Answered: Your Most Burning Questions About Real Estate Title | 2021

Mar 12, 2021

In this video, Andy Conradson of Heritage Title Company answers your submitted questions in regards to Title Companies and Title Insurance.

You’ll hear why about the typical process and why getting your Title team looking at your deal prior to signing the contract is so important.

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All right with me today at heritage title company is any congrats. Yes. We’ll be answering some of our questions in regards to utilizing a title company before and then after signing the contract. And it’s just so important to get a title company on the team before. So we don’t run into these problems when the clock is ticking closing. So, Andy, thanks so much for joining us today. My pleasure. All right. So one of the first questions we have is, so what stage in the purchase does heritage title usually get involved? Well, we get

Involved usually after, uh, you sign a contract, uh, for the most part. Uh, if you want to ask for no money to get more information on the property, that’s an ownership and it comers report, um, you call and ask for that. We usually send that out in a couple of hours to you. Um, it’s probably really important that, you know, what is all on the property before you make an offer on that property being, it gives you a, it’s not a full title report, but it gives you what’s up County record. Um, and then that way, you know, what kind of encumbrances are there loans, uh, liens that may have attached things like that. Very important. So we know what we’re getting into. Yep, exactly. Yeah.

Excellent. And so the big question we get asked is most people deal with title companies on the day of closing. Yeah. And that’s all they know. Right. So having you guys on our team, what’s the benefit of having the title company involved? Sure.

Correct. And yeah. Well, pre-contract you get all the information on the property before you make an offer on it. And then as we get the title, commitment out to you, we have our requirement page. The requirement page goes through all of the things that we require to be paid off and cleared before it goes into the new ownership will be you. And then we’re ensuring good clean title with no liens or judgments or anything like that as it comes into your possession. And then that way you’re starting all over with a clean slate.

Perfect. Yep. All right. And so here’s a popular one. I get, I think people are confused about warranty deeds and title insurance. So what’s the difference in protection? Like if I get a warranty deed, I would assume that the title’s pretty much clear. So why would I have titles?

Okay. So the warranty deed is strictly a recording, um, document that changes ownership. It doesn’t give you any protection. Uh, it doesn’t clear any of the, uh, loans or judgments or any of those things prior to you getting it. So it’s purely just a recorded document showing who is the new owner and that’s it. So title insurance is much different because it does, we go into the whole background of that property. Who’s owned it. We actually go back a couple of different owners and then we find out what they owe, what they, who they owe. And we have to call for payoff information. If there are tax liens, we have to clear those. If there are judgments, we have to clear those if there’s, um, encroachments, um, let’s say, for instance, your building is built on an easement. Uh, we protect you with those types of things. Adidas strictly a recording instrument. Uh, okay.

Yeah. Just because there’s a warranty, it doesn’t mean by warranty that it’s completely clear.

Absolutely not. No. It just shows who the new owner is. Gotcha. That’s so important. Um, so again, I don’t know

Other topics in regards to the title insurance they’re asking, why is it so important? I think you’ve pretty much answered that. Is there anything else you can think of

Title insurance? It not only protects you, but your lender too, if you happen to have a loan on that. So there are two separate policies, but it’s really important, especially when you’re buying multiple properties that you don’t get yourself in a position where you’re buying something that somebody may have had financial trouble with. And they, you know, if it’s the IRS or if it’s, um, mechanic liens, they hit every single thing that that person owns. So if they own a subdivision and they’re building houses and they don’t pay their contractors, that’s what those things will hit every property they own. So it’s important that you get that protection. And I think a lot of people think, well, title insurance is just, I go to the closing, you prepare the documents and I sign them and that’s it. Um, it’s a non-tangible item. And I understand that it’s hard to understand and why do I pay a thousand dollars for this service? But it’s a thousand dollars. Usually, the seller pays for the owner’s policy and you split the closing fee customarily between the buyer and seller. So you want to make sure as the owner, you’re getting a good title company that will pay claims if there are any, and that will cover any possible issues that are out there before you own that property. That’s the difference there. And that’s why it’s, I feel title insurance is really important. And I think a lot of people don’t understand how much we actually do behind the scenes to protect you.

For example, if we own the property for five years and all of a sudden, some random lien holder comes in, then now jeopardizes our title, right from the, you know, look in the past, that’s where the insurance would kick in. And yeah.

