Infill Lots and Title Insurance (LA 1060)
Infill Lots and Title Insurance (LA 1060)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Good day.
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 infill lots and title insurance.
Jill DeWit: For somebody, this is a great show. For some people, other people, for the people in the… This is when… If you’re driving around right now because your kids need to fall asleep, this is perfect. Just be careful because you might fall asleep.
Steven Butala: I can make it real quick if you want.
Jill DeWit: No, this is good. I know there are plenty of people who sought out this show because they’re like, “I need to know.”
Steven Butala: Oh, yeah.
Jill DeWit: Exactly.
Steven Butala: Because they need to know. Here’s the thing so I’ll get right to it. This is a condensed version, in case you’re putting the kids to bed.
Jill DeWit: And you don’t need to listen after this.
Steven Butala: Infill lots, by very definition are lots that are, they’re infill lots in a subdivision where there is already houses or structures and some stuff going on there already. Chances are utilities are available or close. And it’s financially advantageous for a builder to buy a lot from you and build a house on it or whatever they’re going to build. So you need title insurance. You can’t buy and should never buy, in my opinion, infill lots that are, with the intent of reselling them to somebody who’s going to improve the property, without title insurance. And so that could be the whole show there. This came up. You’ll see it in the question here in a second when Jill reads it and, well, we’ll talk about it a little bit further.
Jill DeWit: Great.
Steven Butala: So 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: Joe S. wrote, “I’ve done some reading online and somewhat know the difference between title insurance and title opinion. I’m wondering what other investors are using. Do you use an insurance after a certain dollar threshold has been met? Basically, I’m purchasing lots, anywhere from 7,000 to $20,000. A local attorney recommended using a title opinion on cash deals. Anyone have advice from personal experience? If not, what’s your business’s policies for closing with title and escrow? Thanks, guys.” This is very smart.
Steven Butala: This is a great question.
Jill DeWit: I like it.
Steven Butala: I haven’t had this question in years. Years and years and there’s a reason for that. Because I think a title opinion is silly.
Jill DeWit: I agree.
Steven Butala: I don’t think it’s silly, silly. I think in certain cases, you could order a title plant, form your own opinion, because I have Jill and she has a title opinion on every deal before it ever goes to get title insurance. So I’ll explain what the difference is here in a second. If you go onto LandInvestors.com and look this up, look up keyword title opinion. I have a link posted there in my response to this where somebody on the internet gives them really a description of exactly what the difference is between these two, almost without our opinion.
Jill DeWit: Right.
Steven Butala: We’re packed full of opinions on on this show. If you just want the facts that, go check that out. A title opinion is a lawyer typically who charges a lot per hour, probably 500 bucks, which really concerns me about this. Because I think this lawyer is selling their services to our member here. They go and look at what’s on the deed. Oh, John Smith is on the deed. Then they look, pull the vesting deed, which is the deed before this one. John Smith owns a property there. He’s owned it since 1958. Okay, that’s good. My title opinion… This is the lawyer speaking to himself in the mirror. “My title opinion of this is very, very good.”
Jill DeWit: You’re good to go.
Steven Butala: Here’s a $500 bill, please. That’s the title opinion. It’s a lawyer’s opinion of the condition of the title. So for commercial properties and stuff, it gets way more complicated than that. What a title agent or a title policy, they order sometimes, depending on the state, a title abstract, but they get a title plant and it looks back further than that and it looks at more things than that. And then once more, I’m not a big title insurance advocate, by the way.
Jill DeWit: Correct.
Steven Butala: Once more they go, if it meets their criteria, they write an insurance policy on it. Just the way the same person, same thing on your car or your house, and if something goes wrong within this stipulations of what they said there, they’re going to insure you against that. Is it really valid? Not that much, but I’ll tell you what the big difference is.
Jill DeWit: Is which one valid?
Steven Butala: Title insurance.
Jill DeWit: Okay. Thank you.
Steven Butala: There’s a lot of exceptions.
Jill DeWit: I was going to add to that, too.
Steven Butala: But I’ll tell you what the deal is with the title insurance, and this is not in the article’s opinion. This is our opinion. It’s what I said earlier. If you’re going to sell this property to somebody who’s going to use it, like a homeowner or a home builder or anything that has to do with potential lending scenario, because lenders demand a title insurance policy, for whatever reason. We could debate that all day, why they do it, but they do. And so we’ve gotten it to the point rather than spend academic time figuring this out, we’ve gotten it to the point where we’re paying four and $500 for a full blown title escrow insurance situation in Arizona right now. So you’d be better off to align yourself with a title insurance people and escrow people in where you’re buying real estate and get a good rate from them and then do what Jill does, which is a dual close. Can you explain that?
