What is Title Insurance (995)
What is Title Insurance (995)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hello.
Steven Butala: Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit: And I’m Jill DeWitt, broadcasting from sunny Southern California.
Steven Butala: Today, Jill and I talk about what is title insurance?
Jill DeWit: Oh. We’ve all wondered that.
Steven Butala: We have. The further you get into your career, the more you wonder, “Do I really need this title insurance?”
Jill DeWit: The more you read the exceptions, you wonder, “What is … just what is title insurance?”
Steven Butala: We’ll cover all that. We promise to make this not boring.
Jill DeWit: All right.
Steven Butala: Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community, it’s free.
Jill DeWit: Jeremy wrote, “I’m working on gathering data and deciding where to send my first mailer. My plan is to mail three counties with 500 to 600 mailers per county, for a total of 1,500 to 1,800 on mailers going out.”.
Steven Butala: So far so good.
Jill DeWit: Right, “However, I have a few questions that hopefully someone can help me with. A couple of counties I’m looking at have a large difference in population density from one part of the county to another part of the county. I thought about sorting by zip code, but the undeveloped land doesn’t have a zip code or address assigned. How do I only send mail to the less densely populated portion of the county? How are you pricing counties that do not have a lot of data? I’m looking at several counties, where the total number of properties in the county is less than 10,000. I know these counties fairly well, and I know who my end users likely to be, hunters and timber investors. But, with anywhere from 50 to 100 total listings on land and farm, I’m only seeing 5 to 10 properties on land watch, and similar websites in the Anchorage range I’m looking at sending my mailers to.
Jill DeWit: Do I just base my price off these listings? Or, is there another way people are pricing these areas? Are people just avoiding these counties due to such limited data? Lastly, has anyone had success with subdivision lots in Florida, where there are infrastructures such as roads in place, but the subdivision’s still considered rural in the outskirts of the city? I see a lot of these listed on Zillow, and several have sold on eBay for $1,500 to $2,000. However, at those prices it seems like the profit margin is thin after you pay for the data, mailers, etc, even if you’re buying at $300 a lot.
Jill DeWit: Thank you for any guidance you can provide.”
Jill DeWit: One of our members, Kevin, already piped in. I’m going to read Kevin’s answer here too.Kevin Farrell wrote, “Jeremy, all good questions.”
Steven Butala: Really good questions.
Jill DeWit: Yeah. “I would not worry about population density differences within the county.”
Steven Butala: Neither would I.
Jill DeWit: “Send mail to all the properties in the county that meet your criteria. For example, all the ten acre vacant parcels. Some mail will go to the more expensive areas, no problem. If someone with more valuable land excepts your offer, then you get a better deal.”
Steven Butala: That’s it.
Jill DeWit: Exactly. “Price should be derived from the lowest comps in that county.”
Steven Butala: He’s right again.
Jill DeWit: Yeah. I wonder where he learned it? “That way, you won’t have offers that are too high for the lowest value land. You can do the rural subdivision deals if you plan on doing some volume. You could try a few deals, see how they go, and then go back and buy all you can at a low price, then you’re all right. The margins are thin. These have to be all cash deals of buying and selling.”.
Jill DeWit: This is a perfect discussion today with the title insurance.
Steven Butala: This is a fantastic question by this person. I think their name’s Jeremy.
Jill DeWit: Mm-hmm (affirmative).
Steven Butala: I’ve said this many times on the show before, I’ll say it again. You can tell when someone’s going to do really well with this.
Steven Butala: So, that first mailer, there’s a lot of angst, you know? He’s asking a ton of questions, and believe me, you’re not going to get it all right at the first mailer, you’re just not. What applies, let’s say in Ohio, doesn’t apply in Florida. That’s just how it is. You’ve got to kind of feel your way through it, and get through it, and get the response.
Steven Butala: But, Kevin’s right. The more mail you send out at the bottom of the first rural, vacant land, anyway, for the bottom pricing, comparison pricing, that’s all you got to do. You’ll forget about this… that you ever wrote this question, and you’ll just be dealing with the inflow of signed offers and what happens. Great questions.
Jill DeWit: I like his strategy too, that you’re thinking about areas that you know. You already know who your buyers are, like, thank you. That’s half the battle. You know, like Steven always says, “We work it backwards.”
Jill DeWit: You’re already thinking about who’s going to buy it, what are they looking for, I know the area myself, probably better than anybody in this crew, now all I gotta do is back into, what am I pricing my offers at to get the results I want? That’s perfect.