Yes. So we cover in your title policy, there are exceptions, and then there are endorsements. Um, there, your exceptions will cover anything of record, and, uh, your endorsements will cover anything of record and not of record. So there are limitations to some of these liens that can come back. Um, so they could be out by time, but it’s our job to figure that out. And so if somebody were to file a claim, it’s our job to either pay the claim or fight that on your behalf. So you don’t really have anything to engage in that it’s, it’s our responsibility.

Oh, that’s interesting. So some things that aren’t recorded, for example, if it was an option that wasn’t recorded, right. And that comes up from the past, that’s when total insurance would kick in and I see, wow, good to know, especially if it wasn’t recorded in the first place.

Okay. So then, then it’s a matter of, we have to a justify they have to justify, is it a true invalid lien, but that’s our job to figure that out. And then if it is, how did it get missed? And is that something that then we have to pay, but that’s pretty rare. Um, you know, I think some of the things that we see more common would probably be, um, sometimes you’d have an encroachment and you’ll have like, maybe somebody that’ll put a fence on somebody’s property and they put all of their landscaping there, but you have protection for that. I mean, obviously, if we’re ordering a survey and we know where that stuff is at, then we, we validated where those property lines are. So those are things that if it comes up, we handle it. It’s not that big of a deal,

But it happens. I bet. Good to know. All right. Uh, so this is an interesting one with all the wholesale deal. Yep. Now I might have one coming up shortly, you know, some people talk about doing a double close where you have the current owner, the wholesaler, and then the end buyer and the same, the closing room. Yeah. So with that situation, does the end buyer get title insurance or is there any kind of gotchas with a double closing?

Not, I mean, we, we have a product called a hold open policy and a whole open policy is so you’re, you’re purchasing it as an interim buyer and, and a double close is interesting. We do them as long as it’s full disclosure, everybody knows what’s happening, everybody knows what’s going on, but a hold open policy, we can move it from the seller to you and then to the new buyer. And usually, it’s like 10% more on the premium on the policy itself, but we have a product designed to do that. So then the end buyer does have that protection.

So they do have the protection. Oh, okay. That’s good to know. Uh, another one. So it’s my understanding that toddler shorts has exceptions. Yes, of course. Some of them that I’ve heard. And if you can back me up to see if that would be the case now, like municipal, unpaid property taxes, federal income tax liens, or judgments for closure proceedings, which is interesting. Yeah. Because if it was, if the foreclosure happened 10 years ago, let’s say, and it wasn’t completed correctly, that could come back. Um, and also child support lien. So are these exceptions on like the standard policy and is there options we can add to her insurance to cover these? Yeah.

Yeah. That’s a great question. Um, a lot of these items that you’ve mentioned will be on my requirement page, I won’t typically move them to the exceptions because I will want to deal with them so that you have a clean title coming through. Now, if there’s something that, uh, we can’t resolve, but yet the risk is minimal. But like for instance, when you’re talking about unpaid property taxes, those we would make sure current. So whether it’s coming from the seller, if they’re in distress, it may come out of their proceeds. Um, you, on your hat of behalf, you could probably negotiate that in your price and you’re paying the property taxes. If you get it for the right price, we’re fine with all of that. We have just been required closing instructions to instruct us on how to do it. But those are, I wouldn’t say exceptions.

Those are gonna fall in their requirements. Um, and, uh, when you’re talking about federal tax liens, tax liens, don’t go away. Um, you know, they, if you’re in foreclosure, they typically, we have to get it released by the IRS and they, if they don’t pay them off, as far as the proceeds, um, they may take a settlement and then reattach to that person’s social security number and anything else that they make own. So we still have to ensure that you’re, you have a clean title with those items. And I mean, that goes with all of these all the way from court judgments, um, uh, foreclosure proceedings, those foreclosure proceedings are a little bit more complicated. Uh, we’d have to look at every one of those independently. So if it truly did go through foreclosure and not been redeemed out of foreclosure those proceedings, if it was redeemed, they kind of go away because you’re now current and you’re making those payments.

If it goes to a different owner, they would have got a public trustees deed, which then wipes the title free, and then you start a new, so there are different things that we can do, but those individual ones are, are great questions, but typically I would not take exception to those, um, exceptions or interesting exceptions or some of those things that, uh, if, for instance, a loan was paid off, but not released. And we can a copy of the settlement statement, proving that it was, um, paid off. I’ll take exception to that and put it on schedule B to, you know, um, easements or encroachments. If it wasn’t something that is detrimental to the property, I can give an endorsement over that exception so that you’re covered. Um, those are the different avenues to have a bad kind of situation.

