When to Get Title Insurance (CFFL 0077)
When to Get Title Insurance
Jack Butala: When to Get Title Insurance. Every Single month we give away a property for free. It’s super simple to qualify. Two simple steps. Leave us your feedback for this podcast on iTunes and number two, get the free ebook at landacademy.com, you don’t even have to read it. Thanks for listening.
Jack Butala: Jack Butala here for Land Academy. Welcome to our cash flow from Land show. In this episode, Jill and I talk about title insurance. Not the most interesting topic, but, hey, we need to cover it. So when to use it and when not to. A lot of people are surprised about, you know, that we buy property without title insurance at all for any amount of money. So we talk about how we came to that decision and on an ongoing basis what are some of the parameters are.
But before that, Jill, let’s hear a question.
Jill DeWit: Okay, we, by the way, let me give you our number in case you didn’t hear it a minute ago or a second ago. If you want to call in, ask a question, then you might get on the air. We’ll just answer your question on the air. It is 888-735-5045. I’ll do that again. It’s 888-735-5045. So here is a question that we received recently from Mark in northern California.
It is “How do you know how much money you’re going to make on a property before you buy it?” Or basically, how do you value it?
Jack Butala: Yeah, that’s what I think he’s saying there, you know, is how do you value property? How the heck do you know how much money …
Jill DeWit: It’s a great question.
Jack Butala: … you’re going to sell a property for before you buy it? So …
Jill DeWit: Good question.
Jack Butala: And we teach this. We ask all of our members to pretty much have a great idea, not a good idea, but almost an iron clad idea of what they’re going to sell the property for long before they actually put the money into the property.
Jill DeWit: Mm-hmm (affirmative)
Jack Butala: And I’m pretty confident that’s one of the big concepts or one of the reasons that most of our members are so successful, but it’s an easier shorter version of this. If you live in a house and you’re thinking about selling it, you walk over to the next door neighbor and then the guy next to him and you ask him, “Hey, what do you think these houses are worth? Or have you done any research in it?” And then they all say some version of, “Ah, I’m pretty sure our house is probably worth around a hundred and forty thousand bucks right now.” He asks somebody else around the block. They say, “A hundred and thirty.” And everybody kind of decides, this is all just a theory that, I don’t know, the house is worth a hundred and fifty thousand dollars.
So the internet version of that for vacant land is to go around the various sites that we sell the properties on like Land Watch and eBay and Land And Farm and soon to be Land Stay, which is our site. And check to see what additional properties are selling for, or not additional, but like kind properties.
So if you have a property in what, Mohave county Arizona in a certain area, you go check out what the, let’s say the lowest price is for properties that are selling for about the same size. Let’s say it’s five acres, and you want to be priced below that. Maybe well below that if you’re going to sell it really quickly. So, Mark, that’s what you do. You check the internet. You make sure long before you ever buy the property that whoever is selling it on the internet, you’re below that guy, and you will not. You’ll get a call that weekend.
Jill DeWit: Exactly.
Jack Butala: And if you want some more information on that, go on over to successplant.com. That’s our online community where all the members that belong to Land Academy, we all kind of conspire there together and ask each other questions and get advice on the whole thing.
Ask that question actually. I’d love to hear what everybody else says.
Jill DeWit: Cool.
Jack Butala: I hope it’s the same version, or a different version of what I just said.
Jill DeWit: I’m sure it is. I know where they got their information, which is from us. So that’s pretty easy. I can guarantee that.
Jack Butala: Our big challenge today, Jill, is to make this topic, which I think is kind of boring.
Jill DeWit: Interesting. [crosstalk 00:03:34]
Jack Butala: Interesting and fun. So do you have any stories about some stuff that happened today?
Jill DeWit: I can make it interesting. Oh, stories about today?
Jack Butala: Yeah, like who’d you talk to on the phone or …
Jill DeWit: I had a great day.
Jack Butala: Did you? Let’s hear why.
Jill DeWit: Oh, I just talked to … I ran a promotion today, and in a couple of hours the properties, I had some really good properties that I had in my inventory that we gave away with our program, some really special northern New Mexico near Taos and Santa Fe, gorgeous properties, we gave them away with our packages and phones like ringing off the hook. So it’s really really a good day.
Jack Butala: That’s cool.
Jill DeWit: Really happy I got to talk to some really cool people.
Jack Butala: I love going to New Mexico.
Jill DeWit: Oh yeah. These are properties that you could get emotional about. So you have to be really careful because you know that area like, I just love anything to do with Taos and northern New Mexico which is so darn pretty.
