Cloudy Title Drama (LA 1421)
Cloudy Title Drama (LA 1421)
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 DeWit, broadcasting from sunny Southern Arizona.
Steven Butala:
Today Jill and I talk about cloudy title drama.
Jill DeWit:
What the heck? All right. This, like yesterday’s topic, came from our staff.
Steven Butala:
From our customer service staff.
Jill DeWit:
Our customers, actually. Because this comes up a lot. And I want to say, to quote you, Jack, “Everyone, everyone, everyone.” There’s things to get worked up about and things not to get worked up about, and this is not a thing to get worked up about, and a lot of people do. So that’s the whole point here, it’s like, “Oh my gosh, how do I uncover this?” It manifests into this big problem and it doesn’t have to be that big of a problem. So we’re going to talk a minute about the drama. Are you a drama person? Because that could be part of the problem there, number one, but we’ll tackle that.
Steven Butala:
Oh, that was right in my whole talk today.
Jill DeWit:
What other drama is in your life?
Steven Butala:
The cloud on the title is not really the problem.
Jill DeWit:
That’s not the problem, exactly. It’s the problem right now, but it’s not the problem. Number two, we’re going to talk to you about, okay, what’s really important here? And then number three, I have solutions for you.
Steven Butala:
Before we get into it, let’s take a … I was going to start down the path of defining a chain of title, but we’ll do it in a minute. 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, and additionally, if you’re a member, join us on Discord as a Land Academy member.
Jill DeWit:
For a lot of more exciting chat. All right, Dave wrote, “Two times now I’ve downloaded a bunch of what was supposed to be vacant land data from DataTree only to find out that 25 to 35% of records are actually the owners’ residence and are not in fact vacant. What the heck am I doing wrong? This is super frustrating. Anyone else having this problem, or better yet, know what I need to do to avoid this?
Steven Butala:
Sure, I’m happy to help. 25 to 35% of a data download that you end up not using the data is not that bad. If you would download 10,000 records and you end up using eight or 7,500 of them, you’re going to scrub that stuff out because … And there’s, that I know of, no way to really avoid it. In this case specifically, if you’re getting data records that are residences with vertical construction on it, it’s happening because … And this is all in education. So Dave, I hope you remember. I’m not sure if you are, but if you go through all the education, Land Academy 1.0 and 2.0, it’s in all in there about how to do this. And again, that’s what Discord is for. And I think I actually pulled this question off of Discord.
Anyway, there’s two or three or four or five ways to make sure you don’t get property that have vertical structures on it and that’s through … Every single property should have two types of assessments so that the assessor can tell the treasurer how much taxes, real estate taxes, to charge every year. The land value and the vertical value, or the improvement value is what it’s called. If the improvement value is zero, then you know it’s a piece of land. The problem is that not every … There’s no universal way to book data from assessor to assess her. You can imagine, an assessor in Arkansas that hasn’t yet computerized their operation in 2021 versus an assessor in let’s say Silicon Valley where computers were actually created. There’s going to be a pretty substantial difference between how they contribute that data.
So the answer is to be redundant. There’s vertical assessment percentages that need to be zero. There’s vertical or improvement assessed values that need to be zero. And in some strange cases, this is totally solvable, Dave. In some weird cases, you can even say, “I want zero bedrooms,” and that will trigger it to never get a structure. Or you can do all these things. But what you got to do to avoid this in any case is download a small data set and you can see data before you actually pay for a data download. Here’s what you don’t … Here’s the great news. Don’t stress about data. Data’s cheap, it’s incredibly inexpensive. What’s really expensive is letting it get to your mailer and now you’re paying postage on it.
Jill DeWit:
I was going to say that, that was my big point too. I have one quick question. You brought this up a couple of times, I want to make sure I’m not missing it. Vertical’s not going to be in there. You’re using that as an example.
Steven Butala:
Yeah, I’m sorry.
Jill DeWit:
Okay, good. Don’t go looking for vertical zero, it’s not there. Improvement is.
Steven Butala:
Yeah, I’m sorry. Vertical is slang, real estate slang for improvement value.
Jill DeWit:
Thank you. I knew what you meant.
Steven Butala:
I know. Because you and I slang each other.
Jill DeWit:
Hello. Wow. Oh, that’s good.
Steven Butala:
You like that?
Jill DeWit:
I like that, that was nice. Yeah, I’m not going to say anything more on that right now. There’s a lot that I can say but we’re just going to leave it at that. Wow, there’s stuff I could really say.
Steven Butala:
Just say it.
