Handling Title Issues Communication is Key
If you have done wholesaling for even just a handful of months, you have undoubtedly come across that property that was going to be an easy deal, a sweet deal, a killer deal only to have it stall and possibly unravel because of a title issue. Obtaining clear and marketable title is a key item that rarely gets focus in courses I come across. It is usually a ‘the attorneys will take care of it’ issue. This is 100% true except that it is still YOUR deal first and as long as it is your deal, you must remain in the driver’s seat.
Too many times, I have come across deals that stall simply because as a wholesaler, we forget that the closing attorneys get rather busy themselves and we may find our transaction playing second fiddle or even backburner to ‘easier’ transactions for the closing attorney. This is not a fault of the closing attorney. Think about it, like you they most likely want to knock out the low hanging fruit the same way you thought your deal would be an easy one!
Sadly, this results in even more time to resolve issues and potentially frustrated Buyers both with you and the closing attorney. Not all Buyers have the same desire to be patient to get a deal done. So how do we handle this?
1. Communicate with the attorney’s office and understand the issue.
a. Really understand the issue and don’t be afraid to point out if something sounds wrong or if there is a better way. Attorneys are people too and sometimes what seems obvious to you may not to them. Remember they are busy!
b. Make sure you speak with the closing attorney. While some Closers and Pre-Closers are awesome at what they do, having communication with the actual attorney on an issue is opportunity to build rapport and understanding that comes from working with a decision maker.
c. Don’t just repeat stuff to your Buyer the attorney tells you. Actually learn what the attorney is telling you means and the impact so you can communicate what this really means to your Buyer. Not only do you learn but your Buyer builds confidence in you because you are speaking in informed and educated manner. It also keeps them from doubting the issue and having to go to the attorney because you haven’t done your homework. Don’t underestimate the value of this!
2. Communicate with your Buyer on a periodic or scheduled basis.
a. Make it a point to get updates from the closing attorney to pass along to your Buyer often enough to keep your Buyer in the loop. Set the expectations for your Buyer. Two examples:
i. Minor title issue – check in every 2-3 days and get updates to pass to your Buyer
ii. Major title issue – quiet title problem – check in every two weeks to get updates
3. Set your Buyers expectations and give them the option if the deal is worth it to them.
a. Let Buyers know what to expect for the time it will take to resolve the title issue. Especially if they are seasoned in having dealt with title issues. (do not assume they are) Most Buyers are very reasonable and are willing to wait it out if the deal is strong. This is incredibly important because if they are using a private or hard money lender, they have to then convey to their lender what the holdup is. In essence they are in the same boat you are in.
b. If it is not going to be a quick resolution, ask the Buyer if they want to wait. Some of them may not be in a position to wait. In our contracts, while we do non-refundable earnest money, there is always an exception if there is a title issue because reality is, some Buyers do not have the luxury of waiting for months or longer for an issue to resolve. If they cannot afford to wait, it may be in your best interest to let them out of the contract. If you have a great deal, you’ll find a Buyer that is willing to wait.
Being able to convey clear and marketable title is essential in most typical real estate transactions. There are exceptions like tax foreclosure related sales however that is a story for another post. By and large, doing excellent business as a wholesaler involves ensuring the title is clear and marketable. Remember it is still your deal first before it is the Buyers. You have a responsibility to that Seller and they are counting on you to help put the deal together to get it to the closing table. Leverage the above when a title issue comes up and you’ll be able to navigate it to closing creating true win-win-wins for all.