Question for Wholesalers - How do YOU clear title?

Question

Hello Wholesalers!

I have a fair amount of real estate experience and a real estate license, but virtually no experience with wholesaling or wholesalers.

I've heard and (I know it's good) that most investors will want to make sure the wholesale deal's title is clean (or clean-able) with the contract price.

SO...how are you going about getting these title searches?  how much do you pay for it?  Do you have the rehabber who buys the deal ultimately pay for it?  Are you using local attorneys?  Or how about the national companies like Abstrax?

www.abstraxllc.com -I've used this when buying notes.

All thoughts and comments from Experienced wholesalers (and people who buy deals through wholesalers) are very much appreciated.  Thanks!

David Bokman · Answer

You take it to a title company and have them do the search.Normal cost is about $250, that's what you stand to lose if you cant close the deal. There is no such thing as wholesaling without money out of pocket or at least some loss to you. At least if you're doing it the right way.  Soon as I put a property under contract it goes straight to the title company, how else will you find out if doesn't have issues?? I don't know anyone else doing it differently.......you will find newbie wholesalers holding onto until they find a buyer if ever. The right thing to do is pay for the title search yourself.

Van Blackman · Answer

Hi @Brandon McLean!

This one is easy!

When you get the property under contract with the seller, make sure that the the contract is contingent upon them furnishing a clear and marketable title to you. Typically that cost falls on the sellers' shoulders, so you and your ultimate buyer are not coming out of pocket for it.

Once it's under contract, send the contract to the title co and they will handle everything. If issues arise, that's fine, most of them can be fixed. If they can't, opt to terminate the contract which is within your right to do so for failing to provide clear title.

Hope that answers your question! Feel free to message me if you have anymore. I'm here to help!

Best,

Van

Tom Gimer · Answer

While there may be some background research in evaluating deals, "clearing title" doesn't happen until the title company is ready to close your transaction.

Obtaining and reviewing a title search is not the end of clearing title. It may give you a good idea of what's going on with a property, but that's certainly not the end of it. Let's say you identify a target and buy a title search from some online-only search company (ptooey). The title report identifies 2 potential liens -- a mortgage and a judgment. In order to clear title you'll need more than written payoff statements from both lienholders (oh, the seller hasn't paid his mortgage in 6 months -- he didn't mention that!) ... you'll also need a tax cert, water bills and any other payoffs potentially affecting title. Some sellers are clueless as to what they really owe to get out of a property.

The best way to "clear title" as a buyer is to avoid getting yourself in a title mess by wholesaling a deal that can't close. You do this by requiring (as others have mentioned) clear and marketable title from you seller as a prerequisite.  The right contract forms are invaluable in your trade.

Cliff T. · Answer

Thanks for the replies all. A follow up question clearing title:

Which party usually pays off the existing liens? I'm assuming the escrow company allocates some of the buyer's funds to pay off the exact amount for the liens so the buyer is issued a clean title?

Louis Davis · Answer

@Brandon McLean when I open escrow with a buyer and seller I allow the title company to pull title to make sure it is clean. Depending on the situation is how WE all handle it. Generally, if there is a lien on the title, you can get the seller to pay off the lien after the buyer has sent in his/hers funds for the deal. Sometimes you are able to do a title search online for free through the county assessor site.

Hope this helps,

Louis

Greg Carrier · Answer

I use a local attorney.  It is a bit less than $250.  We buy a lot of tax sale houses so we use them to quiet titles as well.

Question for Wholesalers - How do YOU clear title?

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