Jill DeWit:
And sometimes it hurts.
Steven Butala:
You’re doing it right [inaudible 00:05:46].
Jill DeWit:
Exactly. Oh my gosh, I can’t believe … Woo. So the good news is that that was code. And I know that went over every child’s head and probably some grown-ups too.
Steven Butala:
What’s slang?
Jill DeWit:
Mommy and daddy do you slang each other? Why does it hurt?
Steven Butala:
Oh, Jill.
Jill DeWit:
Oh, that’s good. All right. Where were we?
Steven Butala:
Today’s topic, cloudy title drama. This is the meat of the show.
Jill DeWit:
We need that going into this topic.
Steven Butala:
Yeah.
Jill DeWit:
Okay, so here’s the deal. I have three points. Do you want me to do point by point and you sharing or you want me to get my three out of the way and then you can …
Steven Butala:
Let’s just let me explain please just what the chain of title is and then you can do your whole thing.
Jill DeWit:
Okay.
Steven Butala:
Every single property, theoretically, every property that you’ll ever deal with has a chain of title. So today-
Jill DeWit:
Like a car.
Steven Butala:
Yeah, it’s like every owner of a car. It’s just a record of ownership, that’s all, it’s a fancy word for records of ownership and how it was conveyed. So back in the homesteading times in the 1700s and 1800s, mostly 1800s, if you’ve ever heard of The Great Land Grab, that’s what this is. The federal government got the bright idea to take all the property that they took over. As controversial as that may be, they came in and said, “We own the United States now. We’re going to allocate some of it to the Bureau of Land Management, some of it to the states, some of it to the municipalities.” And the rest is what was called private land and they sectioned it off into 640 acre properties, which is a one square mile.
And they said for $10 an acre, and in some cases for a dollar an acre, or in some cases, and this is what usually ends up in the movies, you go there and put a fence around it and start working it you can have it. And in exchange for that, “We’re going start charging you taxes every year.” And they built the country on that, on property tax revenue. There were no … This is just another interesting, it’s interesting to me, there was no such thing as payroll taxes until World War II, they needed it to fund the war. It was all property taxes. So from the homesteading time …
Jill DeWit:
You’re going to get your history lessons out of the way today as well as learn something about land. Take it away, professor.
Steven Butala:
So the first person that homesteaded … So Farmer John homesteads 640 acres, he’s the first owner. He sectioned some of it off to his sister-in-law, his brother-in-law. He has three daughters and three sons. He gives kids all land. And that sends off, fast forward to 2021, whoever owns that property now in whatever state that it’s in, each one of those properties has a history like that, and that’s called the chain of title. What happens is it doesn’t get conveyed properly. So you can imagine that back in the day, it was just courthouses would burn down and nobody knew who owned anything. There were obviously no computers, it was just all on paper. So when that happened in last century, in the 20th century, things and events and the way that people conveyed title started to get cloudy. And thus, the need for title insurance, because that would insure against courthouses burning down or incorrectly-
Jill DeWit:
Conveying.
Steven Butala:
… conveying the thing. So that’s the philosophical academic, we got that out of the way, Jill’s right. What, in reality, what really happens Jill?
Jill DeWit:
Well, there was a little drama there, and thank you very much. That’s not what the show is about, by the way. I’m just teasing you. So here’s what happens. So sometimes it might’ve been a quick claim and then things didn’t get recorded and somebody else inherited it and they transferred it wrong and they were paying the taxes and now it comes to you. And you’re trying to buy this property, and you’re going back and looking back and making sure it was done correctly. Use it because you’re going to need title insurance and you’re doing your job, by the way, just making sure they’ve got you talking to the right guy that really own it, looking back. And maybe somebody wants to build on it, maybe you’re thinking about as an investor. I’m thinking about what my buyer’s going to do with it, and I want to make sure like, “Oh, this is a dreamy by the lake retirement home property. I need to make sure it was done right, because whoever is going to buy this from me is going to build something awesome there.”
So what happens is I dig in a little bit and I realize, “Uh-oh, okay, who died?” And then what and who and how. And we can’t find the documents and we can’t find the people kind of thing. We just had to … Usually it’s people are dying along the way and it just wasn’t done correctly. That’s often not. Maybe he was trying to pull a fast one, just those kinds of things. And some people get all hung up on it. And some people dig a little too deep on it. Most title escrow companies, title agents, will go back, it’s usually 30 to 35 years, that’s usually the standard, how far back they go. So you don’t need to go back 100 years and to homestead time. That’s what I do at least when I’m starting to process too, I’m going to do this. And if I find something it’s not necessarily a deal killer.
