Business/Finance: HIRE A TITLE AGENT

Tahiti Isle was a great house, in a great neighborhood. It belonged
to a nurse who had developed carpal tunnel syndrome
and couldn’t work at the hospital any more. She couldn’t make
the payments, so she quit-claimed the house to her son, who
lived with her. When the son divorced, he couldn’t make the
payments either.
They thought that the monthly payment was $1,200 and that
the outstanding debt was $142,000. When we met them and inspected
the house, we had them sign an Authorization to Release
Loan Information (see Appendix A). We called the bank. It
turned out that the monthly payment was actually $1,400 and
the debt was in fact $148,000. Whether the inaccurate figures
were intentional or just a result of the turmoil of their lives at
the time is secondary to the observation that it pays to always
do your due diligence.
Gene felt confident he could interpret the title report and
didn’t need to pay a title company to do something so trivial.
With real estate, it pays to do your due diligence on all aspects
of the transaction. All payments appeared up to date. However,
we discovered after we had bought the property that while
property taxes had been paid for the current year and the year
prior, the property taxes for the year prior to that were still in
default. The amount involved was a hefty $5,000. The house
was headed for a tax lien sale, and we discovered this only after
we had acquired the property. We had no alternative but to pay
the $5,000.
One lesson from Tahiti Isle was to always hire a title agent to
read title reports. They’re very difficult to read, and, like any
other document in any profession, chock-full of acronyms and
jargon. If you’re putting money into a deal, you want to make
sure there’s nothing encumbering the property.
The owner wanted $5,000, and he wanted to stay in the
house through Christmas. We agreed.
Filling Tahiti Isle wasn’t easy, even though it was in great
condition. We tried open houses, flyers, advertising, and
putting it on our web site. People considered North Las Vegas
to be not so desirable, even though it was perfectly safe. After
the house had been 70 days on the market, we considered doing
a Section Eight (government subsidized rental) just to get
the property tenanted. Finally we went to our buyer’s agent
and requested she put it on the Multiple Listing Service (MLS)
stating that we would be willing to sell it as a lease-option.
Before long, a real estate agent from California decided to
take on a lease-option from us (he had never done one before).
We had to pay a one percent commission up front to the agent
who brought us the deal. However, since we hadn’t had any
success filling the property ourselves, we were more than willing
to pay.
But you learn from every experience. The one percent fee is
not on the option payment, or even one year’s rental, but on
the entire sale price should the tenant exercise his option.
in other words, a home worth $200,000 today, but with an exercise
price of $280,000, would attract a commission of $2,800
today. Given that most lease-options do not go through to
eventual sale, this seemed a bit rich to us. So from there on in,
we offered a flat $1,000 finder’s fee for agents bringing us a
lease-option buyer.