Welcome back to another episode of the Discount Property Investor Podcast. Today David Dodge and Michael Slane will talk about a deal that they are working on. They are going to educate you on what to expect and how does this work in your real estate investing career. Check this out, guys!
Welcome back to the Discount Property Investor podcast. Our mission is to share what we have learned from our experience and the experience of others to help you make more money investing like a pro. We want to teach you how to create wealth by investing in real estate, the discount property investor way. To jumpstart your real estate investing career, visit freewholesalecourse.com, the most complete free course on wholesaling real estate ever. Thanks for tuning in.
David: Hey guys, welcome back to the discount property investor podcast. This is your host David Dodge with co-host Mike Slane.
Mike: What's up?
David: And today, we are going to be talking about a deal that we're working on right now and this is going to happen to you, I guarantee it at some point in your life or your investing career and we just want to try to educate you on what to expect and how this works. So, what's the deal? Right now, I have a contract to purchase a property, okay? Took it to the title company and I also have a contract to sell this property so after getting it under contract, I started marketing this property and I found a cash buyer and the cash buyer is willing to pay me $5,000 more than what I'm willing to pay for the property.
David: This is what we like to call a wholesale deal. I'm not going to buy the property actually, instead I'm going to use paperwork to control it and then I'm going to sell the paperwork at closing to the cash buyer who's going to then pay me $5,000 essentially to get out of the way. It's also like a marketing fee, you can look at it multiple ways, alright? Now, the title company called me this morning and they said David we have an issue. The issue is that the seller bought the property from a tax sale and the title isn't really exactly squeaky clean.
Mike: Uh-oh. Yeah, so what does that mean? What does that mean guys? That means the deal is unfortunately in limbo or in jeopardy of not closing which means that $5,000 that Dave was ready to cash this check on, he's ready to go play golf or-
David: I'm not giving up on this one though. That's the cool part.
Mike: But right now, he can't-
David: I was getting ready to go golfing though. I mean, come on.
Mike: He can't cash that check, so that's a bummer. So where do we go from here Dave? What is the plan?
David: Seller wasn't aware that there was issues. They were ready to sell and I'm ready to buy. So the title company tells me, they fill me in hey this was bought at a tax sale which is fine, a lot of investors buy at tax sales. Mike and I have bought dozens of properties at tax sales, okay? But when you buy it at a tax sale, you need- in order for you to sell the property, like the traditional route with a general warranty deed or like kind of transfer method, you need to file what's called a quiet title suit which basically just is an attorney that is petitioning the county saying hey my client wants to get clean title on this property and remove all the nonsense behind it, and this process typically takes six to nine months, could take less, could take more, but it doesn't happen immediately and it's going to cost you typically anywhere from two to five grand to do this, okay? But if you don't do this, you're going to have difficulty selling it because there's going to be kind of breaks in the title by the city taking it and auctioning it off and then there's the other sellers that they lost it and they may still have claim to it and it's just kind of the waters are muddy. So as real estate investors or professional real estate investors per se, we will never buy a property outside of a title company because we don't want to buy it, own it and/or fix it and own it, and then go to sell it and not be able to sell it. And that's what's happening right now to our seller. The seller didn't know so I called the seller, Mike you heard the conversation, that's why-
Mike: I was there, yeah.
David: That's why I wanted to do this podcast episode. And I informed them, I said hey or at first I asked, I said hey got some bad news but doesn't mean the deal is dead. Title company doesn't like the title currently, there's no insurance policy from when you bought it, right? So I asked them, I said did you buy it a tax sale? Cuz I didn't know and they said, no no, we didn't buy it a tax sale, but we- but we're probably- we're pretty certain that the guy that we bought it from did buy it at a tax sale and I said okay, now we're getting somewhere. So next question was, did you buy it from him through a title company? Cuz if they did, they would have got a title policy or they would have carved it out. One is good, one is bad, and if they were to carve- or if they wouldn't have carved it out and they had title policy, I could get that, give it to this other title company, we're good, everyone's clean. It shows that the title had been eradicated and cleaned and there's no issues with it. But they didn't do that, they got it quit claimed to them so they bought it, they paid cash then literally handed somebody else a check outside of a title company or a closing attorneys office. There was no escrow or third-party, right? And in exchange for them paying cash, somebody filled out a quit claim deed and gave it to them and I don't even know if that was even recorded with the county or not at this point, I still need to find that out. But the lesson and the thing to keep in mind here is never buy a property outside of a title company or a closing attorney, and the reason is you want to get an insurance policy against any errors that they may have done and/or any issues or people that may try to claim stake on this property. That's what title insurance is for.
