Two interesting items learned in my FL Pre-license course

[Russell Holmes]

I'm about 95% done with my FL Pre-license coursework.  I have my first brokerage 'interview' scheduled for this Friday, (thanks to @Cara Lonsdale) and am all set with the state to schedule my exam (fingerprints/background check, and application with DBPR submitted and accepted).  I'm going to wait until I pass the course final and then schedule my state exam on the next possible day I'm available. 

Anyways, in reading through the pre-license coursework, a good 75% of the material I already had a pretty solid surface level understanding  of from my previous year or so consuming BP forums and podcasts.  Having nothing stand out as foreign has made the coursework easy to digest and remember.  I haven't had an issue with any of the unit quizzes at all.    I would honestly recommend that anyone who is new to real estate investing at least take the pre-license course for their state, even if becoming licensed is never planned on.  The amount of information I've learned in the course about state specific laws and how the business is regulated will be immensely valuable to me in investing and avoiding mistakes in what can and can't be done.  Side note: Wholesaling without a license and without buying the property before reselling seems to be 100% illegal as far as the state is concerned.  They really really really stress the necessity of having a license to represent anyone else in any way shape or form of real estate. So I'm not sure what loopholes wholesalers think they are jumping through, but they are threading a needle with the law.

Two specifics that have popped out to me that I haven't ever seen mentioned on BP when these topics are being discussed are:

In a seller financing, land contract, installment sale, etc:  The buyer only obtains equitable title when signing the loan docs and doesn't receive legal title until the loan is paid in full.  In lien theory states, the buyer with a conventional mortgage DOES get the legal title at purchase with the mortgage lien against the property as collateral.  In a seller financed deal, the seller still maintains legal title.  As such, the seller can legally encumber the property while the buyer is making payments.  The contract is still enforceable, the seller still owes the buyer legal title, clear from liens upon that final payment. However, what happens when the buyer pays off his seller-financed note and learns that the seller has taken out a $100,000 HELOC on the property and skipped town? The buyer can't get the legal title until all liens are satisfied. An unpaid heloc in the sellers name could push the property into foreclosure before the buyer gets legal title. The suggested way to avoid this is for the legal title to be put into escrow during the term of the contract so that it cannot be encumbered. This would obviously be suggested by any attorney, Realtor, or closing agent in the transaction, but all too often, seller-financed sales happen with a more casual closing without 'wasting' money on expert legal opinions, leaving the low-down-payment buyer with far more risk than they realize!

Then, in reading about the order in which liens are paid in foreclosure, I learned something about mechanic liens that is surprising.  Say you hire a general contractor for a rehab.  You pay the general contractor the agreed upon amount, the work gets completed, you part ways.  If he chooses to not pay one of his subcontractors, that sub contractor can place a mechanics lien against YOUR property. That lien is paid based on the date the work was done, NOT the order the lien was filed.  All other junior liens are paid in the order they are filed.  Sure you can sue the GC, but if he didn't pay the SC to the point of the SC placing lien on your property, do you really think he's still around?  This may result in clouded title at sale and/or the requirement to pay the sub AGAIN for what you already paid the GC for, going after the GC in civil court later if you so choose.   I'm sure there are ways to ensure that the subs are getting paid, and I'm sure reputable GC's don't fail to pay their subs to the point of them filing liens, but you really never know.

I'm planning to transition into a full time RE agent career along side getting into investments, but even if I were just investing without a license to sell, I'm not sure I would think to dive as deep into all the laws that drastically affect risk in different scenarios!   

Some of the material I read is on the national level while most is geared toward FL.  So some of this may vary state to state, but still things to think about!