Deal not going to close - Pay the Title Company?

Question

I have a property under contract to purchase for rehab that doesn't look like it's going to close due to a high dollar judgement due that the seller cannot pay. Obviously the title company has done a fair amount of footwork already. If the seller can't close, does/should the title company get paid? If so, who pays them? I plan to use them again in the future, would it be in my best interest to go ahead and pay them? The wholesaler has already offered to cover my appraisal.

I am also wondering where this property will end up. The owner has already moved out. I assume she has, or will soon stop paying her mortgage. Should I hang out and still try to get the property? Or should I take what I've learned in the last 45 days (this was going to be my first rehab) getting ready to close this deal and and look for a new deal. My estimates had about 15-20k in profit in this deal. ARV appraisal was $105k. Thanks for any help.

Dave

Jim Watson · Answer

How about on an apartment building? Contract says I am liable for all costs (4k) if I cancel for problems I find doing due diligence. Doesn't say anything about costs if the loan doesn't go thru.

John Harris · Answer

Agree.  Just do them the favor of using them on your next deal.

I use a title company that I love and will not use another unless circumstances are extreme.  A title company can be your best friend if you show some loyalty.

Autavea Dabney · Answer

I woukld say pay the title company just because of the future relationship you are trying to establish with them.

Tammy Guerrino · Answer

I have worked in Title for 10 years and can assure you that you do not have to pay the title company.  If we were to bill for every deal that fell through we would loose our clients.

Title companies base it on a cancellation rate if you cancel 2 out of 5 deals yes they may ask you to start paying a cancellation fee but if your deals general go through, they just print a cancellation bill for the records and record it as a loss.

You can ask a title company to sign a waiver for cancellation cost before you start working with them.  A big company will accomodate you and leaves you with no worries for when one of your properties falls through.

Good luck and best fortune to all

N/A N/A · Answer

Thanks for both of your comments. Minna, it seems my rehab was done before it started. I'll still be watching your progress.

Minna Reid · Answer

Yeah I would pay the title company. After all, they did what they were supposed to. In fact they saved you from buying a property with a large lien, right? 
I would start looking for the next deal, but keep this one in the rearview. If this house ends up in foreclosure, the lien will remain until it becomes an REO. Maybe you could make the bank an offer once they buy it. Sorry to hear it didn't work out.

Ryan Webber · Answer

I wouldn't worry too much about paying the title company.  You're talking about multimillion dollar insurance companies that do title searches all day long.  Its really not that hard for them to run title and get a copy of the judgment.  It would be like paying a car insurance company for turning you down because of having too many claims.  Its a nice gesture, but I think its unnecessary.  I guess if you really wanted to, you could pay them a title search fee, which is normally $50-$100.  Either way, I would be sure to take your next deal to the same agent.