Steven Butala: Lastly, you mentioned Ebay. Jeremy, he mentioned Ebay. Ebay’s a good place to sell property, but here’s how, in my opinion, how it goes in a fantastic manner on Ebay. Somebody eventually is going to call you back on this mailer, and they’re going to say, “You know what? I’ve a 150 properties in this one area, I bought ’em like six years ago, I’m not going to do anything with them. If you want to take them off my hands for a couple hundred bucks each, that’d be fine. Tell me how you want to do the detail.”
Steven Butala: Now you’re 200 bucks into a property, and you’re going to charge doc prep fee on Ebay, which is two or three hundred dollars per unit, and so your cost is so low, and they’re so consistent, and you run ’em at an auction, and let’s say you make four, five hundred bucks an auction. That’s what you want to do. Ebay’s not a place to retire, financially. Ebay’s a place for a very certain type of asset. Some people in our group seek these assets out only. That’s all they want to buy, is two or three hundred dollar property, and resell it on Ebay.
Steven Butala: Go on Ebay and take a look around. You’ll see us, first of all, but you will see very consistent sellers and consistent product types. You can make that work. We sold a lot of property on Ebay over the years. Not so much anymore, but…
Jill DeWit: For the right dollar amount, that was the thing. Back then, it was a lot of smaller dollar amount transactions-
Steven Butala: Nothing wrong with that.
Jill DeWit: …and that’s perfect for that. And, you know you’re going to load ’em. Someone’s going to buy ’em. That’s the best part with Ebay. You don’t have to sit and stare at it. You know at 30 days, it’s going to close, there will be a buyer.
Jill DeWit: These higher dollar amount ones, we don’t do them on Ebay, because it’s just a whole different community now.
Steven Butala: Today’s topic.
Steven Butala: Before I get into that at all, the whole thing here is to buy cheap property. You’re about to do that. Just get that thing in the mail, and I’m sure it’s going to be fine.
Steven Butala: Today’s topic: what is title insurance? This is the meat of the show. I’m going to describe the definition of title insurance and Jill’s going to make this interesting.
Steven Butala: Title insurance insures against, it’s an insurance policy against defects or clouds in the chain of title. All properties, just for sake of argument, please don’t send me emails of the exceptions of this statement that I’m about to say. All properties, were subdivided or broken up by the federal government in the 1700 and 1800s for one purpose. They would give the properties away, or sell it for $5 an acre, literally, for one purpose: so they can tax you, as the new owner, and create a revenue stream forever.
Steven Butala: Now you have this subdivided property, there’s movies all about this stuff, actually really interesting, I think. Now you have all this subdivided property all over the country, and now you have all this money coming in, so, “Hey, let’s start a country! Why not? Let’s put some county officials in place, so they can collect the taxes efficiently,” and all of that. That’s what homesteading is. From the day that property is homesteaded, all the way to today, literally today, there’s a chain of title. Jeremiah bought it, sold it to his nephew, his nephew passed away and deeded it to his son before he passed away, and on and on and on. That whole thing, right up to the conversation you’re having with the person who’s about to sell it to you, is a chain of title. If it’s very clean from those people and it’s unbroken and there’s no clouds on it, there’s no defects, then theoretically you wouldn’t need title insurance.
Steven Butala: That’s what title insurance insures against, because you can imagine how complicated it would be to follow the chain of title all the way back to the homestead.
Jill DeWit: A cloud and a defect might be names don’t line up, there might be one missing somewhere in there, or somebody passed on and they didn’t deed it correctly. That’s kind of a cloud, and they have to go back and fix it, solve it, make sure it was done correctly. That’s really the point of this too. They want to make sure-
Steven Butala: That’s why I hire an escrow agent, a title agent.
Jill DeWit: Right. You do that because you want to make sure that the person you’re buying it from really is the owner and it was all transferred correctly. We talk this in the Land Academy; Cash Flow From Land program. We’re so picky, that I want to make sure that when I’m transferring a title, if it’s misspelled by when it got to me, I’m not going to fix the spelling here, I’m going to make it exactly how it was so there’s no cloud or no issue with the title.
Steven Butala: Here’s some helpful tips about title insurance and what you need to know about chain of title.