Jack Butala: It’s one big post card.
Jill DeWit: It is. So and I don’t know what it is about southern California, but we all grew up thinking Taos is like the bomb, you know, like that’s where you want to end, in Taos. You know? So you see all these pretty pictures of the snow and the mountains and stuff so …
Jack Butala: Did you buy anything today?
Jill DeWit: Did I buy anything today?
Jack Butala: Is your email full?
Jill DeWit: Oh my emails full.
Jack Butala: Or I mean your voice mail.
Jill DeWit: Yeah, I haven’t bought anything today. I have a bunch of phone calls to return. No but yeah, I have a bunch of phone calls to return. I have a funny phone call. I got a voice mail a while ago from a guy leaving his phone number saying, “I’m calling about irrigation in your area.” I’m like, “What the heck?” Every now and then it’s so cute. Our numbers get in people’s files with property, and they don’t even know if I’m the county or who I am. They are calling for interesting things and I’m like, “I’m not the county zoning so I’m really not, I can’t … ” and it’s so funny so I’ll look up the number and I’ll give them the number and kind of …
Jack Butala: Yeah.
Jill DeWit: … help them on their way.
Jack Butala: Good.
Jill DeWit: So anyway, but yeah just a really … we had a really good day. I’m trying to think what else. We were trying to kick up our social media stuff today too. So we were working on that having fun.
Jack Butala: We have some really good people. Really good talented people working with us right now, and it’s taking such a load off of Jill and I. It’s great.
Jill DeWit: Mm-hmm (affirmative). Very happy.
Jack Butala: That’s my big happiness today.
Jill DeWit: You just don’t want to talk about title insurance.
Jack Butala: No I don’t.
Jill DeWit: You’re just really dragging your feet cause you don’t want to talk about the topic. I’ll talk about the topic.
Jack Butala: I don’t like title insurance.
Jill DeWit: Oh my goodness. Okay. Can I tell you?
Jack Butala: No, I’ll take it. I’ll talk about it.
Jill DeWit: Okay.
Jack Butala: I’m not dragging my feet. I’m just trying to make light of the whole thing.
Jill DeWit: Well it’s easy. I have three easy reasons.
Jack Butala: Oh well good, all right. You do …
Jill DeWit: When I use title insurance it’s not hard. It’s so easy. Okay.
Jack Butala: I didn’t even study before this.
Jill DeWit: You …
Jack Butala: I didn’t. I just said, “When do you get title insurance?”
Jill DeWit: All right. Here are my three rules of thumb.
Number one is. I’ll just go through them and then we’ll go into more detail. For me it’s when there is any doubt.
Jack Butala: Oh that’s a good rule.
Jill DeWit: I’m not sure if this is the right people who own. I’m not sure the ownership. I’m not sure if that person’s okay to sign. You know whatever.
By the way, I’m also getting … the reason I’m even considering title insurance is because the deals that good, I’m willing to pay for it. So that’s already passed my test. So then now I’m doing it because I have any doubt about it. When it’s over five thousand dollars that’s usually my area. Sometimes less. I’ve got title insurance for three thousand dollar properties if they were smoking rocking deals, like one we’re doing right now.
But usually five thousand dollars I’m going to look at title insurance just because I’m dealing with bigger numbers, and then the other reason would be when it’s ever something really tricky. Like I know I’ve got the right person, but there was a trust involved and there’s a power of an attorney, but mom’s still alive and there’s all kinds of little things that, yeah, you know,
Jack Butala: Basically it’s too hard for you to do yourself. So you just send it out to title.
Jill DeWit: Well, it’s not to hard to do. I’m just covering my rear. C.Y.A.
Jack Butala: Oh right. Right.
Jill DeWit: I’d rather C.Y.A. and then I don’t have to think about it. It’s all done correctly and I don’t have to assume responsibility and then my buyers like to know that I bought it with title insurance in those situations and they go, “Oh, okay.”
Jack Butala: Right.
Jill DeWit: There’s no questions. So …
Jack Butala: Let me take a couple of steps back and talk about why we even, anybody would ever need title insurance. And every time I bring this topic up I use an automobile analogy. So let’s say you go buy a five year old car, no a ten year old car. And you are the third owner so to speak. So you’re looking around. You’re checking the car out, and you look on the Carfax report, and the Carfax report says there are three owners before you or two owners.
