Title Company Requirments in Chicago for a Selling a Flip

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Title Company Requirments in Chicago for a Selling a Flip

Noah Lomax
Rental Property Investor · San Diego/Chicago · Member since 2020 · 32 posts · 19 votes

Hey BP'ers,

My partner and I are selling our first Flip in Chicago. We used a Fix/Flip loan to finance. The requirements to do so included in-person inspections before each draw, and a lien release after the final draw. Now that we are under contract, the title company sent us a list of the following requirements to clear construction:

Owner’s Sworn Statement reflec/ng the names of the contracts let by them including the general contractor, contract amounts, all amounts previously paid and zero balances due. If the Owner and the General Contractor are the same en/ty then we will only require a General Contractor’s Sworn Statement.

  1. - General Contractor’s Sworn Statement reflec/ng all the names of the contractors/sub-contractors and/or material suppliers, contract amounts, all amounts previously paid and zero balances due. Final Lien Waivers from the contractor, subcontractors and material suppliers as listed on the Sworn Contractor’s Statement
  2. - Paid receipts for materials purchased
  3. - Personal Undertaking signed by the Owner
  4. - Personal Undertaking signed by the General Contractor unless the Owner and General are the same en/ty. Then only sign the Owner Personal Undertaking.
  5. - Waiver Exam Fee of $350.00 minimum depending on the amount of work involved

Aside from likely not even being able to get every receipt, the requiremetns and the fee seem extremely excessive. I don't want to frustrate my contractor (who was awesome) with a bunch of paper work and chasing receipts. 

Are all of these normal/mandatory in Chicago or should I look at another title company?

Thanks,

Noah

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Sue Hough
Developer · Chicago IL · Member since 2019 · 150 posts · 125 votes
5y

@Noah Lomax hello and good morning.  As a builder in the Chicago market for 20+ years, this is not uncommon.  Chicago Title is notoriously the most difficult, but not by much.  What the title company is requesting is standard of the industry and I navigate this process weekly.  I typically request using Old Republic Title, as they are very efficient and are willing to see the practical side of construction without breaking the rules. You, most likely, can request which title company you want to use.

Once you get accustom to the process, it is really not that difficult and you will not need receipts of every small purchase. A simple "materials on hand" noted in the Waiver portion is adequate for small items.  You will need waivers for any and all materials delivered to your property as the supplier has "lien rights" as long as they deliver.

I have a full packet of documents you will require to navigate the Construction Loan process with a title company.  If you like, message me and I can send it to you and walk you through if you like.  These documents were the crux of my speech I gave at the Bigger Pockets Conference in Nashville 2019.

Thanks and good luck.

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  • Rachel Imhof
    Investor · Chicago, IL · Member since 2015 · 138 posts · 54 votes
    5y

    @Noah Lomax just closed through Chicago title and these were there requirements. I heard other title companies were not as difficult but we stuck with them and finally closed after about a month of chasing down and submitting everything they requested. But ours was new construction.

    0Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @Noah Lomax this is not unusual at all. This type of loan will require complete transparency from the GC, and it also puts a lot of pressure on the GC as the GC has to deal with the mountain of paperwork in addition to keeping your project on track. I am going through a very similar project on a 22 unit apartment building in Cicero right now, and I am so grateful that my GC is able to handle this type of paperwork! 

    1Reply
  • Noah Lomax
    OP
    Rental Property Investor · San Diego/Chicago · Member since 2020 · 32 posts · 19 votes
    5y

    @Rachel Imhof @John Warren Thank you both for the reply. I'm trying hard to mitigate the paperwork on my GC, while not wanting to dodge anything required. This was a total rehab of a 2/2 condo. I'm impressed that you all did it with much larger projects. Next time I'll do some of this upfront or along the way to mitigate.  Thank you both for your help!

