Do I Really need a Title Company?

Starting Out 145.2K Posts 20.3K Discussions

Here's my situation:

I am attempting a wholesale deal from a highly motivated seller to a rehabber. Looking to close ASAP, possibly next week.

The seller has assured me there are no title/mortgage/lien issues. So does that mean I can forego title search/investigation because apparently it takes about 2 weeks to perform (as we're looking to close asap).

Can I just skip past a title company?

I'm thinking of just going with a real estate closer attorney to collect and distribute funds and to make sure our deal goes through.

Sorry if this doesn't make any sense or if any of my terminology is off - I'm still new.

First, the answer to your question is yes, you are more than welcome to skip the title search if you'd like, and just take the seller's word for it when it comes to whether there are any liens on the property.

That said, it's probably one of the worst decisions you could make as a real estate investor (or as anyone who plans to purchase a piece of property).

Here is why:

1. It generally only takes a day or two to do a title search, not weeks;

2. It's cheap (probably under $200) to do a title search;

3. Just because the seller doesn't know about a title issue or lien doesn't mean they don't exist. What if there is a lien in place or a claim of ownership from before the seller owned the property?

4. If the seller knows about a lien or claim against the property, why do you think he'd be honest about it, especially if he knew it would mean the sale couldn't go through? Trust is a wonderful thing, but has no place in a real estate transaction.

Btw, if it was the seller who suggested skipping the title search or it was the seller who told you the process would take "a couple weeks," then it's pretty clear that this seller either doesn't know what he's talking about or he's trying to scam you.

Actually it was the title company that told me it would take 2 weeks.

The seller is reputable so that's why I trusted him and considered skipping in the first place.

I will deliberate and skip or I suppose I'll look for another title co.

Thanks for the quick and detailed response!

Is your buyer also forgoing the title search/insurance as well? Its a nice cheap 1 time insurance cost I think is well worth it.

My area its also only a few days for the title search.

Take J. Scott's advice and don't even think twice about it.It's all about risk transfer.Don't get in a hurry,if it takes 2 weeks so what.This is a trip to court that you can avoid.Trust the seller as far as you can throw the property.

Originally posted by Raymond Lee:
Actually it was the title company that told me it would take 2 weeks.

Find another title company. This shouldn't take more than 2 days if there's no issues...


The seller is reputable so that's why I trusted him and considered skipping in the first place.

Reputation is only one piece of it. There could very possibly be liens or claims that the seller doesn't know about. In fact, there could be liens or claims that nobody currently knows about, but could arise between today and the closing (or even after the closing!).

Btw, your buyer will most likely do a title search, and if he finds a lien/claim against the property, it will be YOUR responsibility to clear it.

Raymond you might try titlesearch.com

First and foremost... I always assume sellers are lying about the property, title, liens, loans, repairs, and pretty much everything. I always do my own DD or hire someone that can; i.e. a Title Company.

I would take my contract to the title company and get the process started asap. I would then wholesale the property and let my buyer know that he/she pays for all closing cost (including title searh). Your end buyer will want a title search and they should be prepared to pay for it.

I don't have an official buyer under contract yet.

The seller informed he can prove title is clear and there is no mortgage - that's why he advertised it as such in the first place. I figured if I could show this to one of my interested parties, they may consider skipping the title search as well.

However I have decided better safe than sorry, so I will be looking for a title co.

Thank you for the massive response everyone, you may have just pushed me out of the way of an oncoming bullet.

Raymond-

Get the title search. I just spent 3 months marketing a sellers home who was in short sale. We got it under contract, and opened title. Title company called me 1 day later saying there were 2 liens on the house totalling $51,000 - both the seller did not know about. She was tricked into signing paper work her husband had, and never knew they were on the house.

Now just think if we closed the deal without a title search...

Danny

Originally posted by Raymond Lee:
I don't have an official buyer under contract yet.

Then what's the rush to get the title search done?


The seller informed he can prove title is clear and there is no mortgage

The way you "prove" title is clear is to get a title search done and get title insurance. If he hasn't done that (and you haven't done it), then there is no proof of clear title.

In fact, if a seller were going to go out of his way to try to convince me not to get a title search (as this seller seems to be doing), I'd be VERY concerned about what might be found.


I figured if I could show this to one of my interested parties, they may consider skipping the title search as well.

Most buyers are smarter than this. They realize that the $150 title search is the best money they can spend on a property purchase.

If a buyer of mine were ever to want to skip a title search (even if I were 100% convinced title was clear), I'd tell him he was crazy. And I'd certainly never try to talk a buyer out of it...

Have a title search done! Period. Dot.

Why would you risk such a thing for a couple hundred dollars? It may seem like a lot, but it won’t seem like much if you ended up costing yourself thousands of dollars and a huge headache down the road. Do not trust anyone...like J said, there are many reasons someone may not know a lien exists. If you do not do a title search you may save yourself a couple hundred bucks here and there, but sooner or later it will cost you...potentially BIG.

@Sherry Lewis, have you tried this www.titlesearch.com site?

