Definition of Equitable Title in Real Estate (LA 1825)
Definition of Equitable Title in Real Estate (LA 1825)
Transcript:
Steven Jack Butala:
Steve and Jill here.
Jill K DeWit:
Hello.
Steven Jack Butala:
Welcome to the Land Academy Show, entertaining real estate investment talk. I’m Steven Jack Butala.
Jill K DeWit:
I’m Jill DeWit, broadcasting from the valley of the sun. What’s so funny?
Steven Jack Butala:
It’s funny.
Jill K DeWit:
We should change it. I’ll do you on the next one. Want to practice right now? I’m Jill Dewitt.
Steven Jack Butala:
I’m Steven Jack Butala.
Jill K DeWit:
Broadcasting?
Steven Jack Butala:
Yeah.
Jill K DeWit:
Well, [inaudible 00:00:31].
Steven Jack Butala:
I don’t how to say it.
Jill K DeWit:
I was going to let you imitate me.
Steven Jack Butala:
No, no, no. I don’t want to imitate you today.
Jill K DeWit:
Not today.
Steven Jack Butala:
Can’t do it on the fly.
Jill K DeWit:
Oh, great.
Steven Jack Butala:
I can only do it when you’re not expecting it in the form of making fun of you.
Jill K DeWit:
And this is fine too. I can take it. I told Corbin, I’m like, “Bring it. I had an older brother and my dad picking on me my whole life,, I can take it.”
Steven Jack Butala:
I know you can. Today, Jill and I talk about the definition of equitable title in real estate. It seems that there’s some confusion and I completely understand why. 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. Last year, a ton of members came to Joe and I frustrated about getting their first offer campaign out, or just frustrated in general with how long it takes to price mailers and do mailers in general, so we came up with a new product called Cod Concierge Data, where we do the mailer for you. We take the entire mailer out of your life and do it for you, except for the pricing, and we show you how to price [inaudible 00:01:49]
Jill K DeWit:
You pick the county, you pick the size, you pick what you want to do, and just say, “I need that data. I’ll be over here.”
Steven Jack Butala:
We have products and tools in the Land Academy environment for just about every issue that you come across in this buying and selling of land and land investment environment, short of actually doing the deal for you, which people, believe it or not, have asked us to do exactly.
Jill K DeWit:
Can I just give you some money? Call me when it’s doubled.
Steven Jack Butala:
Here’s 10,000, let me know when it’s 20. Someone said that to me.
Jill K DeWit:
Happens all the time.
Steven Jack Butala:
With a straight face.
Jill K DeWit:
Can I just give you some money?
Steven Jack Butala:
In social environment?
Jill K DeWit:
I’m like, “No, I don’t need your money and I’m not going to do all that work. I’m doing it with my money. I’m fine.” Michael wrote, “I have a property under contract. I got funding in place. I have a closing attorney to do all the due diligence required to close.” Interesting. “The attorney mailed the closing documents to the seller and then the seller refused to sign before the scheduled closing.” Huh? “He basically said he wants more money before signing any closing documents. Has anyone in this group experienced situation like this? What do you all do when a seller refuses to sign a closing at the last minute?”
Gosh, you know what? Sorry you had to experience that guy. That’s why on Monday we said we don’t want you to be that guy. Congratulations. Now you got the opposite of it. You got the seller saying, “No, I know I’d sell for 10. I meant 20.” Excuse me, I’ve done all this work, this other person’s done all this work. I have this lined up, that lined up, I may have already paid for pictures and got videos done and now you want more money. You know what? It doesn’t happen really often.
Steven Jack Butala:
This is a symptom of a personality disorder. If you’ve done this for any amount of time at all, this has happened to you. I don’t know if I can count on two hands how many times this has happened to us. And it probably happens to you, it never gets to me
Jill K DeWit:
No. Not this far along. Because let me back up and say they’ve signed a purchase agreement at this point so they do feel… Because here’s the thing. When they do this, they the sign purchase agreement, they’re running the risk that you’re going to go back on them and go, “And by the way, we all know why I’m an attorney closing this deal in this situation, so do you want me to have this attorney right now file something and maybe tie up your property, which I can do?” kind of thing.
Steven Jack Butala:
They could put a lien on it.
Jill K DeWit:
They could, because you and I have this agreement right now and you are now going back on what you have signed on the 90 yard line… Excuse me, five yard line. [inaudible 00:04:41] Wrong direction.
Steven Jack Butala:
That’s classic’s stuff, Jill. Jill’s a huge sports fan, by the way. Seriously. A serious sports fan.
