do I need a closing company?

Question

So do I really need a title company to close?

Seems like they charge an awful lot to research the title and liens, insure the title, pay off the mortgage if any, prorate utilities and taxes, and file the documents.

I'm getting a cheap property, have researched the title and liens online, seller is solvent and has no mortgage and easy to find (lived locally all his life), and am comfortable taking the risk of going without title insurance.  It'll be a cash sale.

Has anybody tried forgoing the title company and going to the courthouse to file the documents themselves, with a cooperative and trustworthy seller?

Anything else I need to know?

Arlan Potter · Answer

I had a deal a while back, cash purchase for two rentals. A slam dunk no closing, but I did have my attorney look at the abstract and the title company then prepare the deed for. Nominal fee. We are having the seller and wife ready to sign the deed when we find out the the wife on the deed is not the wife standing there ready to sign. For some reason the divorce ten years ago was not filed or not correctly and basically per the court records he was still married to wife one, but also had wife 2.  Actually that turned out not to be as big an issue as we thought it would be. Because she had done a QC to the husband ten years ago.

The next issue is that the house had been transferred from a trust of 4 family members 20 years ago and there was a mistake in the way the trust deeded over the houses to the seller. The transfer was redone to make the necessary corrections, but this was after the the QC from the wife making her original QC invalid. So back to the drawing board, having to find wife for a QC after ten years, and seller had no clue where she lived.

My attorney researched and eventually we got the QC and bought the two houses.

The moral of the story. Well you know it. Make sure the seller has CLEAR title.

I have another in the works right now. A trust transferred ownership to two sisters in 1995. They want to sell to me.  BUT.       It turns out the house was deeded to 10 people in a will/probate in 1963. And no filings of the transfer from those ten to the trust. So as far as the law is concerned the trust never actually owned the house.  We are in the process of a quiet title suit.

And of course the sisters assured me that they owned the house free and clear.

William Hochstedler · Answer

A few things:

A title company will also do a check for judgments against the sellers.  A BK or divorce could make transfer very messy.

An insured warranty deed will preserve the chain of title which will make it cleaner to sell on the back end as you will have to warranty title as a seller.

I prefer to use title companies so sellers I work with feel everything's on the up-and-up.

Wm

Laura Turner · Answer

Thanks all for the responses.  I know what title insurance is and the risks, and have heard the horror stories.

Over $500 for a property costing about 40k seems like a lot, especially that I'll only hold it a very short time.

https://www.titleresources.com/uploadedFiles/PA%20Chart%20of%20Rates%207%202012.pdf

I've always had title insurance in past, and likely will on the vast majority of purchases in future, but there may occasionally be a situation (like this one) when I choose to take the risk.

I should have phrased my question differently:  Having decided to forego title insurance, what do I need to know about whether to handle my own closing?

Rick H. · Answer

@Laura Turner suggest you complete your profile, including photo, in order to get more and better responses.

I've completed many deals without insurance on the front end, sometimes called "table deals" implying they were negotiated at the kitchen table or such. Actually, this is one of the ways that I prefer to acquire properties.

However, as several other posters have mentioned, title insurance might be a good value for you, after all.

In my early days, I purchased houses in foreclosure from their owners prior to sale, called an equity purchase. Many times these transactions occur at the last moment with little time to spare. It's then when mistakes are especially likely to occur and be costly.

Admittedly, I did not understand title and was puzzled how a title company coukd provide me a title report (or profile) and not catch certain items.

It was probably a combination of my laziness and ignorance that prevented me from either taking the extra steps to properly research my prospective properties and so I ended up puzzled when I got stuck with liens. Both early errors were about $5,000. Title insurance would gave cost about $500.

The best money I have spent was in getting educated on how to do my own title research. Later, my title expertise has paid off incredibly.

You are going to get an education one way or another so you might as well invest in yourself!

Dan G. · Answer

For a cash sale your title work and title insurance shouldnt be too much. Generally when you buy its a very nominal fee of maybe a few hundred dollars. Even when you sell depending on price point, again its a nominal fee of about $750-1250.

Basically like I always tell someone who is buying a house from me or anyone else, is if you dont use a title company make sure the $ involved is money your willing to lose or have tied up in relation to problems arising from not using a title company.

Stephanie Medellin · Answer

Why not call up a local title company and ask them to explain the benefits of title insurance and exactly what they will do for you.  That might help answer your question, and give you a little more insight into the process in your particular state.

Personally, I would just get the title insurance for the peace of mind, considering it's a few hundred dollars.  You don't know what you don't know (i.e. if there's something you missed or something just not showing up in the records).  An owner's title policy will cover you as long as you own the property.

do I need a closing company?

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