The No. 1 Rule to Successfully Close a Real Estate Deal

Let’s make this short and sweet.

A lot of investors who have bought multiple properties and understand the real estate game might think this is a no-brainer. But I’m going to tell you right now that’s not the case—a lot of people don’t know.

Over the last several years, I can’t tell you how many real estate investors have sent us money to purchase a property—as in directing funds to our company account, instead of to the title company. I’ve also witnessed countless investors hand over deposits for a particular purchase, or even the full amount, directly to the seller.

Guys, listen up: The number one rule when you are looking to buy or sell a property is hire the services of a title company. I’m begging you!

Why You Need to Hire a Title Company

By enlisting the service of a title company, you’ll acquire an account representative who will look after your best interest as the buyer. They’ll act in the best interest of the seller, too.

The title company is there to act as the mediator. They are the ones who are going to do the searches for back taxes or liens. They are the ones who are going to prorate rent or deposits if the property is tenanted. They are the ones who are going to hold your hand through the entire process, including where to send money and how to send money.

What’s more, they’ll be the ones to send you the final HUD-1 Settlement Statement, showing you all the charges related to the real estate transaction, line item by line item. If you have questions about it, give them a call. They can walk you through it!

I can’t emphasize enough how important it is that you work with a title company and avoid giving any money directly to the seller—none, meaning none of the deposit or purchase amount.

Sure, it’s a nice thought. I love all our investors who send money directly to us. But, unfortunately, we have to send it back.

So, make sure you work with a title company! I cannot stress it enough.

Here’s another thing: make sure to get title insurance.

You wouldn’t believe how many properties I’ve bought where the title company overlooked certain things when they were searching for liens. Thank goodness I paid extra money for title insurance, which protected me if and when they made mistakes.

It’s human interaction; mistakes do happen. For this reason, it’s best to find a reputable company. Do some Googling. Or just go to another investor or company in town that’s investor-friendly.

That’s my Australian two cents.

I know it may sound weird to more experienced investors. But trust me, many new investors screw these things up. I’m hoping after watching my video, that will no longer be the case!

Have you seen investors make the same mistake? Have you made it yourself?

I’d love to hear from you. Comment below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.