{"id":8202,"date":"2024-03-14T20:29:42","date_gmt":"2024-03-14T20:29:42","guid":{"rendered":"https:\/\/realestatewealthnetwork.com\/blog\/?p=8202"},"modified":"2024-03-14T20:31:41","modified_gmt":"2024-03-14T20:31:41","slug":"can-short-title-problems-kill-your-deal","status":"publish","type":"post","link":"https:\/\/realestatewealthnetwork.com\/blog\/can-short-title-problems-kill-your-deal\/","title":{"rendered":"Can “Short Title” Problems Kill Your Deal?"},"content":{"rendered":"

I got a question into my hotline recently, and I\u2019d like to share the details with you, here in my blog.<\/p>\n

The caller asked:<\/p>\n

\u201cWhat\u2019s your advice on the easiest way to get a property under contract? I have a \u2018ready\u2019 buyer who\u2019s pre-approved but has been having trouble getting a property under contract.\u201d<\/p>\n

Ok, let\u2019s iron out a few details first\u2026<\/p>\n

First, I\u2019m assuming the \u201cready\u201d buyer who\u2019s pre-approved is a retail buyer.<\/p>\n

Why?<\/p>\n

Because the client used the term pre-approved, which means the buyer is engaged with a lender \u2014 presumably, a conventional lender, and they're looking to find a bank-financeable, move-in-ready house. <\/p>\n

Now that that\u2019s cleared up, let me share my thoughts. <\/p>\n

First up \u2014 while there are some exceptions, a conventional lender is generally going to take issue with what\u2019s called a \u201cshort title\u201d.<\/p>\n

For example, let\u2019s say you find a house for this buyer, you put it under contract, and you look to line up a back-to-back closing using my funding to sell the house to your retail buyer who's working with a conventional lender. <\/p>\n

Well, that conventional lender then looks at the title prior to closing and says, \u201cWhoa, hold on a minute here. Mr.\/Mrs. Investor isn't the title holder.\u201d <\/p>\n

To which you respond: \u201cNo, I'm not. But I have the property under contract. I have an equitable interest in the property, providing me the right to resell it and I will hold title on the day of closing\u201d <\/p>\n

The lender says, \u201cOK understood, but we don't finance short title transactions.\u201d (sigh)<\/p>\n

See, most conventional lenders are going to take that stance, which is why we really don't talk about wholesaling houses to retail buyers. <\/p>\n

Now, if your buyer is a rehabber\/investor\/landlord, and they're pre-approved with a private lender or a hard money lender \u2014 not a conventional lender \u2014 well, that's a completely different story. Everything I just said has no bearing whatsoever.<\/p>\n

As we move on to dive into the original question, I'm going to give you both sides of the coin \u2026<\/h2>\n

Let\u2019s assume that your buyer is not a retail buyer and is not talking to a conventional lender, and you're having trouble finding a property.<\/p>\n

In that case, my thought is that you're either talking to sellers who are not motivated enough<\/em> or not motivated at all\u2026 or, the properties you're making offers on are in too good of condition<\/em>.<\/p>\n

Sidebar: I regularly answer questions like this and much more during my LIVE 3-Day Real Estate Summit. <\/em>If you haven\u2019t joined me for this before, grab a seat for free here now<\/em><\/a> and take your investing game to a whole new level!<\/em><\/p>\n

That's the common challenge that we see when folks are making offers, and they're not getting accepted. <\/p>\n

There are really 3 primary challenges: <\/p>\n

    \n
  1. The seller is not motivated. <\/strong>
    <\/strong>And there's nothing we can say that will motivate them. However, time does motivate sellers, which is why we follow up repeatedly<\/strong> when they say no to us. <\/li>\n<\/ol>\n
      \n
    1. You\u2019re making a wholesale offer on a house that's not in wholesale condition.<\/strong>
      That can get your offer rejected very readily and in reality, you\u2019re competing with retail buyers.<\/li>\n<\/ol>\n
        \n
      1. You're in a hypercompetitive market, and you're being outbid because you're being too conservative with your numbers.<\/strong>
        <\/strong>This is also a common mistake. For example, you come up with an ARV of $340,000 and you think, \u2018I'm going to go with $300k just to be conservative.\u2019 Then you come up with an estimate of repairs that are $40k, and think, \u2018I'm going to call it $80k just to be conservative.\u2019 But then you end up knocking down your offer way below your competitors. <\/li>\n<\/ol>\n

        So again, if you\u2019ve got a retail buyer who\u2019s talking to a conventional lender, you're going to have a short title problem. <\/p>\n

        On the other side of the coin, though, is that nothing changes with regard to you having an equitable interest. Put the house under contract, and sell it to your buyer... <\/p>\n

        You\u2019re not acting as an agent without a license, because you had an equitable interest in the property. <\/p>\n

        You're not being paid on commission\u2026 you're being paid a wholesaling fee or an assignment fee for a profit margin based on buying it at one price and selling it for more. <\/p>\n

        You\u2019re not acting as an agent without a license. <\/p>\n

        However, I think the argument remains\u2026 <\/p>\n

        The issue will always be there as long as there's such a thing as real estate agents because they look at some of what we do as investors as competition. And, they've even won the argument in a handful of states with regard to an assignment.<\/p>\n

        So, and this is important, if you're trying to find a retail house and sell it to a retail buyer, you're still using the right steps, but it starts to feed their argument. <\/p>\n

        Now, you might do an assignment of contract to a retail buyer with a conventional lender. I think conventional lenders are more apt to go along with an assignment than they are with a short title because then the title is passing from the seller to their borrower and not passing from the seller to you to the borrower. <\/p>\n

        See, lenders don't like short title deals. But with an assignment, there is no short title because your buyer becomes the buyer who receives the title from the seller. <\/p>\n

        And there you have it. Hope that helps!<\/p>\n

        Regards,
        Cam Dunlap<\/p>","protected":false},"excerpt":{"rendered":"

        I got a question into my hotline recently, and I\u2019d like to share the details with you, here in my blog. The caller asked: \u201cWhat\u2019s your advice on the easiest way to get a property under contract? I have a \u2018ready\u2019 buyer who\u2019s pre-approved but has been having trouble getting a property under contract.\u201d Ok, […]<\/p>\n