Jill DeWit: Yeah. Well, I was going to go back to a couple things in there, from the beginning.
Steven Butala: Okay. Sure. Sure.
Jill DeWit: So a title opinion, you can do your own opinion, like Steven said. It’s like it’s really nothing you can take to the bank or is really going to hold up in court. And I’m sure this attorney will have all that written in there. Like this is just an opinion, like a broker’s opinion. What I think the property is worth. You can’t quote me on that, but here’s what I think it’s going to sell for based on these factors. So, and then, and I’m sure the attorney will state where he looked and what he looked at and the documents that he pulled. Traditionally, title insurance, good ones, I mean, they go a little further and they usually go 35, 40 years back, depending on the company. Depending on the state. They have their own protocol as what they’ll do and they’ll dig up everything they can on the property. They will probably look for liens and things like that. So they go a little bit further traditionally. And that’s why. They’re going to go and they’re going to issue an insurance policy. But again, you have to read the fine print. It’s still against everything that they found. If you really look at title insurance policies, it’s so funny. They say, if I didn’t find it, we can’t insure against it. And I always go, well, wait a minute.
Steven Butala: That’s always cracked me up.
Jill DeWit: And I’m like, well, wait a minute, why am I paying you? But it is what it is. And we don’t need to debate this now because we could talk about this for a very long time. Anyway, so that’s the difference. And like Steven said, it’s just a blanket, feel good, extra step that lenders request. And, most of the time, require that you spend the extra money. It makes them feel good knowing somebody looked into the property and did the best that they could to confirm. And the only thing that you’re doing right now, by the way, is just confirming that the guy who’s selling you the property really owns it. You’re just confirming that you have all the details right. And it was transferred over the years the right way so there’s no surprises that you go build a house and find out six generations ago, it wasn’t transferred correctly or something like that. That’s what you’re making sure. And they really do own it. So.
Steven Butala: Yeah.
Jill DeWit: Now, when Steven mentioned a dual escrow, what we do is to save yourself some time and some money, especially if you’re an investor like we are. You’re not buying this property to hang onto it for 20 years. You’re buying this property to turn and sell it really fast. So I go into it that way with our title companies and say “Hi, I want to do… ” Sometimes they call it a bridge policy. I might say-
Steven Butala: Hold open.
Jill DeWit: Hold open policy.
Steven Butala: Lots of different words for it.
Jill DeWit: Things like that and I explain to them, “Here’s the deal. I’m buying it from you. I expect to come to you, hopefully, in a week to 30 days with a buyer all ready. So I want to pay a little bit extra on the front end to keep this policy basically on your desk. Keep it kind of half open.” They’re going to issue a full policy, but keep it there on the top of their desk is how I describe it. So when I come to you in 30 days with a buyer, you go, “Oh, hi, Jill. Here you are. You’re back. You have your buyer. Great. It’s already right here. There’s nothing more special than I need to do because nobody owned it since the time I issued you that policy. You’re the only guy right there in the middle, so now it’s going to go really fast as you sell it to this person.”
Jill DeWit: And they like it. We like it and then it saves so much money, too. So I use this as a huge advantage for my buyer when I say, “Hey, by the way… ” And I’ve done this with houses, it’s great. I’ve had buyers come to me and they’re traditionally investors and I say, “Not only can we close this really fast now, you’ve got cash, you’re ready to roll. Your closing costs are going to be less than $500.”
Steven Butala: Yeah.
Jill DeWit: “Because I did this hold open policy.” They’re like, “What?” So they’re saving money, too, and then we all win.
Steven Butala: Yep.
Jill DeWit: Thank you.
Steven Butala: I have nothing to add. I mean, if you’re going to buy property that’s on the higher end and it’s usable in a traditional sense, you need title insurance.
Jill DeWit: Yes. This is kind of funny. It’s pretty much describes the meat of the show. Is that what you were thinking?
Steven Butala: Yeah. Oh, did I not say that?
Jill DeWit: It’s okay.
Steven Butala: Oh, we’re in the topic.
Jill DeWit: We’re still in the question. We’re still answering the-
Steven Butala: Oh, my gosh.
Jill DeWit: It’s okay.
Steven Butala: Well, the question and topic are the same.
Jill DeWit: Exactly. So what does this have to do with infill lots?
