whatever is necessary to install them later.
#6. Ownership Claims
Divorces come into play Gültigkeit a lot in these type of claims. A previous spouse may have some legal claim to ownership that can only be erased by them providing a “quit-claim deed” with which they agree to drop any future claims to ownership. This will be in the property records as well.
#7. Covenants and Restrictions
This can be a big one. When a subdivision is formed, or “platted” out, there are usually a set of covenants and restrictions set out in a legal and recorded document. They are binding on the property owners. If you buy a property planning to build a storage building or detached garage, it’s not fun to find out that it’s not allowed in the covenants. It’s really not fun if you start building before the homeowners’ association comes knocking.
#8. Water or Mineral Rights
Not all of the information you get from a title company is potential bad news. Though it isn’t common, in many non-urban wholesale jerseys areas you may find that you have water or cheap nba jerseys mineral rights. However, in the vast majority of the country, you will find the that they’ve long since been sold to or reserved by the government or others. You should at least be aware if some big oil company can drill a well on your property. Don’t worry much about it though, as for most of your fix and flip stuff it’s very unlikely that there is room for a rig, and no oil under the ground anyway, or they would be there instead of the house.
#9. Air Rights
This is another odd one you’ll not likely bump into. But, in some cities there are “air rights,” rights to the air space above the property that can be held by others. There are a few really strange photos out there of a large hotel complex with two buildings and an overhead walkway with a house under it … strange but true.
#10. Title Insurance Coverage
Should you choose to buy title insurance, and you’ll be required to if you have a mortgage, you’ll want to know about coverage you receive from the policy. Because of the thorough research these insurers do, it’s rare for there to be a claim. But, if you own a home and someone puts a fence across the line, you can be compensated for your costs of having it removed or moved over to the right location.
The Mechanics of a Normal Deal
In the vast majority of real estate purchases, the title company plays an important role. They pull out the old research and do a thorough new set of research to find everything new and recent recorded about the property at the courthouse. The sale process goes something like this:
- The purchase contract between buyer and seller is delivered to the title company by one of the real estate agents or principles involved.
- A title insurance “commitment” or “binder” is prepared that spells out everything we’ve talked about in this article.
- Copies of all of the documents we’ve mentioned are attached to the binder that commits the insurer to offer coverage. This can be a really large body of paper, and some bind it into a book format.
- The binder sets out any requirements for the buyer or seller, such as Ingredients getting quit-claim deeds or other things to reduce their risk of a claim later.
- The binder also sets out any “exceptions” to coverage. We mentioned this earlier, as they will not cover things already known, such as encroachments. They will also not cover any claims related to covenants and restrictions, as buyers are expected to read them and know what they can and cannot do on the property.
- The title company coordinates the survey, closing, and mortgage documents to satisfy all of the requirements of the lender. Upon closing, a title insurance policy is issued.
Information There for You to Use
Some of this information is normally available free of charge cheap jerseys or for a reasonable document preparation fee from title companies. You simply walk in with the property address and/or legal description and ask for a property profile. A friend who is a real estate professional might be able to obtain more information for you as well. Title companies court relationships with real estate professionals, as they are their primary source for business.
There is another party very interested in this valuable information provided by the title company. It’s your transactional hard money or private money lender. Being involved in hundreds of deals with real estate investors and closed at title companies, Cornerstone Company has the experience to help you in covering all of the bases in checking out the documents, requirements, and exceptions.
Start here with our prequalification questionnaire. It’s free, fast and easy online. Be ready for funding and help with the real estate purchase process.