Jill K DeWit:
Sorry. Wrong direction. Five yard line.
Steven Jack Butala:
What did you eat for breakfast then?
Jill K DeWit:
I don’t know. You think I’ve been drinking. It wasn’t vodka. But they’re now going, “I’m going to be that guy.” So here’s the deal, and could you do that? You could. Would I do that? No. So like Jack just said, it doesn’t happen very often. I would have another phone call with him and have a conversation like we all know that this is not the right thing to do and that’s not cool. I’ve done this, this, this, this and this, I’m not going to do it. I’m ready to go. I’m ready to hold up our end of the bargain and pay you as promised and I may have even wired the money, because we’re at the signing papers. I wired the money yesterday. It’s sitting there waiting for you. So are we going to do it or not kind of thing. But I wouldn’t and I wouldn’t go through it. I’m not going to go through the hassle. They probably know that too. Not going to go through the hassle of trying to sue them for this contract.
Steven Jack Butala:
Well, I disagree. I like Joe’s first try way.
Jill K DeWit:
That’s my first try.
Steven Jack Butala:
Having conversation with him.
Jill K DeWit:
And then if I have to, I walk away.
Steven Jack Butala:
This is my opinion. I believe that you have a legitimate lawsuit.
Jill K DeWit:
True.
Steven Jack Butala:
You already have a lawyer doing the deal. I think that maybe send a demand letter and say, “This is how this ends for you.” [inaudible 00:06:28] File a lien. I put this on today’s topic because I believe that you have an equitable interest in this piece of real estate, because you have signed documents everywhere that say we’re going to transfer for X amount of money hopefully within a certain amount of time.
Jill K DeWit:
And we’ve had three weeks of conversations that you…
Steven Jack Butala:
It’s too bad that you changed your mind, but you signed your name to this price and it ends like this for you. So we can do this now and you can get your money and we can all have happy a life or we can spend six months with all kinds of terrible legal stuff.
Jill K DeWit:
And I can tie it up so you can’t go sell it again.
Steven Jack Butala:
Then you can’t sell it ever.
Jill K DeWit:
Which would you choose?
Steven Jack Butala:
Once in a while, not often, you really need to play hardball. I hate that. We are not lawyers here.
Jill K DeWit:
It’s not me. I don’t like it.
Steven Jack Butala:
That’s right. We’re real estate investors trying to do mutually beneficial transactions.
Jill K DeWit:
Correct. Not make everybody’s life hard.
Steven Jack Butala:
I did a huge deal one time this happened right at the end. A huge deal.
Jill K DeWit:
I hate that guy. That name is in my head. If I ever run into that guy, look out.
Steven Jack Butala:
Today’s topic, the definition of equitable title in real estate. Like I said, this is the meat of the show. There’s some confusion and we’re going to solve it right now. Can we start with some definitions?
Jill K DeWit:
I will. The definition of equitable title is a beneficial interest in real property that gives the title holder the right to acquire legal title to the property. Equitable title holders cannot transfer legal title to real property, but they derive benefits from the properties appreciation and value.
Steven Jack Butala:
So this person, by that definition, has a equitable title. They don’t own it yet. When you own it, you have a legal title. You want to read the definition of that and then I’ll give some real good examples.
Jill K DeWit:
What is the legal title of a property? Absolute ownership of real property that is enforceable in a court of law. Legal title to real property is evidenced by a deed that is recorded in public record in the county where the property is located.
Steven Jack Butala:
What’s causing a confusion is this, and I understand why. There’s ways to take title in real estate. So if you buy a piece of property and the escrow agent, or you prepare the documents to transfer a title from one person’s name to the next, and you’re an individual, that’s how you take title. Steven, the grant, or XYZ company or XYZ person, the grants, to Jill K DeWit, an individual. And I usually say an individual resident of Arizona, so she took title as an individual. You could take title as an LLC, which is a limited liability corporation in fill in the blank state. That’s companies and that’s individuals. The questions arise when it’s two people or two companies and how do they take title. And if you’re a note taker, please memorize this.
Jill K DeWit:
I am.
Steven Jack Butala:
Take title as joint tenants with rights of survivorship, JTWROS it’s called. And don’t take title in any other way. Just trust me on this. There’s all kinds of stuff that happened that derived out of the 20th century about a married man and woman.
Jill K DeWit:
Tenants in common.
Steven Jack Butala:
Yeah. Joint tenants allows if Joe and I take a title to a property as joint tenants and I pass away, the moment I pass away, Joe owns 100% of the property. It’s not a taxable event. You don’t have to go through probate.