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  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    5y

    @Noah Lomax - If you are working with a title company as opposed to a hard money lender this is not crazily unsual.  We keep all our receipts but aren't required to turn them into the title company.  Sometimes we do this if we want to get paid for stored material though.

    Also working with the title company we always have to do sworn statements and get lien waviers.  It's always a struggle and takes a while to finally get paid which makes it tough on contractors.

    I don't think this is mandatory specifically to Chicago, but probably by most title companies.  It's always good practice because the title company is basically ensuring you have a clear title when you go to sell the property.

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  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Noah Lomax:

    Hey BP'ers,

    My partner and I are selling our first Flip in Chicago. We used a Fix/Flip loan to finance. The requirements to do so included in-person inspections before each draw, and a lien release after the final draw. Now that we are under contract, the title company sent us a list of the following requirements to clear construction:

    Owner’s Sworn Statement reflec/ng the names of the contracts let by them including the general contractor, contract amounts, all amounts previously paid and zero balances due. If the Owner and the General Contractor are the same en/ty then we will only require a General Contractor’s Sworn Statement.

    1. - General Contractor’s Sworn Statement reflec/ng all the names of the contractors/sub-contractors and/or material suppliers, contract amounts, all amounts previously paid and zero balances due. Final Lien Waivers from the contractor, subcontractors and material suppliers as listed on the Sworn Contractor’s Statement
    2. - Paid receipts for materials purchased
    3. - Personal Undertaking signed by the Owner
    4. - Personal Undertaking signed by the General Contractor unless the Owner and General are the same en/ty. Then only sign the Owner Personal Undertaking.
    5. - Waiver Exam Fee of $350.00 minimum depending on the amount of work involved

    Aside from likely not even being able to get every receipt, the requiremetns and the fee seem extremely excessive. I don't want to frustrate my contractor (who was awesome) with a bunch of paper work and chasing receipts. 

    Are all of these normal/mandatory in Chicago or should I look at another title company?

    Thanks,

    Noah

    We've never had to provide any of this to sell a flip in Chicago, not even through Chicago Title Company. They must have found something through the Title Search that's prompting them to ask for all of this information. 


    There is one other possibility. If the money provided by the Hard Money Lender for the renovation was escrowed at Chicago Title Company, they may be asking for all of this to ensure that no mechanic liens can be put on the property by your contractors or suppliers.  Hence why we request lien waivers from everyone at the completion of each phase. 

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  • Jennie Berger
    Lender · Chicago IL · Member since 2020 · 358 posts · 230 votes
    5y

    We have worked with Chicago Title on multiple transactions and decided it was finally time to switch companies (LOL). I literally cringe every time I send our sworn statements over because I know--no matter how pristine my paperwork is--it's never good enough. We have been able to avoid giving them every single receipt  from the GC as long as all the lienwaiver paperwork 'added up' and made complete sense to them. I, of course, had to submit our receipts for large items we purchased, like tile & flooring, vanities, appliances, etc. However the GC never had to do that as long as he provided a lienwaiver for materials as well as labor. 

    Am I correct to assume that you have been collecting partial LWs along the way, with each payment to your GC? As wonderful as your GC may be, most are NOT organized and do NOT have time for paperwork. (We are GCs as well, so no offense to those who ARE well put-together and have assistants to help with the office stuff ;) That's why we pay in milestones, little by little along the way, and with each payment we obtain the necessary LWs so we aren't scrambling for anything at the end.

    We are giving Greater IL Title a chance this time around. I've been told (by one of our lenders for an upcoming construction loan) that they are much more 'construction & contractor' friendly. Time will tell. :D

    Sorry to report this--it's a hassle no matter which way you slice it. And of course, it goes without saying, keep every single receipt you get along the way (next time) so you don't have to chase anything down. 

    Good luck!

    2Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    5y

    @Thomas Zidron - Maybe we should check out Greater IL Title as well.  Thanks for throwing that out there @Jennie Berger.  We have been working with fidelity and it's been extremely painful as well.

