"Cannot get clear Title"???

Question

Hi BPers,

While searching the MLS for expired listings, I've come across a potentially good deal but it looks to be bank owned (foreclosed), which I use to avoid like the plague; However, I'm hearing more and more that these are sometimes good deals and even can be done in a double close.

My question is 2 part.

Firstly, Any suggestions on how to approach the bank/lender would be greatly appreciated. Someone suggested simply sending a Letter of Intent (LOI) to the bank and see what happens.

Secondly, in the notes of the expired listing it states that "cannot get clear title". Does this mean their is some sort of lien against the property? Does this generally disqualify a property?

If there is anyone experienced in this sector of REI, I would love to get your take on it!!

Much obliged,

Ryland Taniguchi · Answer

The best "home run" deals we find usually have title issues. If the deal makes sense (like being free and clear) usually tie up (control the property) through a LLC partnership and JV with the seller rather than purchasing the property straight up.

Requires major problem solving and negotiating skills and massive persistence.

Dealing with title issues is a major pain in the *** and you literally earn your profit on these deals. Also, you need to have great relationships with your title officers because you will be making their life miserable. Recommend buying a basket of goodies to show appreciation.

Jay Hinrichs · Answer

Great question Will,

IN some situations were title is all buggered up Heirs are long gone.  parties never divorced.. estate was never probated because it just was not something the family new about or worried about.. title could be for ever clouded.. so the chance of  someone coming back and making a claim is pretty slim to non.. but you have to pay cash get a great deal. and take on that small risk.. NO one else is going to buy it. and your not going to BRRR it unless you can get clear title.

NOw you can buy it and then quit the title.. and that can be a challenge and time consuming and costly and you never get it done. I have one in Charleston SC right now that we are almost 2 years into and 5k plus in attornies fee's for us its just cost of doing business If I never can get title or buy the prop well so what.. I lost 5 to 10k no biggee... and its a bare lot I want to build a home on and sell new construction.. so title insurance is a must if I am to do with it what I want.. can't rent a bare lot often.. this is very common in Charleston.. were you have very old titles and a lot of folks that just don't follow normal Paper work.. IE   you hear.. well my mother left my daddy and the never got divorced and when he died they never probated the estate etc etc. these are the scenerios that bugger title it happens every where.. in all states and in all types of proeprites. those htat know how to fix them make a killing..  thank you Rick Harmon. !! the BP expert at this.

Colby Lee Bodoin · Answer

I would get a local title company to run a title search on the property and determine what issues exist then you can go from there. If you go that route and figure out what the title issues are let me know and I can try to help you determine what the best way to proceed is.

David Dey · Answer

@Ryland Taniguchi spoken like a true "title fixer!!"

I send flowers, chocolates, art pieces, etc.., and lay it on OH SO THICK, to make up for the torture I put her through.

Additionally, I love the fact that we have some contrarians here that don't fall into a straight panic and lose all bodily functions at the mention of a non clearable title.

Point one:  as Ryland said, this can be where you literarily earn your profit.

Ex: Earlier this year, I just flipped a 25 unit condo complex with a starting price of 850k which had a screwed up title as well as a mountain of code enforcement liens.

My final price ended up being 200k and after clearing the title the flip was for 457k, and believe me, we earned every dollar of it.

(The magic mantra of this type of investing is, it's not whether it's right or wrong, it's what the underwriter will cover)

Point two:  if for some reason you just can't clear the title up... >gasp< I'm about to say it!!!  If the price is right, SO WHAT??!!

Ex:  somewhere back in 13-14, I came across a property that was forwarded by another investor that couldn't figure out what to do.

It was a rehabbed property that had been funded by one of those high interest hard money companies that disappeared after the crash.  By the time he was ready to pay it off, they were gone.  He abandoned the property and for years it had just sat there but then code enforcement picked it up and started dinging him.  He ended up refining the place up and had a tenant moving in that month.

He was trying to sell the property for 21k.  Thinking it could give him some money to try and clear the title with.  (The original loan was in the high 60k range)

I just simply asked him, "forget the liens and codes and back taxes.  What do you want for you?"

"I spent 2500 on refixing the property.""I would be happy if I could just get that back."

The tenant had already paid for the deposit and the first months rent so I said, "keep the deposit and rent you just received and I will give you the balance to meet your 2500."

He was happy and signed over a quit claim deed. By the third month, I was in the green.

It had been a great cash flow property ever since, until I sold it to another investor for 15k as a qcd.

So again, I ask you.  If the price is right... Who cares??!!

Jay Hinrichs · Answer

Cannot get clean title could mean a myriad of things.. and that would not be a flip opportunity In my mind.. it could be a good investment for a buy and hold LONG term were you don't really care about title.

Banks these days pretty much only deal with those with Actual cash so unless you can proof up real funds not some dummy HML letter etc.. but actual cash in an account you own.. that will give you the best chance .. short of that you will normally lose out to other investors who can do that.

Account Closed · Answer

great. thanks @Colby Lee Bodoin

Account Closed · Answer

thank you Jeff Beard

Account Closed · Answer

thanks again @Jay Hinrichs that clears up a lot!!

Account Closed · Answer

Thanks @Jay Hinrichs , this may be a RE 101 question, but here it goes..  Why wouldn't one care about title in a Buy and Hold? So at what point, if ever, would I be able to get a clear title? Wouldn't I need it if I wanted to use a BRRRR exit strategy? Be it 1, 5, 10 or even 20ys down the line.

David O · Answer

Title issues could mean anything. It could mean someone else has an interest down the chain of title. It could mean a lender still has a lien on it and is refusing to release it as it is still open. It could be something stupid like a prior owners lien that is closed, but not released. I would be very wary unless you know about title or consult someone who does and know exactly why they can't obtain clear title.

Also, I would want clear, insured title on very deal - even buy and holds. Potentially dangerous and $$$$ draining.

"Cannot get clear Title"???

Most Popular Reply