If so how do you rate their service, seems pretty legit after going through their site.

I presume the $99.95 option is the optimal and standard choice for most.

I have negotiated with my title co to give me a break on the second search and policy. In other words if you pay for it now or the seller pays for it now with your title company, you may be able to negotiate a lower rate the second time around since very little time will have passed. Mostly on the title work but a little on the policy.

Medium gary logo  2 Gary Parker, GaryBuysHouses | [email protected] | 801‑635‑4756

Originally posted by Gary Parker:
I have negotiated with my title co to give me a break on the second search and policy. In other words if you pay for it now or the seller pays for it now with your title company, you may be able to negotiate a lower rate the second time around since very little time will have passed. Mostly on the title work but a little on the policy.

This can be done if you request a "hold open". It also happens to be true for a re-issue rate, which is available for a certain period of time after the title policy was issued.

Originally posted by J Salter:
@Sherry Lewis, have you tried this www.titlesearch.com site?

If so how do you rate their service, seems pretty legit after going through their site.

I presume the $99.95 option is the optimal and standard choice for most.

I would never use a title company (like this one) that:

1. I couldn't walk in the front door and speak to someone if there are questions/issues. What if you have a title dispute and they don't answer your calls or emails?;

2. Didn't have a local reputation and presence. What if there are title issues that needed to be researched locally...does this company do local research at every public records office in the country?

Find a local title company who comes recommended and pay an extra $100 for a title search. That way you know you're covered, you know the local research is being done correctly and you know you can get in touch with someone if there are title issues/disputes.

Never close without a title search and unless that closing attorney is representing the seller, he/she may not close it without proof of good title. The attorney may give a title opinion as well.

As mentioned, if that property goes in your name to your buyer you will be responsible to clear up any issues to that buyer and then forever in the chain of title. Liens, divorce, death-estate matters and errors in closings ot transfers happen all the time. If an issue comes up five years later and you were not insured you could have a bill to pay having been in the chain of title.

I suggest you simply assign your contract if you can and stay off title but if you close, get a search done. That title company may have said 2 weeks thinking you wanted to close with them, I'd ask again and specify search only, they do them everyday and one more shouldn't matter.

My title company would give me a preleminary search for free, but then I closed with them.

Sounds like you need to find a title company that will work with you a bit closer too. Good luck

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Originally posted by @J Salter :
@Sherry Lewis, have you tried this www.titlesearch.com site?

If so how do you rate their service, seems pretty legit after going through their site.

I presume the $99.95 option is the optimal and standard choice for most.

J Salter,
I used this site now 5 times and all of my experience was good for me. Okay I'm not in the US so I can't walk in the front door of an title company like J Scott but on my first propertie search in Cincinnati OH was an issue found in the title and they helped me for these only paid 100 bucks to find out why and made a fix then.

-Uwe

I'd never forgo a title search. Besides determining if the seller has a "saleable" interest in the property and identifying any liens, the title search also identifies any restrictions or easements on the property.

In a property that I purchased recently, the title search turned up a parking easement that allowed the next door neighbors to park on a 12 foot strip of land between the properties. This right of way was established in 1924 and the seller had no idea it existed.

While your seller may truly be noble and honest, it is worth the couple of weeks and few hundred bucks to sleep better at night.

@Uwe S. thanks for the advice. I'll give them a try sooner or later.

In re: "Sherry Lewis: Raymond you might try titlesearch.com"

What is the difference between the $39.95 fee for information and the information that is free from your local appraisal district? I don't know if all counties have it, but here in Houston, we have the Harris County Appraisal District.org online for free and they give you present owner, tax appraisal, taxes, school districts, etc.

I'm not familiar with any on line title search or appraisal entity, except to look up valuations and see that their values were way off, like Zilow.

Some may be missing what a title search is or does, it has nothing to do with assessments, valuations or taxes other than to see that taxes are current.

COnsider when looking at anything on line how they would address this one issue:

Mary and John were prior owners jointly and later get a divorce, several years later they are divorced and the decree is filed and John sells the property to Bob and Betty who get title insurance but had an exclusion in coverage as to liens or encumbrancs not shown of public record. (Mary gave John a Quit claim deed, but it was never filed by John) John is killed in a car wreck, but never updated his will.
Then you come up and buy the property from Bob and Mary, close and you have the same exclusions on your title policy as to issues not shown of public record.

Three years later Mary passes away and her son inherits all.

Now, Steve, son of Mary and John makes a claim to ownership of your property due to Mary not executing the sale or warranty deed and makes his claims under her interests inherited.

Now what? How is your "on-line" company going to assess the requirement that a quit claim deed had to be filed and that Mary's holdings passed to Steve did not include your property?

While such issues do arise, you'll need to get an attorney to defend you, against the claims and to seek coverage by the title company in making an error in the search or filing any damages....$$$$$$

A title search done by a title company places much of the liability of such issues on the title company and title opinion. If you do it yourself, it's on you or perhaps your $99.95 internet company. And I bet that any internet company will have a disclaimer concerning the chain of title being insured or guaranteed. Good luck

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com