3 Guidelines to Finding a Wholesale-Friendly Title Company
How you buy properties is likely determined by your goals. So it makes sense that the title company you choose to help you close on those properties should be, too.
When I bought my own home, I hired a traditional retail title company. The process took a couple of weeks from beginning to end. But when you’re buying and selling multiple properties per month, waiting that long for a title agent to get things in order isn’t always convenient — or possible. Because of this, working with a wholesale-friendly title company couldn’t be more important.
Title companies may all seem similar from the outside looking in, but don’t let that fool you. Many charge high fees, don’t do the type of closing that would work best for you, or take too long to complete the closing at all. For the average home buyer — who needs to title a property only when he or she buys a home every eight to 12 years — this is fine. But it doesn’t work as well for a wholesaler who’s churning out business at a steady pace.
When wholesaling, you’re operating within a limited time frame. With a nimble title agent in your corner, you can close successfully, even if a buyer ducks out at the last minute. And if you’re serious about growing your wealth by wholesaling properties, you need a title company that understands the value and importance of keeping pace.
The Role of Title Agents in Wholesaling
What makes a title agent great to work with as a wholesaler? Having a strong understanding of the real estate wholesaling world and being familiar with the ways wholesalers conduct closings are two great places to start.
For instance, if all parties are local, an in-person closing usually makes sense. If they’re not, the buyer or seller might use a mobile notary for a fee of roughly $100 to $300. But for wholesalers who turn over 10 or more transactions a month, it makes a lot more sense to make someone in the office a public notary. The volume of deals far outweighs the cost to either pay mobile notaries — which could be up to $2,000 — or travel to the title company’s location.
There are a couple of closing methods that make the most sense for wholesalers. Generally speaking, assignment agreements are the simplest, fastest way to move property from seller to buyer. As long as you don’t mind buyers seeing your profits, these are a good way to go.
Wholesalers who prefer to keep their profit margins a mystery, though, might rather use a “double close” instead of an assignment. The double close is a quick transfer of ownership in which the wholesaler closes on the property for a few minutes and the buyer closes on it directly after that.
To mitigate the risk of buyers defaulting, you might work with a transactional lender who loans the full cash amount of the property for one day until the buyer’s payment is secured. During double-close deals, good title companies will make sure the buyer’s funds are secured prior to getting started.
Whichever method you use, a good title agent will guide you through it seamlessly and know the ins and outs of what needs to get done. And there isn’t much that could be more valuable than that.
How to Find a Wholesale-Friendly Title Company
Use the following tips to help you find the best title agent for your wholesaling business:
1. Search for title companies geared toward investors. Title companies that are comfortable with wholesaling usually offer low fees and fast turnaround service without cutting corners. Many even handle multiple same- or next-day processes and changes, and they have structured protocols to ensure they do their due diligence, keeping you from being sidelined by any surprises at closing.
2. Ask for referrals from other wholesalers and investors. Though you can always look online for title companies, you’re better off asking other investors and wholesalers for referrals. People who have been in the business long enough know which title offices check off the investor-friendly boxes.
The simplest ways to start discussions about title companies are joining local real estate groups online and attending local real estate organizations. The more you network, the more exposure you’ll get to title companies that want to work with wholesalers. You only need one, so if you notice a lot of people recommending the same office, do your next deal there to test it out for yourself.
3. Don’t interview title companies before working with them. Instead of interviewing title companies, keep those referrals in your back pocket until you have a signed purchase agreement and are ready to have the title checked. Working with a title company is pretty transactional, so you’re not making any long-term commitments.
Once you have a signed purchase agreement, send it over to the title company you were most referred to, and ask your contacts there how much it would cost for them to do a title search and close the transaction. All in all, it should end up being between $800 and $1,000. Also, ask them how long it’ll take for them to do their work. A title company that isn’t investor friendly will take weeks, but one that is will be able to complete its search in two to five business days.
While title companies are transactional, if you continue choosing a good one for a lot of your future deals, you may be able to get those fees and time windows down even further. So until then, get out there and close some more deals!