When you are in the process of having a contract closed in Tax delinquent Investment you need to consider a time frame. Remember not to make that contract null and void, so give it a very good time frame of about 60 to 80 days. This is for your security, as well as the sellers, so there is still a way to back out of a contract, if you need to.

But, of course, you do not want to wait 60 to 80 days before you close. You want to close much faster. You want to close, ideally, as fast as possible, because the faster you buy it, the faster you can sell it, and the faster you make money. So, therefore if you work with a title company, make sure you send the sale agreement to the title company, once it is accepted. Tell them you expect them to close escrow on or before a specific date. You want the title to be ready as soon as possible, so if it can be ready the week after the sale that would be best. Then they know that they do not have to wait until the close of escrow. Very often, title companies wait until the very last moment. They are trained to wait on attorneys. They are trained to wait until the day of close of escrow comes and they close a day or two prior to that. The title should be ready a month earlier than close of escrow, ideally.

In my experience sellers are ready after 10 days. Then, they sit there and wait, and if you do not remind them. They just let the paperwork sit there for another 50 days before they say, “Okay, let’s arrange for closing.” So, you want to make sure that you are on top of the situation. Remember, just because they have agreed to sell does not mean that they will chase after you, you still have to do some legwork. This is your investment and it is in your best interest to make sure it goes smoothly from beginning to end.

In Tax Delinquent Investing, follow through is just as important as acquiring and convincing the seller. You will be dealing with third party organizations that is used to playing the waiting game. Remember, this is your money we are talking about. Would you leave a wad of cash sitting around? I think not. Make sure you direct the third parties accordingly so that your investment process can go as smooth and seamless as it can be. Your investment is turned around faster and easier.

When you make an offer to purchase a property, you will sign a Purchase or Purchase and Sales Agreement with the Seller. This document will be the binding contract and agreement between you and the Seller and the provisions in that document will spell out certain events which must take place before your escrow can close. Within the Purchase Agreement will be a provision for the scheduled “Date of Closing.” A date is normally filled in when the offer to purchase is made by the buyer. Once your offer is presented to the seller, the seller may choose to change this date before accepting your offer.

Both you and the Seller will come up with a closing date which seems reasonable. The closing date should allow you enough time to apply for and obtain a mortgage, if you will be getting a loan to help finance your purchase, and the seller will choose a closing date which allows ample time to move out and find a new home or property. The closing date which is agreed upon should also take into consideration such contingencies as property inspections, the title report review, and any special circumstances, such as one or more parties being out of town or out of the country, an estate or probate situation, or other complications which may involve legal assistance.

To set a reasonable closing date, both parties need to understand what their individual responsibilities are before closing can occur. You and the Seller should list the tasks you each must perform and then try to calculate a time limit for each of these tasks. The Seller, for example, may find that there are liens or other encumbrances on the title of which he was not aware, and these “clouds” on the title will need to be cleared up before the title can be transferred. The property inspection might show up minor defects which the Seller may be required to repair, or major defects might become evident, in which case you and the Seller may need to come to an agreement as to who will pay for these repairs. These types of events are not unexpected in a property purchase and should cause no delay in the closing, as long as they have been provided for ahead of time. Before setting the closing date, try to think of any situations which must take place before you go to closing.

The Seller may request that the closing date be contingent upon the sale of his present home. This date may be rather arbitrary, but a tentative 30, 60 or 90 day closing date could be set and when the actual closing date can be set, then an addendum to your purchase contract can be drawn and signed by both you and the seller. In this case, you would want to be sure to notify your escrow or closing officer of any changes in the date for closing.

Keeping the escrow officer informed of exact dates is very important, as she will be prorating and calculating certain expenses and credits, such as interest, taxes, and insurance and these will be calculated right up until the day of closing.

The lender may have an important role in setting the closing date. Your loan may take longer than traditionally expected, perhaps you have additional items the lender needs to verify, or perhaps you are self-employed and the lender will require Profit and Loss Statements and other documentation to document your financial profile. Perhaps the lender will require that certain repairs on the property take place before they will agree to fund the loan. To avoid any unnecessary delay in closing by a lender, you might want to consider getting “pre-qualified” by a lender and asking them if they see anything unusual in your credit which could hold up your loan. If property repairs are required, you could ask that money be held in escrow for these repairs, rather than hold up the agreed upon closing date.