    [email protected]
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  • Sue Hough
    Developer · Chicago IL · Member since 2019 · 150 posts · 125 votes
    5y

    @Noah Lomax hello and good morning.  As a builder in the Chicago market for 20+ years, this is not uncommon.  Chicago Title is notoriously the most difficult, but not by much.  What the title company is requesting is standard of the industry and I navigate this process weekly.  I typically request using Old Republic Title, as they are very efficient and are willing to see the practical side of construction without breaking the rules. You, most likely, can request which title company you want to use.

    Once you get accustom to the process, it is really not that difficult and you will not need receipts of every small purchase. A simple "materials on hand" noted in the Waiver portion is adequate for small items.  You will need waivers for any and all materials delivered to your property as the supplier has "lien rights" as long as they deliver.

    I have a full packet of documents you will require to navigate the Construction Loan process with a title company.  If you like, message me and I can send it to you and walk you through if you like.  These documents were the crux of my speech I gave at the Bigger Pockets Conference in Nashville 2019.

    Thanks and good luck.

    3Reply
  • Noah Lomax
    OP
    Rental Property Investor · San Diego/Chicago · Member since 2020 · 32 posts · 19 votes
    5y

    @Jonathan Klemm Thanks for the note. My contractor is already paid. This isn't from the lender. We used a rehab loan where the lender required lots of paperwork (which I largely handled) and then received a lien release from the GC at the end. But then on top of that paperwork, our buyer's title company is now asking for this. It's not new construction. I appreciate what their objective is. I just found the overall volume daunting and a bit unnecessary. Thanks for the insight. I'm glad to know my GC won't think I'm a crazy client. I want them to want to work with us again!

    0Reply
  • Noah Lomax
    OP
    Rental Property Investor · San Diego/Chicago · Member since 2020 · 32 posts · 19 votes
    5y

    @Jennie Berger Thanks, Jennie!


    Just to clarify, this is not for the Title Co. for our loan. That's all done and clear. This is for the Title Co. our seller chose for the sale. And we just purchased the property with a clean title and no issues.


    For our lender, eWe did have inspections and releases along the way, with a closing lien release. Our contractor has been truly great to work with. Admittedly I filled out everything I could for them so all they had to do is sign. And I kept receipts for all materials that I purchased (including their SOWs and change orders). However, this title form breaks everything out different than my builder did, which is different than my lender did. So now we are doing a third breakout, and I feel for the guys. 

    I will keep Greater IL Title in mind. I'm the seller, so I didn't get to chose the title company that asked for it.

    1Reply
  • Noah Lomax
    OP
    Rental Property Investor · San Diego/Chicago · Member since 2020 · 32 posts · 19 votes
    5y

    @Sue Hough Thank you, Sue. I shot you a note. 

    0Reply
  • Jennie Berger
    Lender · Chicago IL · Member since 2020 · 358 posts · 230 votes
    5y
    Originally posted by @Noah Lomax:

    @Jennie Berger Thanks, Jennie!

    I will keep Greater IL Title in mind. I'm the seller, so I didn't get to chose the title company that asked for it. 

    As the seller, you can still request the title company.  Attorneys get paid from the title companies on each deal, so they usually want to work with one company vs the other. They have contacts at the title companies that they are used to and comfortable working with, and they are happy with their fee structure as 'repeat clients'. If the title company you request can match or beat the other title company's offerings, the attorney may be willing to oblige. Case in point- we are about to close on the sale of one of our rehabs and we requested to work with GIT. Buyer's attorney said (paraphrasing here): 'As long as GIT will match the rates of my other company, that's fine.'  I'm not saying it's always the attorney's choice.  But I'd be willing to bet it more often than not is up to the attorney, because why would the buyer (who may have never bought a house before, or rarely works with any title company) really have a preference? Title companies all do the same thing, for the most part. :)

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