Rookie Rehabbing Questions

Hi All

I am going to begin doing rehabbing and I had some questions regarding puchasing/financing:

We most likely will have enough money to pay cash for both the home purchase price and for the rehab work. When paying cash for a property (which I’ve never done before), does the sale need to go through escrow like when there is a loan involved? If not, then is it still possible to have a title company do a title search for you. And what about title insurance (owner insurance)? How do you get title insurace if the sale does not take place through an escrow company? Is owner title insurance even necessary (recommended)?

We plan on flipping the property once rehab is complete.

I realize that these may seem like rookie questions, but that’s what I am when it comes to cash deals.

Any help would be appreciated.

Thanks a lot

I would close at a title company and have them do a search and issue title insurance. I would not meet at his house and give him the check over the kitchen table. I would still have my lawyer involved. He will probably have me set up an escrow account to make sure the deal is as it is presented. If I had enough cash to do the deal, then I would put 10% down on 10 deals and finance the rest. That is the beauty of leverage. Instead of controlling one $100k house, you now control a cool $1million worth of houses.

I buy my rentals for cash. Yes, absolutely use a title company or a real estate lawyer (I have used both but some states require a lawyer). I always get a title insurance policy – it will only take one claim to pay for all of the title insurance I’ve bought!

After I rehab, I do a cash-out refi based on the new appraisal…at this closing you will not have to repurchase owner’s title insurance becasue it would still be in your name.

For me the beauty of paying cash is that I can negotiate a much better price and can close in a week.


This is what I always do:

Buy for cash, repair and then refinance based on ARV. My tenants pay my mortgage plus (if that scenario won’t work out financially, the property isn’t worth it to me, and I walk away). I always use a lawyer and get title insurance to protect myself. The only time I move away from this formula is if I can get the seller to carry a note which has been rare in my experience. I buy distressed property – and the owner is as distressed as the property, in most cases.

A cash buyer has much better buying position IMHO, than one who is waiting for financing. And, you can close quickly.

Once you refinance, you’ll pay the piper – money isn’t cheap and I always hate that part :slight_smile: Then you start again.

Good luck to you.

Since you admitted you are a rookie. Don’t even consider closing without a good real estate attorney. As in any business, most people are great to deal with, but some are not. Don’t believe anything the seller, real estate agent, friend or even other investors may tell you on face value. Verify, verify, verify. Until you understand the process. I have run across some very sophisticted sellers, that pose as “distressed”, in other words a wolf in sheeps clothing waiting for a not so sophisticated buyer to dump their “cherry” investment property on.

Pilot your post couldn’t be truer --WTG! I always worry that people will take what is written here for face value. I’ve read great posts and learned many different approaches to the same problem. You have all taught me and I really appreciate it. However, I always verify any information before I move forward.

So far I haven’t run across a wolf-in-sheeps-clothing seller, but I have zero doubt they are out there. It can be a costly mistake to assume everyone is as honest as you are. Thanks for the reminder Pilot.

Rookie Question,
what is title insurance, is it different from builders risk insurance…


From the REI Club “Inveting Glossary” (there is a link on the left column!):

Title Insurance - an insurance policy that protects the holder from loss sustained by defects in the title

Basically, the title company will validate the entire historical chain of custody for the subject property and issue an insurance policy that says tat the seller can legally transfer the property and that it is free from any encumberances or defects. If a problem arises, the title company will be on the hook to resolve the issue.


I thought when you hire a titel company to do a title search, so that can determine that the title is clean.

So what you are telling me is that you can do a title search, the title company can say its clear you close and then when you try to sell it , another title company discovers issues with the title -

Do I have the right idea - and if I am correct why wouldnt the title company be held responsible anyway regardless if you had title insurance, you paid them to perform a service, which they didnt do…

Or is my thinking completly off
thanks for any replies

If you get into a position that there is some sort of cloud on the title, even if the title company has examined the title history and vaildated thatit is clean, you may still wind up in court…the insurance covers you for that.

For instance, you buy a property from a guy htat bought it from a husband and wife…unbeknownst to you and the seller, the wife never signed off on the property transaction…someone else forged her signature. You’re living in the house and then, a couple years later, the wife says that she is still the owner of the house. By the title search, the transaction appears valid but she files claim and now your title is clouded. What will you do? If you have insurance, you’re covered, if you don’t you may be out-of-pocket for a lot of expenses to clear the matter up…


Thank you for that explanation/example Keith. I didn’t really understand this previously either.

One more thought on the tittle insurance. It is always a safe idea to get an extended policy which covers mechanics liens which are not covered under a regular policy, at least in Idaho, a contractor has a grace period of when the can file a lean on a property and if it happens after you purchase the property you are now liable to pay for this lien. An extended policy will help protect you against this sort of thing.