The closing agent may have a role in controlling the closing day. Check with the escrow officer to get an idea of how long it will take to issue the title reports and how long it will take to prepare the closing documents.

Schedule your closing as soon as possible in the transaction, as escrow officers often are busier on some days than others and you would want to be sure to reserve your time and day. When scheduling your closing with the title or escrow company, let them know that you want ample time to go over and review all the paperwork. Oftentimes, Buyers and Sellers are rushed through this critical process, as the closing agent may have a busy schedule that day and these documents are all standard and commonplace to her. Closing agents may forget that each provision and each commitment listed in a document may be new to the party and will need to be explained carefully.

When an attorney is involved in the transaction, whether representing the Buyer or the Seller, normally the attorney will explain each provision in detail. Keep in mind that the escrow officer or closing agent is a neutral third party only. The title company cannot give legal advice or interpret documents for you. The closing officer can explain each item and review how the numbers were calculated, but for any legal opinions, you will want to consult with your attorney.

When you give your deposit to the real estate agent and the signed sales agreement has been signed by both the buyer and the seller, the agent may then “open” escrow.

If there is no real estate agent involved in your transaction, the escrow may be opened by either the buyer or the seller. When you first make your offer to purchase a property, you typically give a good faith deposit check.

The real estate agent will deposit this money into their company “escrow account”, to be held until the seller has signed the agreement and all the terms of the purchase have been mutually agreed upon. Escrow is not open until the good faith money is actually placed in the hands of an escrow agent. This may be a title company, an independent escrow company, an attorney, or any other authorized closing agent allowed in your state.

Upon depositing the buyer’s deposit money with a closing agent, escrow may be considered to be “open” and a file number given for the escrow. An escrow officer or closing agent will be assigned to your account, and this person will follow your escrow all the way through the closing process.

The escrow agent will be your main contact at the title or closing company. Any questions in regard to your title report, escrow money, obligations under the escrow, or progress reports should be directed to this person. Although there are many steps involved in processing your escrow and several different people working on your escrow, such as searching the title, preparing the title insurance policy, processing the loan documents, your contact at the title company will remain the escrow officer.

As a party to the escrow, you are entitled to call the escrow closing agent at any time to request information or explanations.

Virtually every county in the United States has a place where records of title are publicly recorded. The recording system gives constructive notice to the world of the transfer of title to property. Recording simply involves bringing the original deed to the local county courthouse or clerk and recorder’s office.

The original deed is copied onto computer or microfiche, recorded in ledger books (or computers), then returned to the new owner. There is a filing fee for the deed, which runs about $8 per page. In addition, the county, city and/or state may assess a transfer tax based on the value of the property or the selling price.

Practical Tip

If you are trying to find out how much someone paid for a property, simply read the edge of the deed. The recorder usually prints how much transfer tax was paid on the margin of the deed. If you know the tax rate for transfers in your county, simply do the math backwards and you will discover what was paid for the property, even if the purchase price is not stated on the deed.

Grantor/Grantee

The most common indexing system is by grantor (the person conveying an interest, usually the seller or mortgagor) and grantee (the person receiving an interest, usually the buyer or mortgagee). All documents conveying property or an interest therein (deed, mortgage, lease, easement, etc.) are recorded by the grantor’s last name in the grantor index. The same transaction is cross-indexed by the grantee’s last name in the grantee index.

Geographical Index

A few areas of the country use a geographical grid system. By locating the property on a grid map, one can obtain all records of transfers and liens on the property.

Torrens Title Registration

A few areas of the country use a title registration system, which is much like a car title registration. Proof of ownership is presented to the county recorder, who then issues a certificate of title. The certificate of title is conclusive proof of ownership.

Recording Statutes

Every state has a recording statute which dictates who wins in a battle over ownership. For example, what happens if John gives title to Mary, then he gives it again to Fred and Fred records first? What happens if John gives a mortgage to ABC Savings and Loan, but the mortgage is not filed for six months and then John borrows from another lender who records their mortgage first?

