Do you use a title company when buying property directly from owner?

Question

Okay, this seems like a simple question with a simple answer, but I could use some advice.

All of my rentals have been MLS listings bought the traditional way with a realtor. However, I've been presented with an unexpected opportunity to buy a house directly from a family who inherited it and have no interest in keeping it. Neither of us want to get a realtor involved since that would just cut some of the profit out of the deal.

Assuming we come to a mutually agreeable price, what exactly do I need to do to complete the sale? It's my understanding from my preliminary conversation with them that the house does not have a mortgage on it. Can they just grant deed the house to me and then I can record the grant deed? Or is it advisable to use a title company to do the transfer? Obviously I want to also make sure I get a clear title, so is going through a title company the best way to accomplish that?

Any suggestions/advice is welcome. Thanks.

Kyle J. · Answer

Thanks guys. I'll use a title company.

Account Closed · Answer

Even with an all cash deal I want the assurance that I have clear title.  I also want to know if there are any easements or encroachments on the property.  Title insurance is relatively cheap for what it protects you against.

Account Closed · Answer

When we bought our house from my uncle in 1996, we didn't take it to title. If I'm buying from a stranger, I will definitely go through a title company.  It's just cheap insurance, and the seller is typically paying for it.  This sounds like an all cash deal to me.

Account Closed · Answer

Words can't express how much I agree with the above.

Account Closed · Answer

I'd call Chicago Title in Stockton.  They can make it easy for you and your seller.  They can do everything by mail and arrange for the seller to go to an office local to them to sign the deed or they will send a mobile notary.

Account Closed · Answer

Don't close the deal without the benefit of escrow and title insurance.  Uninsured deeds will cause you problems down the line, even if the property is free and clear.  When you go to refinance or sell, the title company will want to see an insured transaction when you bought.

You can write up a very simple contract (seller, buyer, property, price and terms) and submit to an escrow/title company.  They'll prepare the deed (correctly) and figure out the transfer tax and recording fees and prorations of property taxes (if desired).  More importantly, the title report tells you whether or not you are not only buying something free and clear, but details that you might not know that affect the property (easements, special assessment districts, inclusion in a redevelopment zone, etc.)

You don't even have to prepare a contract as escrow instructions suffice for a simple deal in California. If you and the seller are ready to go, you can call a title company and give them the names of the parties, the property and price and terms.  And go from there.

I'll say it again: don't close without the benefit of escrow and title insurance.  Fees are based on selling price.  Minimum escrow fee is about $350 and minimum title fee is about $400.  Even you have to pay many times that, what you get is worth so much more.  If you are planning on reselling the property in the near future, be sure to ask for a title binder.  That way you won't be charged full price for title insurance when you re-sell.

Where are you in Nor Cal?  I may have recommendations for title/escrow services.

Kyle J. · Answer

Thanks.  I'll be using a title company.

On another note, I was reading through another thread here on BP and I saw someone mention that you can do a "title only" service through the title company without escrow.  Obviously, I'm sure this would be cheaper.  But I'm just wondering what the pros and cons of doing it this way might be.

My primary concern is that I end up with a clear title, so the idea of doing it without escrow (and the associated fees) intrigued me.

Account Closed · Answer

Kyle J., I might add, if you do get an uninsured deed, you will have to go back to the seller and get an affidavit of deed signed before you resell.  The seller may be difficult to impossible to find at this point.

Jeff S. · Answer

Buying directly from the owner is that much more reason to use a title insurance company. When you have an agent set up escrow you have some guidance, without one you are at the mercy of your own ignorance. Just the fact that you asked this question tells us you need help, and the minimum would be title reports, title insurance and escrow services, and likely legal advice.

Kyle J. · Answer

Thanks K. Marie Poe.  That's good info.  I'm in Lodi, the property is in Stockton, but I'm thinking that the most convenient place to do the title stuff might be in Sacramento since that's where the sellers are located near.  I go there frequently too so it wouldn't be an inconvience for me.  Any recommendations you have would be appreciated.

Do you use a title company when buying property directly from owner?

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