So that’s where the cloudy title drama comes in. A lot of people are like, “Oh, well, shoot, I guess this isn’t going to work. That’s going to work. They didn’t do probate.” This needs to happen, that needs to happen. It’s not an automatic throw your arms up, kick it to the curb situation. So what’s really important? Do the best you can. If it’s easy for you, you’re just looking through … You want to look back … If the same guy’s owned it since 1955, I’m done.
Steven Butala:
You’re done, you’re all set.
Jill DeWit:
I’m done. I don’t have to look anymore than that.
Steven Butala:
And you’re talking to that person on the phone.
Jill DeWit:
He happens to still be alive, because he got it when he was 18. Great. And that happens. But the other situations you do need to make sure, before you move forward, you’re just making sure that, “My grandpa gave it to me. I think it was done … It’s mine. I have a copy of this, I have a copy of that.” Whatever it is, sometimes it’s even really clean and they just don’t know it. It’s joint tenants with rights of survivorship, and the guy says, “My wife passed,” and I’m saying, “I’m sorry. Actually it’s not hard to transfer title because you did join tenants, so this is going to be really easy and clean.” And they’re like, “Yay, I didn’t even know that,” kind of thing. So you need to do a little bit of looking to see what’s important. And you’ll learn as you go, this is not going to be Title 101 here. I want everybody just to calm down a little bit. Title 101 is another show, actually another week.
Steven Butala:
Can I make two points here really quickly?
Jill DeWit:
Yeah.
Steven Butala:
All issues with cloudy title are solvable.
Jill DeWit:
That’s what I was going to get to.
Steven Butala:
Okay, sorry, go ahead.
Jill DeWit:
Thank you for the segue.
Steven Butala:
Sorry.
Jill DeWit:
So then the point is don’t get worried about this yet, here are your solutions, okay? “It’s not easy, I know there’s some stuff in there. I really feel like I’m talking to the right people. They’ve got all kinds of documents, so I know it’s the family,” whatever. One, an escrow company, sometimes we, in our world, will self-close transactions. This would be a situation where I don’t. I need to make sure there’s enough money in the deal that I can afford to pay, I don’t know, eight, $1,200 depending on where the deal is, how big it is, to get title insurance and let them uncover it. And what I do is I help them out as best I can too. When I open escrow, I say, “This is as far as I got. I got this, this, this, this and this. Here’s this.” And they’ll take it from there, and they’ll undo it and they’ll make sure that it’s right. Even sometimes they have to go back and redo some documents. They’ll cover all that, that’s what you’re paying for. So there’s solution number one.
Number two, maybe it didn’t get probated or it needs a proper probate, which involves an attorney. So that’s something that … And that’s a conversation you’re going to have with your seller, by the way. Did you have an attorney when this happened? Do you still work with this attorney? Because maybe we can get this attorney, turn him back on, and get it real cheaply and quickly to handle one more document. They did everything but this one thing. They did the house, but not this piece of dirt over here. We can go back and do that, and the attorney can probably do it real quickly and easily. Or it might involve you getting involved. And this is going to be all you, all personal preference and really whatever you work out with your seller, because there’s going to be money involved there.
And then the last thing is you too, by the way. There’s two more points. Some of these things, as you get going and you get good and you become an investor and you’re doing deals, you might get to know some people or you just can make these calls. I’ve had situations that I knew weren’t that bad, but I didn’t know how to do it. I’ve called the county and said, “Who’s your favorite attorney in the area and does a lot of stuff for these people [inaudible 00:15:05].” “Oh, it’s Mr. King over on Main Street.” “Awesome.” Hang up, I call Mr. King on Main Street. And I’m calling him for two reasons. One, “Hey, can I get your inside information? Can you help with this? What needs to get done?” And often they’ll even say, “It’s this form, it’s one form. Record it with this and this before you do the deed and you’re good to go.” Like, “Oh, thank you.” And they will sometimes give you free, at least for me, sometimes give you free advice that you can handle it yourself. So number three, you could try something yourself as you get going.
And then the last solution is, and this still happens to me right now as I’m sitting here today, there are some that I don’t want to do. There are some that eventually are just too much time, too much money.
Steven Butala:
Or money.
Jill DeWit:
Exactly. Now it’s like the deal’s not worth it. And especially if you’re buying a one to $2,000 property to sell it for four or five. Are you going to pay $1,000 on attorney fees and wait six months? No. I don’t want you to, your time is worth more than that. You can do three more deals or five more deals or 50 more deals in that time and not worry about that one.