Most states follow a “race-notice” rule, which means that the first person to record his document, wins, so long as:

1. He received title in good faith, and
2. He paid value, and
3.He had no notice of a prior transfer

Example. John buys a home, and, in doing so, borrows $75,000 from ABC Savings & Loan. John signs a promissory note and a mortgage pledging his home as collateral. ABC messes up the paperwork and the mortgage does not get recorded for 18 months. In the interim, John borrows a $12,000 from The Money Store, for which he gives a mortgage as collateral. The Money Store records its mortgage, unaware of John’s unrecorded first mortgage to ABC. The Money store will now have a first mortgage on the property.

Example. Fred sell his home to Ira, who forgets to record the deed. In the interim, Fred gives a deed to his daughter, Susan, as a gift. Susan records her deed. Susan will not defeat Ira’s ownership, since Susan did not pay value for the property.

Among the various items which will be prorated, or shared between the buyer and seller at the closing will be real estate property taxes. Although prorations are normally pretty straightforward and easy to understand, property taxes can be a problem if provisions are not made for an increase in tax assessment which may occur after the close of escrow.

Often the closing agent must use the taxes from the previous year to compute the prorations for the sale. Let’s say that your escrow closes in September and that the new taxes will not be available until November. If the taxes go up, are you responsible for new taxes for the whole year since you only lived in the property for 3 months? One answer to this problem is to sign a Proration Agreement, whereby the buyer and seller agree to make up the difference among themselves.

Many times it is common to ask the seller to pay a little extra in real estate taxes above the daily proration fee, because in many areas property taxes rise each year and the exact amount of the next bill may not be known. Oftentimes, the seller is asked to put up 110% of the daily fee to cover any increases.

Once escrow is closed, it would be difficult to go back to the seller and ask him to pay you for any additional property taxes. Likewise, you would not want the seller to come back to you and ask for a refund if the property taxes were to go down.

To prevent any misunderstandings, ask you escrow officer, attorney, or real estate agent about the property tax prorations, and find out when the property tax assessment is scheduled to be made in your state. Tax assessment dates vary from state to state. In California, for example, taxes become an outstanding debt against property on the first day of March, even though they are not payable until considerably later.

The full fiscal year for property taxes in California runs from July lst to June 30th, and it is divided into two halves so that payments may be made in two installments. In Illinois, as another example, property tax payment dates vary. Larger counties typically schedule them for March lst and September lst, and smaller counties schedule them for June lst and September lst.

A simultaneous closing, sometimes called “table funding,” is a transaction in which the seller sells the property, carries a note, and then sells the note at the same time the property sells, or within a very short time afterwards. This type of transaction falls in a gray area of the law. It could be considered a loan disguised as a sale.
The logic behind this questionable condition is that the seller never intended to carry the note, and if we bought the note, we could be considered a lender because we would be the first party to provide money.

If the transaction is judged a loan, the note broker and the note buyer could be required to comply with all licensing and disclosure requirements of the law. Failure to do so could result in severe penalties.If the transaction is judged a loan, it could also be considered as a usurious loan, charging an illegally high interest rate. This could also result in severe penalties.

Therfore, we only buy notes that are “old and cold,” where we entered the picture after the note was created and one or two months have gone by.

If you have ever bought or sold real estate, you have probably paid for title insurance. What exactly is title insurance? Why do we need it? How can I save money on title insurance? These are common questions asked by real estate investors.

Whenever title passes, the seller usually gives a deed containing certain guarantees or “warranties” (hence the name “Warranty Deed”). The seller warrants that title is good, that is, no one will come challenge the integrity of the title. For example, if a deed that was passed before him was forged, all subsequent transfers are void. Other problems may be more subtle, such as a deed with an incorrect legal description or misspelled name. Any irregularities in the “chain of title” will place a “cloud” on the integrity of the title.

The Title Search

When you are ready to sell a property, a title search is performed by a title company or attorney. The title searcher follows the chain of title back about 50 years, tracing the ownership through deeds recorded in pubic records. The searcher also checks to make certain that previously recorded mortgages and other liens have been released. Based on documents found in public records, the title company or attorney will prepare a “title insurance commitment.” A commitment is a statement that based upon certain documents found by a search of public records, the company will issue a title insurance policy for a certain fee.

The Title Insurance Policy

The title insurance policy, unlike most insurance policies, covers past events. For example, the daughter of a previous owner claims that her father conveyed a deed while not mentally competent, the current ownership may be in jeopardy. The title insurance company will defend the claim and pay for any damages (usually the value of the property). The policy does not cover claims based on events that occur after the policy is issued. Furthermore, the policy usually contains numerous exceptions, such as claims based on information undisclosed to the title company. Thus, if you are aware of any potential problems that might lead to a claim, your failure to disclose this information to the title company will lead to a denial of a claim based on those events.