So there’s you, now the new owner. There’s the person you’re buying the car from. Let’s call him John Smith, and then before that there’s Sally Jones, and then before that there’s Ford, the manufacturer.
Well, it’s exactly the same thing with any piece of real estate that you buy. Before you it’s the person that you’re purchasing it from. Before him there’s several other people involved, and then right at the very beginning there’s our federal government when they homesteaded the property literally, in which the analogy is with Ford. so that’s the chain of title. Both with the car and with a piece of real estate.
So when there’s a break in the chain which causes a lot of questions like, “Was it fraudulently deeded?” You know, what you want, and that’s called a cloud in the title when there’s a break. So there’s a chain of title since the beginning, and if everything looks good I’m not sure why you need title insurance.
Jill DeWit: Right. So that’s a great way of saying it. So like Carfax is like title insurance.
Jack Butala: Yeah.
Jill DeWit: And it’s like if you’re looking at a Carfax and it shows from 2001 to 2003, 2003 to 2005, and then it jumps to 2007. You’re like, “What happened between 2003 and, or 2005, 2007? Who’s that?”
Jack Butala: Right.
Jill DeWit: That’s a cloud in the title, and that would be a reason to go, “Wait a minute.”
Jack Butala: Right. Exactly or if it was deeded. So John Smith owned and then it wasn’t deeded properly, and there’s a gap, not even just a time gap, but a person gap if you know what I’m saying. So that’s what title insurance protects you against.
Gaps in the title are what we call cloudy titles. And it’s expensive. You know, depending on the state that you’re in. I’ve paid as little as four or five hundred dollars, or you can pay upwards to two or three thousand dollars on a building or something like that.
So full disclaimer here. I would never buy a house without title insurance, and it’s not so much that I’m concerned, it’s that when I go to sell it they’re going to have that gap. They won’t have necessarily a gap, they won’t have a gap in ownership, what they’ll have is a lack of insurance gap, and to title companies that’s just as bad as having a gap in ownership.
I’m trying to make this fun.
Jill DeWit: No it’s okay. No I get it. I get it.
Jack Butala: So this is what I used to be that a long time ago I would buy every single property with title insurance, and if you talk to any seasoned real estate person that’s what they’re going to say. You guys are nuts for ever doing that.
Well, we pay five hundred dollars for a five acre property a lot of times or a thousand dollars or two thousand. So we’re not spending a lot of money on these properties, and we don’t have lenders. We’re just paying cash for them. So nobodies requiring us to do this. So the only reason we would pay, just what Jill said, the only reason that we would seek out title insurance is because we’re concerned.
Jill DeWit: Mm-hmm (affirmative), and it’s a good enough deal that it’s worth it.
Jack Butala: So as real estate professionals we have access to data which now you have access to, to check to see who owned the property before you. So if you’re talking to John Smith on the phone and the data that we provide says John Smith owns it, which is First American Title’s data. Right back to them. You know, that’s a pretty darn indication, and your paying five hundred bucks for it. Hey, that solves all of my tests.
In our programs we go through this in great detail. We talk about exactly, you know, how to do this. We’re skipping along the top here. This is an overview for the show, but it doesn’t take a lot of intelligence nor time to see that you’re speaking with John Smith, and John Smith owns the property on paper from an unrelated third party. So …
Jill DeWit: Exactly.
Jack Butala: That solves my tests, and then I’ll tell you what we didn’t talk about, what none of us have talked about. One of the big reasons that I have several deals in with title right now. Big reasons that I purchase title insurance is because I look at whether or not I’m going to make a lot more money when I sell it. Does it make that property more valuable? The same way that you would maybe paint …
Jill DeWit: Sometimes you’re right.
Jack Butala: The same way that you would paint the inside of a house because just to freshen it up right before you sell it cause you think you’ll get more money.
Title insurance does that. That exact same thing.
Jill DeWit: That’s true. It does. You know, what’s interesting also too, is you don’t have to, like what you just said, and if you’re a buyer, when you sell a piece of property, or at any point along the way you can still get title insurance later on. Everyone too. So say you’re buying a property from someone, and it doesn’t come with title insurance, but you kind of want to have it for your benefit. You can seek out a title agent after the fact too and have it for yourself.
Jack Butala: And almost a hundred percent of the time I would say that title insurance comes with escrow. So escrow and title are two completely different things.
Escrow is, there’s a person sitting behind a desk who’s closing the deal for you. They’re talking to the seller. They’re talking to you. They’re collecting the money. They’re doing all the paperwork. They literally generate the deed. They make sure it’s recorded properly. That’s a huge benefit.
