I’m certain that you, like me, spent some time at the beginning of 2019 reflecting on 2018. Part of my reflection focused on a couple of real estate closings in which I was involved for my own investments. In my mind, these closings should have been simple, but they were filled with all sorts of complications. After analyzing the reasons why, I’ve figured out that it was because of my failure to clearly communicate what I envisioned the closing to look like. One of the results of this analysis is this series of posts on beginning with the end in mind when it comes to real estate closings.
I want to begin with a term I see floating around in cyberspace in which people are looking for an “investor-friendly” title company or closing attorney. I’m not quite sure what they mean by “investor-friendly,” but let me tell you how I think they are using that term. They are looking for a title company with experience in handling deals for real estate investors who don’t fully understand what they are doing and all the necessary steps of the transaction. This contrasts with my situation in that I understood the necessary steps, but I failed to explain those steps in a cover letter or in the Purchase and Sale Agreement. I presumed the closing agent would understand. I was so wrong!
To begin with the end in mind, lay out how you want the closing to finally and completely occur. Next, think about what it means to have an “investor-friendly” title company. It’s my opinion that an investor-friendly title company can be developed by the parties to the transaction clearly spelling out what it is they need to have done in the transaction. Since none of my deals involve bank loans, there is not a lender dictating a bunch of terms. Rather, it is me as the buyer or me as the private lender trying to control the transaction.
As you think through your real estate deals beginning with the end in mind, you can work backwards in a step-by-step sequence of what the title company or closing attorney must do to bring this transaction to a closing where good, marketable title changes hands.
In my next few posts, I will discuss specific components of closings and some of the things that need to be understood to make them go smoothly.