Do you get a title opinion done when purchasing a house on contract from a seller? I would think you would want to make sure you can get clear title when purchasing on contract.
If there is a balloon payment after 2 years and I get a conventional loan at that time, I will have to pay for another title opinion???
Yes, I would check the title chain since the last time the title was insured.
A title company will often provide a title report gratis, if you’re a potential repeat customer, and as a professional courtesy.
Otherwise, you can either pay the title company their report fee, or simply go to the country recorder’s office (or go online in some cases) and check to see what’s been recorded.
The most important thing for you to do as investor, to protect your interest, is to record a memorandum, or notice of agreement against the property, so that the seller cannot further encumber the property beyond what you agreed to.
Some sellers will want to pull money out of the property. Have them do this BEFORE you commit, and then afterward, you record a lien in your favor which will stop the seller from further encumbering the property.
As investors ourselves, we do NOT allow our buyers to record any liens (especially with Land Contracts) against the property, as this just undermines the purpose of using a Land Contract in the first place.
If the buyer wants to record a notice, he can go ahead and get financing from someone else to buy our property.
Of course, as professionals, we’re not going to over-encumber a property and cheat our buyers out of their money (and/or cause us to end up financing buyers from prison).
That all said, unscrupulous, incompetent, advantage-taking private sellers …will OFTEN try to pull this off on unsuspecting buyers. So, if we’re not buying from a seasoned professional who has something to lose by screwing us this way, we want to record a memorandum of our agreement.
Meantime, in the event our buyer recorded a memorandum, and then defaulted, we would have to sue to remove his lien.
I mean try getting a defaulted buyer to file a ‘release of lien,’ after we’ve put him to collections, and/or run him through the eviction process. Yeah, that’ll happen.
Thanks for the info! I’ve always worked with an attorney to do title opinions (In Iowa). My attorney said he was going to do some preliminary checking into this for me but not do a full blown title opinion.
Yes!!! Get the title opinion when you sign the contract. We started out in Real Estate 12 years ago and we could not find a mentor to give us advice and we made a few mistakes. In our experiences 1 out of 10 properties will have a title issue even if there are no liens against the property. One clouded title cost us about $5,000 in legal fees. If they have title insurance things will be much easier.
Good Luck!
randyscott