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The title search is one of the most crucial steps to closing any real estate transaction. As an investor, you need to do prudent research and be 100% sure that the person you're buying from has a clear title to the property. You need to ensure that you're getting a deed and paying the actual property owner (not somebody else who thinks they own the property or is lying to you and claiming that they own it). When I bought my first house, this whole concept really confused me and if you're new to real estate, it may seem confusing to you too...

Why A Clear Title Matters
In many ways, it's a similar process to buying a car.

Suppose you see a car parked in someone's driveway with a "FOR SALE" sign in the window. The car looks nice, so you walk up to the house, knock on the door and say, "I saw this car parked in your driveway, is it yours?" The person replies, "No, but I'll sell it to you for $10,000!"

There's obviously something wrong with this picture. A person can't sell something they don't legally own and while it sounds like a ridiculous conversation, you'd be surprised at how often I've encountered situations like this in the real estate business.

How does this kind of issue come up in the first place? There are a lot of ways but most often, I come across people who have inherited property from their parents or relatives and somewhere along the way, the proper paperwork was never filed to give them the legal right to sell the property. Other times, people buy properties without doing their own due diligence and then THEY get stuck with a property without a clear title. One way or another, people can end up with their name on the tax bill (and sometimes on the actual deed). Still, somewhere in the "chain of title" (as recorded in the county's historical documentation), the property wasn't transferred correctly from the seller to the buyer.

Another key reason you'll want to do a title search is to ensure there aren't any liens or mortgages on the property. Especially when you're offering people a very small amount of cash for their property (like I tend to do), there will be times when they conveniently neglect to mention that they have a $100,000 mortgage or $20,000 construction lien that is still tied to that property. If you fail to catch this in your title search before closing on the deal, these issues will fall into your lap along with the property.

You will eventually run into this issue if you make enough offers and buy enough properties. When you do, it's usually a problem that doesn't have a quick or easy solution.

Knowing When It's Worth The Price
Admittedly, doing your own title search will open you up to risk. There is always the possibility that you'll miss some crucial piece of information along the way. However, I have done a few dozen title searches on my own over the years, and I have never been burned by it. As a personal rule the only time I do my own title searches is when the expected market value of the property is less than $10K (i.e. we're talking exclusively "rinkydink" properties here). As soon as I start dealing with substantial deals in the tens of thousands, I never leave it to chance. At that point, a fullblown title insurance policy costs more than worth the cost. #retipster #sethwilliams #landinvesting #realestateinvesting #realestateinvesting

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