Ask for a “Re-issue” Rate

A title insurance coverage starts from ancient history and ends from the date you transferred title. Since most transfers are insured by a title company, the longer you own the property, the more the policy costs. Consider this: if you buy a property and the transaction is covered by title insurance, then you sell it six months later, what are the chances that something went wrong in the last six months? The answer is that the chances are slim to none, so the risk of a claim against the title are slim to none. For this reason, title companies offer a “re-issue” rate. The re-issue rate is a discounted price (usually about 40%) on the title insurance policy if another policy from a title company was issued on the same property within the last few years. The rate is lower because any claims that arise from events before the previous owner are covered by the previous policy. Thus the new policy really deals with the risk of claims from events that occurred while you owned it.

Try a “Hold-Open” Policy

If you are buying a property with the intent of re-selling it within a year, ask the title insurance company for a “hold-open” policy. For a small fee (usually an additional 10% on the policy), the title company will hold a title commitment open for a year or more. Rather than issue a policy based on the first transfer (from the seller to you), they will issue a policy on the second transfer (from you to the next buyer). Since the seller usually pays for title insurance, you can pay the additional 10% when you buy, saving 90% on title insurance when you sell.

Every Real Estate Investor (REI) wants to close as soon as possible but unless you help the process along by doing the simple tasks required by your Hard Money Lender (HML) and the title company you are almost guaranteed to miss your closing date. A real estate transaction closing is quite simple and the better you understand it the more you can impact and even influence the closing itself. Let’s start by looking at the four main parties to a real estate closing.

1.) The Buyer - You
2.) The Seller
3.) The Title Company – Closer
4.) The Lender – Hard Money Lender (HML)

Each of these parties have varying degrees of influence on a typical closing.

1.) The Buyer - You

Has most of the responsibility for producing all of the required items needed to close a loan. The buyer also is 100% responsible if something bad happens. I know many of you think that the lender, seller or even the title company can be at fault. If a closing does not happen it is the fault of the buyer. Why? Because as the buyer, you should be on-top of the transaction and be ready to step in and find a solution if a problem arises. The buyer is the only party that has the motivation, access and responsibility to ensure that all problems are solved and that the transaction closes. Let me repeat this… The buyer is the only party that has the motivation, access and responsibility to ensure that all problems are solved and that the transaction closes.

2.) The Seller

Is simply along for the ride. Once they have the property under contract to sell their sole responsibility is to show up at closing, accept a back-up contract or to give you an extension if you do not close on time.

3.) The Title Company – Closer

Will be working closely with you and your lender to bring the transaction to a successful close. However it is important to remember that there are other transactions being closed at the same title company and by the same closer so it is the responsibility of the you the buyer to ensure that the title company is moving every forward in a timely manner. Remember that a title company’s busiest time is from the 20th of the month to the end of the month. If you are trying to close your loan during this time period be aware that the title company may have problems finding a time to get you in to close. As long as you provide everything you are required to have by the lender into the title co in a timely manner your loan should close as scheduled on the contract. The lender will coordinate with the title company to close the transaction as required by the contract.

4.) The Lender - Hard Money Lender

Will drive the closing of your transaction and will work closely with you to get all of the items required to close the loan in a timely manner. It is important to note that ALL of the required items must be received by your lender as-soon-as-possible to ensure a smooth closing that happens on or before the closing date on the contract. Your lender will not close a loan until they have everything that you are required to provide. Most lenders require everything to be received by underwriting at least 72 hours prior to closing. Don’t expect to deliver requested items to the lender on the day of closing or even the day before and still close as scheduled. A lender will not draw loan docs until they have a complete loan package. Docs take 24 to 48 hours to be drawn, approved and sent to the title company. The title company itself needs several hours to prepare a HUD-1 for the lender to approve prior to closing.

As mentioned in earlier in the article that you the Buyer have the greatest responsibility and influence in a typical transaction. If you get all the required items to the lender and the title company in a time manner and stay on-top of the closing process you can almost guarantee a smooth closing every time. If you simply kick-back and wait for the transaction to close and plan on providing the required info when you “get around to it” plan on having a lot of missed closings. A smooth transaction with a Hard Money Lender should take 2 weeks from application to closing. You decide what type of closing you want.

