$10,000 house - simple close? - Posted by Christy

Real Estate Investing Real Estate Law
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Posted by HR on February 08, 2001 at 21:27:54:

I agree with the others completely. Focus on big dollars, not little pennies. Don’t grind your closing attorney, insurance agent, subcontractors (within reason), etc if you want these folks to be reliable members of your ongoing team. Thus, who do you grind? The seller! (presumablly you will only buy one house from them, or a few at best). Thus, buy the house as cheap as you can and don’t squabble over pennies.

Regarding skipping the title inspection and title insurance, NEVER! Here’s two recent examples.

Tomorrow (hopefully) I close on a reo I’ve had under contract for months. I planned on closing in 30 days, by Christmas, but it turns out the the mortgage company that’s selling the house isn’t even on title! Sure, title is supposed to be good. Sure, all the liens are supposed to be cleaned off thru foreclosure. (So why is that city health code lien still there, too?). I’m buying this place for $2000. My atty is getting all the necessary docs to refile their previous sale, which was never recorded, so I can file thereafter. Not doing a title search on this would have created a monstorous gap. Not a good idea (and title insurance for a property less than 10K? It’s only about $50. Please. Splurge).

Deal #2. Buying for 10k. Also has title problems. Been tied up for 60 days and could be tied up for another 90. Uggg. Never would have discovered the problems without a title search.

Moral of the story: get out of the typical newbie “let me save myself a penny” mentality. Grind the seller. Save thousands. Then you can pay your team well so they can protect you and do the job right.

Good luck,

HR

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$10,000 house - simple close? - Posted by Christy

Posted by Christy on February 08, 2001 at 09:42:51:

If you are buying a $10,000 house, can’t we just exchange money for title or do I need to get a title search ya, ya, ya? There’s got to be an easier closing process that will save me money.
Christy

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Nervous Nellies - Posted by JD

Posted by JD on February 08, 2001 at 18:21:17:

If I am buying a 10k house, I would try to do the title search myself. 9 times out of 10 I can do this conclusively within 15 minutes. But that is just me. Most people would be better off paying the $300 or so for Title insurance.

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Re: $10,000 house - simple close? - Posted by Mark

Posted by Mark on February 08, 2001 at 12:51:42:

Christy yuo might have better luck than I , but this is way my luck is going,bought 3 houses in Dec. all were below 15,ooo all had defects(leins) that had to be cleaned up,bought 2 in Jan both for $9000 each,both had heirs that were found during title search.So as the others have said :“penny wise and pound foolish”

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Re: $10,000 house - simple close? - Posted by Rich[FL]

Posted by Rich[FL] on February 08, 2001 at 12:42:25:

I bought a house about 7 months ago that actually had title problems to be worked out. Turns out it was rather “simple” to fix (in this case!) The original developer sold to buyer #1 and had to reclaim the house for reasons unknown. Anyway, they did not get all the proper signatures for the release and ended up selling to buyer #2. Fifteen years later, buyer #3 comes along (me) and decided to buy the house. Sellers anxious to sell, I’m anxious to buy. Sign contract and take to title office. They start the title research and paperwork and discover this “little” problem. I’m informed but also told that seller is working this problem hard, along with the title company, and doing all the leg work to clean up the problem. Fortunately, the original developer is still in business (you may have heard of them, they’re big in the southeast - Jim Walter Homes). They bent over backwards to help make everything right. All we needed was one quit claim deed signed by buyer #1. Closing was delayed about 2 weeks, but at least I’m fairly sure, as is the title company now, that the title is clear with no hidden “gotchas” lurking in the shadows.

Do yourself a favor and always get title insurance; unless you’ve developed the expertise to completely research a title and have enough confidence in yourself that you can self-insure against loss.

Good luck and happy investing!

Rich

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better safe than sorry - Posted by George

Posted by George on February 08, 2001 at 12:30:59:

Those a couple of hundred that you spend on the title company could save you a lot…

don’t be cheap, you may earn a few thousand dollars in this deal

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Re: $10,000 house - simple close? - Posted by Jack

Posted by Jack on February 08, 2001 at 12:17:59:

Hello Christy,

Nate gave you good advice, and Sherry W. is a smart investor. Here’s why:

Someone could have a claim against the property that you know nothing about.

You want a “marketable title.” It means you want title to a property which renders the property free and clear and able to to be transferred freely. So, can you be reasonably certain that you will be rendered property that is indeed free and clear by not protecting your own interest? By that I mean, taking the word of the seller as fact, without investigating the possibility of a defect in the title (= a problem with the title which may render it nonmarketable. And is also termed “cloud on title.”) So, how do you protect yourself?

Well, you could do the work yourself. You could examine the “abstract of title” (= a record of the title, or history of ownership of the property). If you choose to do that, you will need to go to the courthouse, or to the office where the records of deeds are kept and read the history of the property. If the property (and I’m not referring to the home that has improved the property — although it’s part of your search — but the land itself) is in an old neighborhood, or even an old homeplace such as a ranch or farm, could take you back to the 1800’s or farther because the ownership history of the property (and again, not just the improvement, such as a structure (home built on the property) goes back that far. However, with newer properties, the history is much shorter, and, with new development, the title work will already have been done by the builder who bought the property prior to building on it. But, will you know about easements or restrictions if you don’t take the time to perform the title search? Not unless the present owner offers that information. But will they tell you everything that they know? Possibly not. So you must protect your investment.

A word to the wise, is to obtain title insurance. The result of the title abstract or search is contained in the opinion or report of a specialized attorney that’s hired to do the search, and his or her opinion is presented to you, the buyer, at settlement. This insures that the title is good, clear and marketable, and that if any problems arise, the title insurer will pay to have the defects cleared. This is your best defense against a possible title defect. So Christy, don’t try to save a few dollars on something as important as the title to your investment.

Wishing you a successful deal! —Jack

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Re: $10,000 house - simple close? - Posted by DanT

Posted by DanT on February 08, 2001 at 11:40:12:

Just bought a $10,000 house myself in December. Had title search and title insurance. Don’t leave home without it. May be a cheap house but I still wouldn’t want to lose 10 grand to save $110! Just my thoughts. DanT

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Re: $10,000 house - simple close? - Posted by Sherry W

Posted by Sherry W on February 08, 2001 at 10:17:43:

Christy,

I always get a title search. But we will see what the pros say.

Good Luck,
Sherry W

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Followup… - Posted by Jack

Posted by Jack on February 08, 2001 at 12:37:14:

As Dan pointed out, aside from the “title insurance” you will need to have the title search performed. I didn’t want you to think you were getting that with the “title insurance.” Good luck! —Jack

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Re: $10,000 house - simple close? - Posted by Nate

Posted by Nate on February 08, 2001 at 11:08:19:

You should always get a title search. Think of it this way: regardless of how cheap the house is, if you don’t get a title search (and title insurance) there is always a chance that every dollar you spent on it will be worth NOTHING.

NT

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Re: Followup… - Posted by Christy

Posted by Christy on February 08, 2001 at 13:14:18:

Wow, What great advice! Thanks to everyone!
I now feel more confident in sticking to the regular channels instead of trying to save a buck.

I definitely don’t want any horror stories later.
Thanks again,
Christy