So in regards to like standard exceptions, do you, would you recommend having, uh, additional protection to cover some of those? Yeah.

And there, they’re not costly so we can give you those options. Um, sometimes it’s, you know, a $50, um, endorsement to cover some of the standard exceptions. Uh, so it’s, it’s relatively inexpensive to have the protection that you require to, to move forward and feel confident.

Excellent. So when we have the policy, we could see the exceptions right there, and then we can go through with you, like, how do we get that off? So how it works, Mike, is you, when you guys go under contract

Track with the property, you send us a copy of the contract, which engages us to do a title, commitment. That title commitment is per a pre prep preliminary, uh, commitment on us to ensure that property and in that you’ll have, you know, page one will be everything with the new title, how you guys are taking title. If there’s any loans, we’ll do a lender’s policy there too. And what that amount is. And then on page, I think it’s like page two or three. So you’ll have like legal description, all parties to that transaction on page one, page two, we’ll have, you know, your requirement page, which will be everything that is of record that needs to be cleaned off record being paid off or whatever, moved to you guys. And you’ll have how you’re going to take title on that side. Um, page three typically is, uh, the schedule B twos.

So you’ll have the exception page and those will have, you know, oil and gas, uh, leases in a subdivision. And, you know, everything is under a planned unit development these days. So a lot of those things will be included in those and lenders take exception, title companies take exception cause there are regulations that you can’t drill within 150 feet of an improvement. One improvement is a sidewalk, a curb, a road, a structure. So you’re protected, but those are things that will be in your exception pages. You’ll also have one through four, which is the, anything of record, anything, not a record, those needs that will be in that there is an endorsement to cover that. Um, if it’s a, uh, multifamily unit, usually there’s a multifamily endorsement, something like that on that page. So I can go through the commitment with you on how to read it. What’s important. And that’s another appointment that you and I can have. And, uh, go through that.

Keep you in the loop before closing day, correct? Yes. Excellent. Uh, so this one’s interesting. This looks like it might be coming up with me lately. So if I work with the lien holder yes of, uh, so I don’t know the property yet work with the lien holder to reduce the lien and now it’s time for closing. So are there any recommendations you can make to me what not to do, ensure that that reduced lien follows through with closing? So everything is stated properly with the new lien amount.

Yeah. So you’re talking about an existing lien on the property and you’re wanting to get a reduced amount on that. Okay.

So I work with a lienholder, like for the courts or

Sure. So, um, that would be, our closers will be so I’m, I’m on the title and sales side, but the closer would call for a payoff and that payoff, if you’re already working with them and they give us a reduced payoff amount, that amount will be the amount that will be on the requirement page to be paid off in order to move forward with closing all. Okay. So you will

Coordinate with the lien holder, correct?

Our closures definitely we’ll do all of that.

Okay, excellent. So our closing costs dictated by the state at all is so

That they’re filed with the insurance commission, which is part of the, uh, Dora and the state. Um, so they are not dictated by the state. We as title companies have to file our rate, filing and justify why we’re going to charge what we’re charging. So whether it’s a closing fee, whether it’s a title policy, those all go through, they’re not negotiable because they’re filed with the, uh, insurance commission.

So let’s say for instance, um, my competitor’s at $900 and I met $1,200 and you want to send me the business and say, Hey, but your competitors like nine, I don’t have the ability to reduce those because it’s filed with the state of Colorado. So there’s really not on the title companies, whether it’s, you know, X brand or my brand, we’re all filed and we were regulated. So that is the fee. And there’s really no negotiating on those. And that’s why that is a, I see,

Makes sense then, uh, another one is, so what closing costs to the buyer of a multifamily property expect, particularly when we’re not using traditional institutional financing,

Right. Um, I don’t have an exact number of what it would cost you because it would depend on the purchase price amount. So all of our fees, our title insurance fees are based off of, uh, let’s say if you’re buying something for a million dollars, you’ll have a rate filed for that amount. It could be $1,600. It could be whatever, but, um, and then you’ll have your endorsements on top of that. So, um, as far as the buyer will pay, if there’s not conventional financing, your, your fees are substantially less. And it depends, obviously you’re, if you’re writing the contract and you write in that you’re going to cover the closing costs, including title, well, then your fees are going to be more, uh, like I said earlier, customarily in the state of Colorado, uh, the seller will pay for the owner’s policy for the new buyer. Okay.