Steven Butala:
When there is a cloudy title situation, the key to achieving getting title insurance is having a compliant seller. We just walked away from a deal where we would’ve made half a million bucks. And the seller was so angry.
Jill DeWit:
Angry.
Steven Butala:
Angry. And I don’t know why. He was a lot older than most of the people we buy property from and just really frustrated and angry. He would refuse to sign the affidavits, then that would’ve been fine. If he would just sign the affidavits and done a couple of other things. All he had to do is meet somebody at a coffee shop or at his house, a notary, and sign all this stuff that we asked him to sign and we would send him a check. But he just couldn’t … Seller compliance is mandatory.
Jill DeWit:
You know what I think it was? There’s two things. One, he might’ve been slanged in a while. Might need to get a good slanging. Sorry, had to get that back in there.
Steven Butala:
We’re going to get our hands slapped on on iTunes for our G rating.
Jill DeWit:
No. And the other thing was, honestly what I think what was going on with this guy, I think he was embarrassed. I think at the end of the day he was acting as his own attorney and really thought he knew how to do these transactions when people pass and doing this and doing that. And he actually made himself a little mess. And so we were undoing the mess and it just got to be too much.
Steven Butala:
It was a lot of talking.
Jill DeWit:
It was a lot of talking. And that’s okay, that’s all right. So I hope this calms you all down.
Steven Butala:
[inaudible 00:17:56] too.
Jill DeWit:
If you have any more questions hit us up at landinvestors.com, because I like putting questions there because everybody can see it. Even Discord, if you’re a member, you can see Discord, but for everybody else you can see it at Land Investors. Happy to help, because I know this, when you come across a title issue, these are some of the things that just don’t make sense to a lot of people, and happy to help you. Happy to clarify and get you there.
Steven Butala:
Yep.
Jill DeWit:
Thank you for joining us today. You can find us five days a week right here on the Land Academy Show.
Steven Butala:
Tomorrow the episode on the Land Academy Show is called DataTree versus TitlePro versus RealQuest Pro. Those are the three places where you get data, three best places. You are not alone in your real estate ambition.
Jill DeWit:
So the slanging, we need to stop it, you think?
Steven Butala:
It’s interesting … No, I think it’s okay.
Jill DeWit:
Who’s going to pick up on that word?
Steven Butala:
I think it’s fine. It’s interesting that we have to take these topics. It’s challenging for Jill and I to take these topics that can be pretty boring and make them funny.
Jill DeWit:
Well, sometimes it’s-
Steven Butala:
Or make it just bearable.
Jill DeWit:
Well, here’s the other thing. I mean, if you’re having … It’s painful for me when I have title issues, like I just told you. We had spent 50 something days with this guy too. Now thank goodness it wasn’t me spending 50 something days and it was not my team doing it full-time 50 something days, that would have killed me. But it was we’d talk and have to wait a couple days while title would work on something. Talk, wait a couple of days while title would work on something. It was that kind of a thing, and it really does stink for me too, when we have to say whatever and we’re out. And it’s not you, don’t worry about it. Just doing it, open the next envelope, send out some more mail and open the next envelope, it’s the best thing I can say.
Steven Butala:
There’s a company in Orange County called Tax Title Services. Actually this is a prelude to tomorrow. DataTree, TitlePro and Real Quest Pro are all in some way in Irvine, California, which is where this company called Tax Title Services that specializes and they charge for it. But they specialize in these tougher … And they will issue you a title insurance policy, I’m hearing. We haven’t used them ourselves because we haven’t had to, but I’m hearing members all over our group say, “This is the greatest way to get title insurance on let’s say property that you foreclosed on a lien foreclosure, a tax lien or tax deed property, or these tougher title properties.”
Jill DeWit:
Thanks. If you need access to any sort of ownership or property details, including phone numbers and FEMA flood zone overlays, check out neighborscoop.com, created by investors, that’s us, for investors, that’s you.
Steven Butala:
We are Steve and Jill.
Jill DeWit:
We are Steve and Jill.
Steven Butala:
Information …
Jill DeWit:
And inspiration …
Steven Butala:
To buy undervalued property.
—————————————-
If you have any questions or comments, please feel free to email me directly at steven@BuWit.com.
The BuWit Family of Companies include:
I would like to think it’s entertaining and informative and in the end profitable.
And finally, don’t forget to subscribe to the show on Apple Podcasts.