Mike: Yeah, that's the key.
David: That's the key.
Mike: You want to make sure that no one else has a legal right to say that they own that property and that's-
David: You want to stamp it.
David: This is David's or Mike's or discount property investor's property, not I have the paperwork on it, but there's other names and yeah, you want to clean.
Mike: So long story short, if you're like man, I didn't understand what they're talking about. What's quiet title, what's a quit claim? What's a-
David: Let's slow down a little, I like that.
Mike: Whatever, so real quick, the easiest answer is take your contracts to a title company. You need to go to a title company or a closing attorney and have them check the title or clear the title. So basically they're going to run their reports, they're going to do inspections and figure out hey there was a tax bill back in 2010 that didn't get paid or hey this person- this lender back in, you know, 4 years ago said that there was- this wasn't cleaned off. Here's what we're going to do: we're going to reach out to that lender, we're going to make sure that they sign this release and now they no longer have an interest in the property. So that's what the title company does when they say they're clearing title, or oh there's some issues and we're trying to figure it out. So a title company does a lot of work behind the scenes that you may not know about and I don't want to know about it honestly.
David: That's their job, let them do it.
Mike: That's kind of one of the funny things it's like when title's like giving me updates and I don't even want to know.
David: Flown over my head [inaudible].
Mike: Like yeah okay, it sounds like-
David: I'm just like are we set to close or not? And if not, what can I do to help you, help me?
Mike: Yeah, exactly that's- And that's- I'm not trying-
David: That's it. Don't forget, it's what can I do to help you help me? That's how it works with a title company, right? They want you to close cuz they don't get paid if it doesn't close, that's the coolest part. You're not paying them to not get you to the finish line. You only pay them when you get to the finish line. Love that.
Mike: Yeah, so again, I'm not trying to be rude with them. I don't really say like oh I don't care, but it's like okay and that's exactly- Dave took it over, it's what can I do to help make sure this closes or what's the issue? What can I do to help? And usually they're like oh I'm on it and that's normally the relationship, but it's oh I'm on it but-
David: Usually, 98% of the time, they solve- they tell you there's a problem and then they solve it for you.
Mike: Yeah and the problem- and here's why they relate to you: one, because they're doing their job but two, it typically slows down closing. You're often going to get something like this where there's a- there wasn't a quiet title done and they're not going to be able to close in a week like Dave- like everyone had hoped. You know like Dave was hoping this was going to close next week. Well, it looks like it's probably not going to close next week, but again, they might be able to figure out how to get this done.
Mike: So that's the moral of the story.
David: Or yeah, a couple other options are they go back and they find out where it was bought. Maybe it wasn't done with a quiet- or with a quit claim, that's what they think and they can provide the title policy. The other option would be they start the quiet title process and we just give them a new contract that says we close in nine months or on or before and once they have the quiet title process completed then we move forward with the purchase, but we will not buy a property that has title issues because we won't be able to sell it. It would be doing us a disservice to buy that property from them because we would be in the same situation that we're in now again when we would go to sell that, alright? So lesson here today, use title companies and closing attorneys.
Mike: They're your friend.
David: They are your friend and they will help you and you can kind of make them your coach guys. You can have them help coach you on how to get these deals done and that's it. Short episode today, lots of gold nuggets. Thanks for watching. Don't forget, check out discountpropertyinvestor.com for free access to the three pillars of wholesaling eBook, as well as free courses on wholesaling and marketing methods. Thanks for watching, signing off.
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