If there is a loan involved and they want to own a lender’s policy, it, you get a subsequent policy, but it’s at a reduced rate. Uh, it’s probably less than half of what your owner’s policy would be. So, and private money, uh, investors sometimes want that, but if it’s investors that are coming in and buying it all together, they typically don’t need a lender’s policy nor do they want one. So you’ll just be getting the owner’s policy, which is provided by the seller. And then you’ll just split the actual closing fee itself.

Oh, I see. So policy with private money is kind of it’s negotiable.

It is. Yeah. So they, they may want it. They may not. So sometimes they just want a copy of the owner’s policy and, and if they’re recording a deed of trust, typically they will ask for, um, a policy. Sometimes it will be private investors. It will be, uh, look like a cash deal with no recorded deed of trust. Um, in those cases they won’t ask for those at all. Oh, okay. That makes sense then. Yeah. Yeah.

All right. Uh, so how could you explain when we, uh, we’re about to we’re signing the contract? We give some earnest money. Yes. And I believe once they sign the contract, that’s when the gears start with the title company. Correct. So how does the earnest money work? Is it just school, regular escrow, or is there anything different? We

Have an earnest money account that’s set up directly.

We don’t co-mingle those

Funds. So like with different transactions, it’s just one transaction with you set up for that one account, um, that way. And typically they are held, uh, earnest money is held by the title company, um, especially in this kind of situation because we’re third disinterested party. So you’ll sign an earnest money agreement, uh, forms. And then that way, if there’s a dispute, you guys need to work it out and tell us how to disperse those if somebody is in breach of contract. Okay. So we typically will hold the money here. We’ll apply it to the closing. And so that’s kind of just a deposit or a down payment on that property. And then we will, you’ll see it on your settlement statement as a credit to you guys as the investors when you’re buying the property. So if the, if the, uh, property amount is 500,000, you’re giving $10,000 in earnest money, you’ll see it’s four 90, but the purchase price is still at 500,000, but you’ll see the credit for the 10,000 anyway, in that transaction.

I see. And of course, once you have the contract, you just follow the letter of the law and the contract as far as who gets it and what time, what contingencies you got it. Yep. Gotcha. Okay. So, uh, with transactions involving, um, maintaining the currently such as, as subject to, or wrap-around mortgage, so what differences should we expect in the process and with such a transaction? Is there anything you can recommend to do in addition to what’s usually standing?

Yeah. I think, um, wraparound mortgages are typically not seen any longer because the lender usually has a due on sale clause. However, uh, they can be done as long as we disclose everything that’s happening. Now, if some of the things would be slightly different, you’ll still see the owner’s policy. Uh, you’ll still see, uh, you know, a warranty deed. Uh, I believe you had asked in, in this question, you know, how does the ownership look well, if it’s a wraparound and you’re actually buying the property, it does go into the new buyer’s name with a warranty group, um, which on a wraparound could pose you some problems to do it that way, because, uh, it shows, uh, the legal owner is someone different than the mortgage. And that’s where lenders, don’t like the fact that if they weren’t in contact with you to get you qualified, to buy that, or assume that, and that’s where assumptions come in, which is kind of nice because, on commercial, you could probably do that.

Um, and then they do not put modification and showed the new owner in place. So there are different ways to handle that. And those are kind of like a snowflake. So we want, if, if that’s what we’re going to do, and it is possible with the lender, cause we’re still gonna have to engage them, then we can figure out what kind of recorded documents they need, what kind of, um, protection they would like if any. Um, but yeah, that’s, that’s how we would handle those. Um, or like you and I talked earlier is maybe, uh, do it with a private money source in lieu of a wraparound loan.

Makes sense. So here’s an interesting one. So if we have a seller-held note, so we’re not using institutional financing, the foreclosure proceedings, is it, is it a different process?

It’s not, so it is the same process. They still have to do, um, the, the notifications, you know, the pre-foreclosure seventy-five days before we’re run that kind of stuff if they were going to foreclose or if you guys were going to close. But, uh, uh, doing a, um, a private note holder is we would still do it just as if we had a conventional lender. We would, uh, offer the same service with title company. So I understand that the title company would be involved in a possible foreclosure like that. I didn’t realize that, uh, we don’t, but I mean, if, if they’re, if you’re going to foreclose, um, so that’s all handled through the public trustee. The title company only would be engaged to if you’re doing a private mortgage, uh, if, if you’re the seller and you’re going to hold the note, um, you just give us instructions on how to record who’s on the title, that whole thing.