Jill DeWit: It is. I feel kind of lazy. You know, it’s kind of funny. It’s like, so often we’re our own title agents and we do everything ourselves, but the times that I do get to, I almost feel like, “Ew, yeah, I get to go through a title agent for this one. I just get to sit back and go … ” And I’m the buyer so all they need from me is a check. I mean it’s super easy. Just tell me where and when to wire the money. Done. It’s the seller that gets to come up with whatever documents and I don’t have to ask for them. I can just sit back, and let me know when you guys are ready for me.
Jack Butala: So again, with the car analogy, it’s the equivalent of never have to go to the DMV again. I don’t ever have to do it. It’s like a car dealer actually acts as an escrow agent if you buy a … if you’re silly enough to buy a new car they’ll handle all that for you.
Last used car I bought, I haven’t talked about this, the last used car I bought, I found like an escrow version for cars.
Jill DeWit: Mm-hmm (affirmative). Carfax.
Jack Butala: Well, no, no. For escrow, not the title.
Jill DeWit: Oh, an escrow thing? What?
Jack Butala: Yeah, you walk into this place, and you give the person you’re stuff and they already got the other stuff from the seller, and so they handle the whole thing for you.
Jill DeWit: Oh. Really?
Jack Butala: You don’t have to go to the DMV. Yeah.
Jill DeWit: Where is this?
Jack Butala: It’s right, it’s really really close here. Just because of this show I started thinking about it.
Jill DeWit: That’s kind of funny. I’ve never even heard of that. Well, that is really cool. How much do they charge?
Jack Butala: Oh, it’s like sixty dollars.
Jill DeWit: Oh.
Jack Butala: It’s cheap.
Jill DeWit: That’s why because they’re just standing there saying, “You sign here. You sign here.” It’s like you’re paying sixty dollars for probably not a lot of work even.
Jack Butala: Yeah, but oh no, hey, I’m not going to argue with you.
Jill DeWit: Oh my goodness.
Jack Butala: But again, you’re paying for convenience.
Jill DeWit: You are paying.
Jack Butala: You don’t have to go to the DMV. You don’t have to talk to the seller anymore.
Jill DeWit: For lazy people.
Jack Butala: Oh my gosh.
Jill DeWit: I’m just kidding.
Jack Butala: Plus, I’ll tell you, plus, they do fifty deals a day. It’s getting done right.
Jill DeWit: Yeah, that’s fine, and they take it all down to the DMV, and it’s all good. I’m all good with that.
Jack Butala: Actually I asked, the person who owns this thing, I asked her, she said, “No, we have this special standing thing because we’ve proven ourselves. It’s all electronic.” And she never goes there either. It takes her thirty seconds.
Jill DeWit: I’ve never heard of this.
Jack Butala: Yeah.
Jill DeWit: I did not know that existed.
I have something funny. Okay, when you think about the job of a title agent, I don’t know if this is your experience, this has been my experience, but the work that they do and how on it, it just seems like it’s a kind of a boring and not exciting, I guess it’s a boring job, not that it’s tough, but there’s things you’ve got to do.
Anyway, I’ve never met a title agent that wasn’t super fun and nice. Do they just cut loose? No, seriously because their day to day job is so monotonous, I don’t know, they just cut loose, but like every time I work with them, it’s like I’m making friends with these people. They’re fun people. Why is that?
Jack Butala: You know, it’s like a sales person, but without the pressure.
Jill DeWit: Oh, that’s it.
Jack Butala: They talk to people all day long. They really control these deals.
Jill DeWit: They do.
Jack Butala: I’ve met a lot of real estate agents who have no idea how to close a transaction, and they’re seasoned real estate agents. Commercial brokers are famous for not knowing how real estate works at all.
Jill DeWit: All they know is they have a guy that will sell for this, and this guy will buy for that. I put it together.
Jack Butala: That’s it.
Jill DeWit: There you go.
Jack Butala: They put the deal together …
Jill DeWit: I’m out.
Jack Butala: … and wait for a check because escrow and the attorneys do all the work.
Jill DeWit: Right. That’s so funny, but am I right. Have you ever?
Jack Butala: No the best employees I’ve ever had are hands down are former escrow title people.
Jill DeWit: Right and they’re used to being efficient.
Jack Butala: They’re organized. They can do three things at once. It’s weird to watch. They can like talk on the phone and type a letter to someone else.
