Feb 22 • General discussion
TITLE COMPANIES (Part 1)
UNDERSTANDING TITLE COMPANIES IN REAL ESTATE WHOLESALING:
A title company plays a crucial role in real estate transactions by ensuring the legitimacy of property ownership transfers. They verify the seller’s ownership, confirm the buyer’s identity, prevent fraud, and facilitate the closing process by ensuring all financial obligations (liens, taxes, etc.) are cleared before the deal is finalized.
Why Use a Title Company?
- They are licensed and insured – ensuring compliance with legal procedures.
- They act as a neutral party – though not always fully unbiased.
- They issue title insurance – protecting buyers from potential title defects.
FINDING THE RIGHT TITLE COMPANY FOR WHOLESALING (VERY IMPORTANT)
Most title companies cater to traditional real estate transactions involving realtors. However, wholesalers need title companies that handle cash transactions and assignment of contracts. To find an investor-friendly title company:
- Search Facebook investor groups for recommendations.
- Ask wholesalers in your area who they use.
- Directly call and ask, “Do you work with investors?” If they hesitate or show reluctance, move on.
- Follow up with, “Are you familiar with an assignment of contract?” If they confidently say yes, they may be a good fit.
Title Company’s Role in a Wholesaling Transaction:
1. Providing the Contract & Earnest Money Deposit (EMD)
Once a wholesaler secures a property under contract, they must:
- Submit a copy of the contract to the title company.
- Deposit the Earnest Money Deposit (EMD), which is negotiable (often $100-$500, sometimes $10).
2. Title Search & Clearing
- The title company pulls title records to ensure clear ownership.
- They check for liens, unpaid taxes, and legal issues.
- Title commitments are issued (summarizing title status). The wholesaler should ask for a simple explanation from the title company.
3. Assigning the Contract
- The wholesaler sells their contract to a cash buyer via an Assignment of Contract.
- The title company facilitates the replacement of the buyer in the contract.
4. Closing & Disbursements
- The seller transfers the deed to the cash buyer.
- The cash buyer provides the funds.
- The title company ensures all taxes, liens, and fees are paid.
- Assignment fees are paid to the wholesaler.
- Title insurance is issued to the buyer.
Title Company Fees
1. Government Fees (NON-NEGOTIABLE)
- Recording Fees – Charges per page for legal documentation.
- Property Taxes – Any unpaid taxes must be settled before the sale.
- Documentary Stamps & Transfer Taxes – Taxes based on the sale price.
2. Title Company Fees (NEGOTIABLE)
- Title Insurance – Varies by state but is a fixed per-thousand-dollar charge.
- Closing Fees – Administrative costs to run title and process transactions.
PRO TIPS:
- Title fees can range from $500 to $3,500 depending on the state.
- Experienced wholesalers can negotiate lower fees with title companies.
Final Steps for a Smooth Closing
- Review Fees in Advance – Ensure transparency and consistency.
- Attend Closings When Needed – Be present to prevent last-minute misunderstandings.
- Opt for a Wire Transfer – It’s safer than a check and ensures immediate access to funds.
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KEY TAKEAWAYS:
✔ Use an investor-friendly title company that understands wholesaling and assignments.
✔ Submit contracts and earnest money immediately to start the title search.
✔ Title searches take 7-10 days, so start early to avoid delays.
✔ Assignments allow wholesalers to avoid owning the property while still profiting.
✔ Title companies handle all legal paperwork, disbursements, and ensure clear title before closing.
✔ Government fees are fixed, but title company fees can be negotiated.
✔ Avoid surprises by reviewing all fees in advance and attending closings when necessary.
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TITLE COMPANIES (Part 1)
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