Is it better to use a title company or real estate attorney to close?

Question

I am new to REI and I have a wholesale deal under contract in Kentucky. Now what? Should I find a title company or real estate attorney? Should I have a buyer in place before I pay for a title search? Any help would be greatly appreciated!

Clay Smith · Answer

I use the KREIA sponsored people. Harry Borders with Border & Borders.

Maybe someone else can comment on fees. I made my decision based on their exposure to real state investors and what I deem fair pricing. They have always offered me advice with out charging.

Refer to this post for clarification between the two

http://www.biggerpockets.com/forums/51/topics/5166...

Kimberly T. · Answer

I wonder if the prevalence of using an attorney vs title company varies by region. I've never even heard of using an attorney when buying property (unless it's some huge complicated purchase), and we've bought properties in CA, AZ, and CO. We always use title companies. They research the title of the property and you get title insurance showing that if they screwed up and there's a problem with title that they should have caught, they'll pay for it (well, their insurance will pay for it).

Edit to add: this is something that none of our real estate agents has ever even asked us about when we bought property. It was always just a given that we'd use a title company (which is typically chosen by the seller).

Edit to add: this is something that none of our real estate agents has ever even asked us about when we bought property.  It was always just a given that we'd use a title company (which is typically chosen by the seller).

Account Closed · Answer

in michigan, we use title companies. I've never heard of anybody using an attorney.  If someone involved an attorney in a property closing, red flags would go up for me, like what is the problem?  I am an attorney, and have no idea what an attorney would do in a real estate transaction.  Deed prep takes two minutes to add your name and a property description to a document.  I guess the title companies technically use attorneys to do that and charge about 100 bucks.  But it all seems like East coast red tape to me, kind of like how New Jersey doesn't let you pump your own gas.

Kimberly T. · Answer

Oh! I just looked those up... the mortgage states are the ones where the lenders had to go through the courts to do foreclosures a few years back and that was all over the news about how the courts were backed up with that. Ok, I see it now.

We have only bought in CA, AZ, and CO, always with trust deeds.

David Dachtera · Answer

There are two ways that real estate is sold.

You probably live in a trust-deed state. At closing, a trust is established such that the lender has the right to take the property back should you default on payments. Title ("deed") is held in trust and not conveyed to the buyer until the loan on the property is fully amortized (paid off).

In a mortgage state, title is conveyed at closing while the loan on a property is tied to the lender's lien on the property by a financial instrument called a mortgage. Mortgages are a bit counter-intuitive because the buyer ("mortgagor") gives it to the lender ("mortgagee") while the lender gives funds to the buyer (indirectly) to give to the seller to make the purchase.

In either case, you're signing legally binding contracts. So, an attorney is ALWAYS recommended, but in a mortgage state, it is required. In fact, you can even give your attorney your limited power-of-attorney and send the attorney to closing while you do something else.

Hope that helps. It can be confusing.

Kimberly T. · Answer

I'm not sure what you mean by mortgage states. Can you explain that?

Greg Hammond · Answer

@Clay Smith

Thanks for all the great info! I will give them a call tomorrow. I actually used Borders and Borders years ago when I bought my first house. I looked up their website and they seem great. Thanks again, Greg

David Dachtera · Answer

In mortgage states, an attorney is required. In that case, you need both the attorney and the title company.

Greg Hammond · Answer

Thanks for the response Kimberly! I may use an attorney until I get more comfortable but being new I want to make sure I cross all my t's and dot all my i's. I have A LOT of questions!

Greg Hammond · Answer

Clay I was thinking of using an attorney as well. Do you know if there is a huge cost difference between a closing attorney and title company? Can you recommend one in Louisville? I was going to try a double closing or maybe even a back to back closing. Do you do many wholesale deals or are you mostly buy and hold?  Sorry to bombard you with questions but you seem to really know what you're talking about.

Is it better to use a title company or real estate attorney to close?

Most Popular Reply