Jill DeWit: I wonder if there’s a special title escrow school that they all go to. Where do they come from?
Jack Butala: You know, I looked into that one time. I said, “what are the … in Arizona anyway, what are the requirements to be a title agent?” And zero.
Jill DeWit: Really?
Jack Butala: Yeah and I’ll tell you this, they do not make a very good living.
Jill DeWit: Oh man.
Jack Butala: And this is a few years ago. So I don’t know now.
Jill DeWit: That’s interesting, huh.
Jack Butala: They earn their money, I mean, and I’ll tell you, it’s a situation like we talk about this in the program and over a lot of podcasts and at shows I’ve said, take those people to lunch.
Jill DeWit: Right
Jack Butala: Actually I did a blog that screams out take them to lunch. Forget about your real estate agent. Take your title person to lunch.
Jill DeWit: Yes.
Jack Butala: Send them some cookies. You know.
Jill DeWit: Definitely, yeah, I should do that. That gal that we really like that we’re working with right now, and it’s nice to that some of them when you find a good one they can do deals all over for you which is nice. It doesn’t have to be that county.
Jack Butala: Yeah, they charge for that so in the end, I mean, but it’s just a single point of contact for you. So for years I used a northern Arizona title, and I would still use her now, but she’s just retired, but I would call her. She’d charge a couple hundred bucks to manage the, even if we were buying at Nevada, she would call that local little title agency there.
Jill DeWit: Oh that’s right.
Jack Butala: She would charge one or two hundred dollars a deal.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: I mean that’s the whole thing.
Jill DeWit: She’d handle it.
Jack Butala: Yeah, it was great.
Jill DeWit: That’s so nice. See what I’m saying.
Jack Butala: All right. It’s almost like twenty minutes in. Let’s talk about something else.
Jill DeWit: Oh, [crosstalk 00:18:39] we’re done.
Jack Butala: I don’t know let’s talk about …
Jill DeWit: How was your day?
Jack Butala: It was great. We talked about it a little bit. I’m having, we’re busy as heck, but hey, don’t remember a more profitable time.
Jill DeWit: Yes.
Jack Butala: I don’t remember doing more real estate deals. Being more organized and the feedback and the success that Land Academy members are getting, and this is not a plug, it’s just staggering.
Jill DeWit: Mm-hmm (affirmative). We are three weeks into January right now, and I am so darn exciting I cannot tell you.
Everybody is on the right track I think, and I mean not just us, but I mean our members. They’re so far ahead of the game, I think, way ahead of the game. When I’m seeing results in like sixty and ninety days out of some of our members I’m just kind of blown away.
Jack Butala: Me too.
Jill DeWit: And I’m also excited about the programs that we’ve got coming up that we’re going to release and the website changes that are coming. It’s like I’m getting impatient. A website taking a month for me right now is to slow.
Jack Butala: Oh man.
Jill DeWit: I’m like, I want it tomorrow.
Jack Butala: Welcome to my world.
Jill DeWit: I know. So it’s funny. It’s good.
Jack Butala: No, we’re releasing a data package coupled with a printing package for our members to send out mailers the way that we do. Right now what happens is we refer them to a data source. Lots of members, hundreds of members. We refer them to a data source, and then they go out on their own. They do the deal with the data, and then on their own they go find a printer.
We decided to solve that whole problem for them and actually we are now a licensed seller of that actual same data, and we cut a smoking deal because as a group we’re sending hundreds and hundreds and thousands of letters out every week, I mean every month. So we got us just an unbelievable rate for everybody. Cheaper than a stamp. It’s literally cheaper than a stamp.
Jill DeWit: That’s awesome.
Jack Butala: To get the whole thing done so you never have to lick an envelope or even touch a piece of paper. So we’ve got just an overwhelming response in a positive way, you know, where do I sign response.
Jill DeWit: Mm-hmm (affirmative) yeah.
Jack Butala: That get’s released February first and get some sleep now Jill.
Jill DeWit: I know, it’s going to be awesome. It’s going to be awesome and it’s going to be automated.
Jack Butala: Yeah. Yeah, that’s good. Nice.
Jill DeWit: That’s going to be nice.
Jack Butala: Plus, a lot of members are asking us, “Can you provide this program? Can you provide … ?” And the answer is, “Yes.” They’re all coming. It’s just I love when existing customers love it, and they’re telling you they want like an extended version or it’s great.
Jill DeWit: Yep.
Jack Butala: Hey, join us in another episode where Jill and I discuss your all important success in land investment and in life.
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