Steven Butala: Well, infill lots, above all other land property types, in my opinion, are there with an intended use already. The use has already been assigned to the property. If it’s between two houses, there’s a pretty darn good chance that it’s going to be used to build a house on it. If you’re a real estate professional, you drive around, you see these industrial parks that are all developed out and you’ll see a sign that says build to suit on there and then the lot’s all ready to go for some type of warehouse or whatever it’s zoned for. Manufacturing. Can you imagine a manufacturing deal without title insurance policy? The lender would just laugh.
Jill DeWit: Exactly.
Steven Butala: In fact, what they’d do is go back through the chain and get one.
Jill DeWit: Call me when you have it.
Steven Butala: And there’s a question coming up later this week about that.
Jill DeWit: Yeah.
Steven Butala: So infill lots and title insurance go together. That’s the whole topic.
Jill DeWit: Even if your end buyer… I was just thinking. So like what you just said. Traditionally an infill lot is going to be built on. It’s one that’s just available for whatever reason. Maybe the person who was hanging on to it forever, who knows, to make some money out of it and now someone’s going to build on it. That’s because it fits. It’s right there in the neighborhood. You’re not going to put a park or something there. It’s that or nothing. But once in a while you have nothing. Like you’ll have people that do want to just expand their property. I remember, there’s often you find people buying adjacent property or property behind their homes because they want to expand just their footprint, have their whole yard be twice that size and just make sure no one’s going block their view. Something as simple as that. Even you just can’t go into it knowing that. So we do recommend getting title insurance that way you’re covered either way. So if you sell it to the neighbor who’s just doesn’t want it being in his view, he’ll sleep that much better knowing you did the title insurance for him and it’s all included in the sale.
Steven Butala: So if you’re buying five acres in northern, let’s say, Mojave County or way north Maine or some property that’s truly rural vacant land, someone’s probably going to use it to their benefit. Maybe for for hunting or just to say I own it and the whole thing costs 1000 bucks. Do you need title insurance? No, you don’t. And that’s where this whole question comes from. Do I need title insurance or do I just need an opinion, usually my own opinion, about whether this person can actually legally convey this property to me. I know it’s in the father’s name, but the son’s got it and it’s still the father’s name, but the dad’s supposed to sign it. That’s what this lawyer was talking about. That’s not going to pass a title opinion and you can do that yourself.
Jill DeWit: Right. I think it’s one of the things that’s kind of funny that with our members, once they get into it and they see how much data that we have at our fingertips, I’m often helping out my title agent. By the time I’m opening escrow, I have the vesting deed. I’ve done all my homework. Here you go, here you go, here you go. And they’re like, “You kind of did my job for me.” I’m like, “I know that, but A, I want to save you time. I want to get this done faster and B, I don’t want to open escrow without knowing it, because it’s right at my fingertips. I have it all.”
Steven Butala: If we sent them the transfer deed and a title plan from like DataTrace-
Jill DeWit: Right.
Steven Butala: … we would do like 98% of their job.
Jill DeWit: Exactly. What’s so funny is I don’t think that would change their procedure at all. Most of them are kind of old school and they have a checklist. Oh, boy. That’s a whole nother show.
Steven Butala: Hey, we know your time’s valuable. Thanks for spending some of it with us today. Join us next time for an episode called Member Travis Jenkins Tells Us Extremely Successful Land Academy Stories.
Jill DeWit: I want to say he talks about his hiring best practices and there was something else in there.
Steven Butala: He’s scaling from… He just joined us. He’s not that old of a member. He’s at 150,000 a net per month with six employees and he’s trying to scale to 1.5 million, I think, in six months.
Jill DeWit: By the end of the year, he says he’ll be at about a million a month. So, yep, it was-
Steven Butala: It was an extraordinary interview.
Jill DeWit: … a really good show. We had a good time. And we’re going to answer your questions posted on our online community found at LandInvestors.com. It is free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: I didn’t. I was going into that… Who knew I had that much to say about title insurance?
Steven Butala: I didn’t. You just saved me, though. I was all ready to… I had researched pulled up.
Jill DeWit: Yeah.
Steven Butala: And you did a better job than the research I did on Google.
Jill DeWit: Because I’m doing my own title insurance every single day.
Steven Butala: I know. I know you are.
Jill DeWit: I tell you, some day if we decide to circle back around. I know we talked about it, but some day it’s in the works. We’ll be doing it. Wherever you’re watching or wherever you are listening, please subscribe and rate us there.
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