Ripping Your Escrow Deposit from the Iron Grip of Your Closing Agent

I have said it before and I will keep saying it – “If you want to keep an escrow you
are entitled to, take action before the buyer/seller defaults.” Even very
experienced investors may go for years and not have an escrow problem when a
buyer doesn’t close. Then I get a phone call asking if a title agent is allowed to
keep the escrow without a signed release from the buyer who defaulted.

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The following is a common moral, ethical and financial dilemma. For some
readers there is no problem and the solutions are very simple. For other readers,
it may take some thoughtfulness to make the best decision.

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Do You Really Need Title insurance When Buying a Property?

Title insurance is not available in all parts of the world and in those countries title
disputes are settled through court action or a mediation board. Unfortunately,
those court and mediation actions can take a long time and the outcomes are
never guaranteed. In the United States, title insurance is a mainstay of
transferring a property, but is it really necessary?

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I probably heard this question for the first time 30 years ago when a buyer asked me exactly that, “Is that the best you can do?” when I was selling him a house I rehabbed. Actually, it took me back at the moment but I quickly recovered my composure and answered, “Yes”. If this buyer had been more persistent and asked a couple of times more, I might have dropped my asking price, but he gave up too quickly.

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Is it Illegal to Sell a Property You Don’t Own?

This Weekly Insight started with a phone call from a wholesaler who I have personally known for probably 6 years. He used to rehab when I did but we never actually rehabbed a deal together. Instead, I had sold him a few wholesale properties that he either rehabbed or re-sold as wholesale deals. I haven’t asked him, but I suspect between wholesaling and retailing, he has bought and sold between 135 and 150 properties.

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Investors rely heavily on the closing agent to give them a title policy at closing to insure their interest in the property. Unfortunately most investors don’t know the difference between an insurable and marketable title and it can come back to haunt them in the future.

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I looked forward to writing this article about as much as twisting my little finger off with a pair of pliers. It started when a real estate broker and mentor student called to say that she now understands why I hate realtors (I don’t hate realtors). She went on to explain  how the couple of deals she was working on were messed up constantly by other agents’ arrogance and that they were clueless about how to get a deal closed if it wasn’t
perfect in every aspect. They also expected the co-broker’s agent to do all the necessary work as they sell listings and don’t have to do the dirty work to get the deals closed.

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It happens on a regular basis, someone asks me about doing owner financing on a property they own so they can sell it to a buyer who can’t get a conventional mortgage. The logic is simple, it’s better to take some income on the property than get nothing at all, and the selling price could be what the seller was asking. Sounds good, sell the property and put the money in a higher yielding mortgage instead of a certificate of deposit or a passbook account. But looks can be deceiving and reality can be cruel.

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Nearly ever day we have students or other investors tell us about possible deals from bulk REO packages or “tapes” as they are called in the trade. Simply put, lenders take a group of properties that have major problems and can’t readily be sold and offer them  as a bulk sale to investors. They are sold for cash to middle men and the buyers are generally savvy investors using other people’s money (OPM) to do the transactions.

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This should be short and sweet depending on whose side you are on. A student makes the usual ridiculously low offer for an REO (bank owned property) and gets rejected. The student personally feels rejected, but I explain persistence pays. Low and behold the lender counters two months later.

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