Steven Butala: In general, for rural, vacant land, the issues that occur in the chain of title are regarding dead people, and dead people can’t complain. If I buy property, if I buy a hundred acre property-
Jill DeWit: I don’t know, my mom is going to find a way.
Jill DeWit: I’m sorry, I disagree with that statement. She’s alive, she’s healthy, alive, and happy, but, I don’t know.
Steven Butala: Here’s the worst case scenario-
Jill DeWit: Theoretically.
Steven Butala: You buy a piece of property, I sell a piece of property to Jill for $20,000 and she knows something about that property that I don’t. This happens to us. She knows that it’s the perfect place to put an airport. This is a true story, this happened to us. She wants to get the deal done, she buys it from us, we deed it… She buys it from me, I deed it to her, and she goes and sells it to a company, like an airport company. They hire a title insurance company and they go back through the chain, because they’re about to spend-
Jill DeWit: Big bucks.
Steven Butala: Tens of millions of dollars, if not more, to put in a regional, little airport, and they needed to make sure there’s no defects in the title, and so is the lender. It’s not so much the people that’re doing the airport, it’s the lender that really demands title insurance. That is really what this is all about. Building or lending on the property, you tend to want, really, a safety net, and that’s title insurance is supposed to provide.
Jill DeWit: You’re basically hiring an unrelated third party to go back and do all the homework and check it all. That’s it. If they find something, their job is to go fix it. Their job is to go, if there’s a little hiccup, and something was not deeded correctly, they will go to that person-
Steven Butala: They’ll call ’em.
Jill DeWit: …and say, “Hey, when you did this transaction in 1982 with this person, it was not done correctly. Thank goodness you’re still alive, I’m going to send you a form, can you please print it out, have it notarized, and sent back to me, and it will take care of it.”
Jill DeWit: That’s what they’re doing. Then they’ll make it perfect for you.
Steven Butala: There’s tons and tons of little examples, many of which Jill and I have experienced since the ’90s, so I feel qualified to talk about this topic. Some of them are really important. Some of them are not. Do you really need to go back to 1872? What can happen, and does happen, is that airport gets built, and somebody from 1971 says, “That’s my property. What are you guys doing building on my property? I paid the taxes. I didn’t, this isn’t right. Some procedural thing, you shouldn’t have ended up with this property and, in fact, I’m going to sue you.”
Steven Butala: That’s what title insurance is supposed to smoke out before construction ever starts, your transactions ever start, or anything that’s going to create equity. These things happen. I just read recently that a vast majority of these cases get settled. It’s all because, and Jill’s going to love this, they just get settled. “Here’s $10,000, please stop it.”
Steven Butala: If you really look at these title policies and really read them. If you listen to our show at all, we’ve talked about this a million times. They insure against very, very little, if that.
Jill DeWit: It’s kind of funny. I know. That’s a whole ‘nother show.
Steven Butala: But, lenders love ’em. In fact, they require them. If you ask a typical lender why they need title insurance, they’ll say, “What’re you talking about? Why do I need title insurance? Why would you ever buy a piece of property without title insurance?” But, we know better in this group.
Steven Butala: There’s a lot of reasons why you should buy property without insurance, I think.
Steven Butala: We know your times valuable. Thanks for spending some of it with us today.
Jill DeWit: Join us tomorrow for an episode with member Andy Barnhart, and he shares his Land Academy success stories. And, we answer your questions. Post it in our online community, landinvestors.com. It is free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: Hey, you know what? House Academy is live, by the way, just so you know. Just plugging it, just letting you know.
Steven Butala: It’s live today?
Jill DeWit: It’s been live, I’m just sharing it right now. If you’re listening to this show, and you’re here because you heard about House Academy, just so you know, the Land Academy members have it. But, sit tight, in days, it’s coming this month. I’m just going to leave it at that.
Jill DeWit: If you want to get in early, by the way, go check out Land Academy and reach out to my team, and there’s a way you can get added early.
Steven Butala: We’ve been in beta for a while on the site. We made it available to Land Academy members only, and it has been wildly successful, to say the least. I’m not here to sell anything, I’m really not, but when we produce these programs, and people respond very well to them, and they start to say things, “Boy, this is going to change my life again!”, that’s why we do this.
Jill DeWit: I know.
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Steven Butala: We are Steve and Jill [crosstalk 00:15:19].
Jill DeWit: We are Steve and Jill.
Steven Butala: Information-
Jill DeWit: …and inspiration-
Steven Butala: …to buy undervalued property.
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