Uh, and, and we would follow those instructions to do that for you. If you were the buyer, um, with somebody who’s going to hold the note and you’re either going to be there, your bank, basically, um, we would, we would still get instructions from that standpoint, but on a foreclosure proceeding, if you’re looking at that, uh, that kind of is out of everybody’s hands and we have to just do what the state and the courts, um, instruct us to do at that point. And then if they go all the way through the foreclosure proceedings, and then you get a public trustees deed, uh, or they sell it at, at the courthouse, uh, on a window, you know, I think it’s like Wednesdays that nine o’clock in the morning or whatever. Um, you know, that’s, that’s something that we don’t provide.

Any insurance.

You can get it after the fact, if you bought something at the foreclosure market and wanted to do that, um, cause you’d get a public trustees deed at that point, if you wanted to purchase an owner’s policy because you wouldn’t get one from the County, you could engage us at that point just to make sure everything’s cleared.

Um, the foreclosures, typically a lot of things are purged off of that title, but there are certain things that don’t come off, uh, Oh, which are, um, uh, tax liens are, can still be there. Uh, and the main ones are HOA liens. They’re called super liens. They don’t go away. So if you buy something from the foreclosure market and there are HOA lanes, cause if they default, they’re probably not paying their HOA dues. Um, you have to clear that. And so hos can only by law go up to six months of back dues. So you’ll still have to pay it, but at least six months worth of HOA dues. But you want to make sure that that’s cleared wow.

Judgment lien. So they usually disappear with the foreclosure or you do. Uh, it depends. I mean, judgments be out by time. So you’ve got to see when it was recorded and all of that other stuff, but they are notified as well. A judgment lien holder has the ability to redeem that property just as the first and second lien holder. It goes in order. So the first lien, if they’re in foreclosure, everybody below them gets notified. They all have an opportunity to buy that property, but they have to pay the lien in front of the liens in front of them. So if it’s the judgment, it can go away. But they actually were notified in the forecast

Closure. They have to pay the first and the second,

The second or the second, and then the first ticket that property cause they are in or so they, uh, but like I said, they do go away. Cause you were notified that you have the opportunity as that judgment, uh, the lien holder to buy that property because you filed your judgment against that property. Uh, and it went into foreclosure. You had the ability to take that property.

Now it was going to cost you to get it for everybody in front of you. You had to make good on it makes sense. So you can always buy a lien position, you know, and that’s something maybe you would consider doing if it was a good enough buy. Sure, sure. But really it’s, it’s a, it’s kind of a risky thing, but sometimes those risks really do pay off. Especially if you can buy a lien holder’s position as an investor, HOA ones, per instance would be a good one to buy because then you’re not going to be dealing with, um, a hundred thousand dollars. You may be dealing with thousands of dollars. You can buy that lien position and then you can start the foreclosure proceedings.

Even if you’re in second or third position, you still have the power.

Sure do.

That’s interesting. And the last one we have is in your experience with run mortgages, does the seller or buyer usually hold the title at closing

The buyer? Does the buyer holds the title? Oh, okay. Yep. Because you still do a deed transferring that ownership, um, in that. So that’s where you’ll see the difference in that as we talked earlier, that’s where lenders get, if they ever pull up to PA, if you’re not escrowing, it’s not as big of a, uh, an issue, but if you pass, grow your taxes and insurance, if they get the tax bill once a year and they see a different owner in place, they could call it that note. And that’s that risk with wraparound mortgages. So yes, it does go into your name cause you want to make sure that you’re not just a holder of a lien because if you didn’t move that ownership deed to you, you really have no, uh, no collateral, you know what I mean?

The ownership.

Right. So yeah. You want to make sure that that’s done if you do venture into the rapper rounds.

Oh, I see. So then I guess technically we’ve been a wraparound and subject to pretty much the same as far as the closing and who owns title and who absolutely. So yeah. Okay. That’s a good one. Okay, great. Well, thank you so much for spending time with us today to answer our questions.

So if any of our viewers would like to contact you for more questions in regards to the total yes. Transfers or anything, how would they get in touch with you? Uh, either my cell phone or my email address, my cell phone number is (970) 222-7299. And my email address is Andy dot congrats. And that’s C O N R a D S O Excellent. Yeah, thanks so much Eddie, but it was nice to meet you.