Prior to the actual closing day, there are several things you should do to be certain that your real estate transaction will close on time, and that everything will go smoothly. A day or two before closing, you should review your final closing statement or HUD-1 Statement, whichever is used in your area of the country. You should go over all the calculations and be certain that you are given credit for all your deposits and any other credits due to you from the seller or for other items agreed upon between buyer and seller. Go over all the lender and title and escrow fees, to be sure they are what you had been told and that you agree to them. Check the math calculations on the closing statement. Errors do occur.

Carefully review the preliminary report or the guarantee of title insurance, to verify the exact legal description of the property and any liens, encumbrances or other items which may have been discovered on the property. Be sure that all items are removed that you did not agree to. Verify that the title or escrow agent has your correct vesting, or the way you want to take title to the property. This is important because to correct a vesting on a deed later on is time consuming and can be avoided if care is taken when escrow is closed.

Besides the paperwork which you must review and verify, you should reinspect the property once again just prior to closing. Is everything the way you expect it to be? Have all the necessary repairs or other corrective work been done that were promised to you? This is important so that you don’t arrive at your new house and find unexpected surprises.

The most important thing to remember is that before closing you want to be certain that all the conditions of the purchase contract have been met. You want to be sure that all directions given to the closing agent have been performed. Before signing your name to any closing documents, check and double check that everything is correct, interest rate, fees charged and condition of the property.

If everyone always did everything they said they’d do, we’d all be a lot richer. Unfortunately, tasks are overlooked, and the ball is often dropped. If you want to have successful closings, you must have strong “follow-up” skills to catch problems early in the process. Follow-up on everyone and everything.

We can’t begin to tell you the number of closings that almost fell apart, or would have fallen apart had we not kept a watchful eye on the entire process to make sure that everything was completed when it needed to be. Here’s a typical scenario: you’re wholesaling a house and you have just 30 days to get it closed before the contract with the Seller expires. You find a buyer who can get a loan and close before the expiration. Then a few days before closing you find out that the loan isn’t ready and closing must be delayed two weeks, but the Seller already has another Buyer ready to pay more than your price, so they refuse to extend your contract. You just lost the deal.

So what is follow-up? We used to think it meant staying in touch with the buyer to make sure that everything was completed for the loan. Then we learned that the buyer is often a newbie and clueless of what needs to be done. Mortgage brokers just usually respond “Everything looks great” until they can’t close the loan. So the real trick to following-up is to speak to the final decision maker for each step. This works whether you’re selling a retail house or a wholesale house, or even if you are the buyer/borrower. The goal is to close without delays.

Assuming that you have already received a pre-qualification letter from the lender, and ensured that the lender will loan on the deal (i.e. no issues with title seasoning, assignment fees, inhabitability of the property), the first step is to follow-up with the broker/lender that all of the application paperwork was submitted, and have they forwarded it to the lender? If not, what is still required? Determine if the lender requires a termite letter, appraisal, and a survey (most lenders do). If so, have they all been ordered? When is each to be completed? Keep following-up until you verify that each has been delivered. You also want to verify that the appraisal was sufficient for the loan.

If we don’t already own the house, we order a title report as soon as we go under contract with the Seller to discover any defects early in the process, and begin resolving them. Closing attorneys usually do not order the title report until just before closing to receive as current information as possible. But if they find problems, it could delay your closing. It is well worth the $125 to run title ahead of time, and eliminate delays.

Once the broker has forwarded the paperwork to the lender, the next step is to verify the loan has gone to underwriting. If not, what is the delay? If so, was the loan approved? Do any conditions need to be met? What are they and who is handling them? Make sure that once the conditions are met, the loan is returned to underwriting and approved.

Verify that the closing has been scheduled with the attorney, and that they have cleared title. Find out if and when the loan package will be forwarded to the attorney. Then remind all of the players of the date and time of closing, to bring a picture ID to closing, and to bring any funds required in a certified check.

This seems like a lot of work that should be handled by other people, but the reality is that often times something is overlooked. Through your diligent follow-up efforts, problems will be detected early and corrected, allowing your closing to occur flawlessly and on schedule.