Jill K DeWit:
No questions asked.
Steven Jack Butala:
It’s over. [inaudible 00:10:30]. Well, just take title that way certainly for your primary resident. If you’re in estate planning, take in joint tenants. There’s all kinds of other ways. So that gets confused with equitable title. A great example of equitable title is if you’re familiar with tax liens, when somebody stops paying property taxes, you can buy those property taxes and then at some point foreclose on that property.
So the minute you buy a tax lien or you pay the property taxes for somebody else, because they stop paying, now you have a equitable tile. You can’t transfer the property, but you have an interest and you’re staring down the path to process for ownership in that property. And another fantastic example was the question today. We have a signed purchase agreement. We’ve got title documents done. The whole closing package is done. All I need to do is sign the closing documents and the deed to transfer the stuff and then I’m going to give you consideration, or money. That’s what equitable title is.
Jill K DeWit:
That was great.
Steven Jack Butala:
Here’s another great example, and there’s a lot of people that take advantage of this. What’s the definition of wholesaling out there? If you sign a document that says, “Jill hates this.”
Jill K DeWit:
I do.
Steven Jack Butala:
Actually I do too. She’s not wrong.
Jill K DeWit:
It’s given wholesaling a bad… Given that a bad wrap.
Steven Jack Butala:
We buy property, we invest in property and we resell it. We take title to it and resell it.
Jill K DeWit:
Let me pause for a moment, I want to emphasize that, because that’s what confuses the planet right now. Especially today, we’re going to do a Clubhouse later today and if you’ve ever heard us on Clubhouse, we get a lot of people that they’re just like, “What’s this land investing thing you guys are doing?” They show up and they’re confused by the fact that we actually buy the property. So we buy it, I put the money down, then my name’s on the deed, then I resell it. I’m not a middle guy running around with a signed contract trying to double close it. Thank you.
Steven Jack Butala:
That’s perfect segue. And some people do and many states are passing legislation now to make this not legal. You find a seller, they’re willing to sell it for $30,000. You don’t have the 30,000 or don’t want to spend it on it, you ask them to sign a purchase agreement, an assignable purchase agreement that allows you to go find a buyer for 50,000. You get the 50,000, you put it under contract and then you get to buy it. You take that $20,000 triage, which is some people call wholesaling. It’s an incorrect use of that word. I don’t know what it’s called, but you have equitable title. Now the more I think about the question today, the guy’s full blown equitable title and that’s actionable, legally actionable.
Jill K DeWit:
It really is. And that’s the thing, I can end it on this, back to the question, how much time do you want to spend? How much money you want to spend chasing down this person because of this deal? How much stress is it going to cause on your life? I would try to solve it, work it out together with a seller, but if it were me personally, and that’s how we’ve done in the past, then I walk away and just say, “Well, we’ll never work with you,” and trust that karma. Happy you could join us today. Five days a week, you can find us here on the Land Academy Show.
Steven Jack Butala:
Tomorrow’s Jack Thursday and I’m going to talk about where to start in real estate. You are not alone in your real estate ambition.
Jill K DeWit:
I like this.
Steven Jack Butala:
What do I do?
Jill K DeWit:
What do you mean what do I do?
Steven Jack Butala:
I want to be rich, I love the idea of real estate, maybe I should go buy a house and rent it out.
Jill K DeWit:
And get a bunch of roommates. I don’t know. Maybe that’s it. You want to fix it up first.
Steven Jack Butala:
Spend a lot of money on the house, spend a lot of money on the tenant improvements, and then rent it out.
Jill K DeWit:
Isn’t that it?
Steven Jack Butala:
And then you can get all that money you spent back $1,500 a month at a time.
Jill K DeWit:
Great. That’s hilarious. Oh, my gosh. Thank you for tuning in. As I mentioned earlier, we’re on Clubhouse. So as this airs, we are not on an on week, I will tell you, so here’s when you can find us. On the first and third Thursday of every month, Jack and I are live at one o’clock Pacific Time on Clubhouse in the Land Investing Club. You can go find us, follow us, or go to the Land Investing Club, follow that, follow both and join us.
Steven Jack Butala:
We just did a Land Academy calendar by the way. So if you go to our website, landacademy.com, you can see which Thursdays it falls and you can see when all of our stuff…
Jill K DeWit:
[inaudible 00:15:12] call.
Steven Jack Butala:
Everything.
Jill K DeWit:
Super cool.
Steven Jack Butala:
We are Jack and Jill. Information…
Jill K DeWit:
And inspiration…
Steven Jack Butala:
To buy undervalued property.
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