Have I been ripped off from wholesaler?

Question

I just closed today on my first flip this morning and gave the closer a check for the full price of the property.

County records reflect that the owner is Mr Tom Smith.  He is in another city and left the property as is.

I paid an LLC for the home.  The LLC was not the wholesaler.

I feel a little uneasy right now.  The HUD Settlement Statement reflects the same of the LLC as the seller and me as the buyer.  No mention of the owner of record, Mr. Tom Smith.  How do I prove that the LLC bought the property from Tom Smith and had the right to sell it to me?

The utility company wants proof before I can have the utilities turned on.

How can I prove that I am now the owner?  Did I just hand over a large sum of cash and am out of luck?

I am feeling very uneasy right now.

Tom Gimer · Answer

@Jay Hinrichs Depends on the deal and the parties.

City rowhouse with nothing out of the ordinary... not much to talk about. Client generally takes our word for it. Buyer acknowledges receipt of commitment.

High-end residential or commercial... all parties receive in advance, attorneys review.

Anything out of the ordinary (such as @Jan B. situation), title figures it out, confirms with all parties, and in some cases kills the deal.

Re EMDs... our REALTOR board contracts all have detailed provisions regarding deposits and resolution of disputes over same. All read as if one of the brokers may have the EMD in escrow.

Tom Gimer · Answer

@Jay Hinrichs Very good question. Around here we don't even refer to it as "opening escrow". Perhaps it's because in many transactions the title company is NOT the escrow agent... instead it is often the selling broker (or in some cases the listing broker).

Would-be buyer often gives  his/her agent the EMD check, a copy of which accompanies the offer. A settlement agent is identified in the contract -- title may not even be aware of a ratified contract until somebody finally decides to send us a copy!

We could give a preliminary title report in 24-36 hours but honestly, the parties generally do not expect it. We provide a title commitment in 5-7 business days.

But what I referred to for @Jan B. to consider in future deals is what she does prior to contract. She can contact an attorney or title company to obtain background on the property and the parties. Certainly would reduce the stress.

Shawn Clark · Answer

Wow, I didn't realize the differences between states where quite THAT different. Must make it interesting investing out of state.

Federico Gutierrez · Answer

Aren't you in a pickle. Does the county have a website where you can check the transfer of the property?Maybe google fiscal + office + "Name of county"

Jay Hinrichs · Answer

@Tom Gimer  out our way the quickest way to lose your license is to foul up your trust account.. there for I don't play that game and never will..

Jay Hinrichs · Answer

@Greg H.  very very few..  however to be quite frank a lot of my clients use these guys and gals.. so in essence I am funding them I just don't have to deal with them. by the time the file gets to me its just ready to fund.

@Tom Gimer is it standard practice to mail or e mail a copy of the prelim or title commitment to buyer and seller and have them initial that they read them and understand them.?   Or do you just tell your client " I checked the title for you and your good to go " and they simply take your word for it.

I agree closing on East coast is totally different than what we do..  AGENTS RARELY handle deposits.. I know when I owned my brokerages I refused to have a trust account.. and like I said I have not seen a EMD check made out to a broker in Oregon in 20 plus years of doing deals here.. its ALWAYS made out to the title company and or sometimes the seller directly.

I know the stuff I do in Chicago its crazy agents there just hand the contracts to attorneys then duck and cover.. they don't even negotiate addendums and inspection reports half the time.. LOL... And god forbid the average resi agent even has a clue how title and escrow works... So now you have buyer and seller.. they each have and agent and they each have their own attorney.. throw in a lender or two and you simply have too many cooks in the kitchen frustrates the bejeezious out of me half the time.

Greg H. · Answer

@Jan B.

So I read it as you made a check out to the LLC.  I will say it is very rare these days that a title company would accept a cashier's check.  Moving forward, never go through with a deal unless you understand the transaction.  The LLC part is not a big deal as people who deal with me always buy from my LLC but I disclose everything upfront and do not have to double close

@Jay Hinrichs Have you ever bought a property from a wholesaler ?  Personally, I have rarely had a deal worth pursuing and never have.  I have received several emails over the years with "deals" from wholesalers that were actually my own properties !

Jay Hinrichs · Answer

@Tom Gimer  plus by getting the prelim in 72 hours I know right then who owns it and if there is a double escrow or an assignment happening @Greg H.  at that point I can either cancel.. or keep going I am not keen on buying from middle men that don't own the properties.

Jay Hinrichs · Answer

@Tom Gimer  not sure why this is.. but out our way ( west coast) once we open and order we get a written preliminary title report e mailed or mailed to us usually within 72 hours.. this will show the current owner .. tax's  leins etc.

this way if you have title issues you have plenty of time to work on them.. I never understood why in some markets they wait to the end to actually run title.. like they do in SC  seem Backassward we are always running into delays when I buy stuff there because of easy title fix's we would have found the first week of escrow instead of at the end.

Also I don't trust an escrow agent to tell me if title is good I want to read the title report personally.. what they may accept I a may not.. or I may have questions etc..

Do you know why its done this way and way preliminary title reports are not done first thing and provided to the buyer within the first week of opening escrow.. ????

Jan B. · Answer

Thanks, Tom.  Yes.  I brought a cashiers ck made out to the Settlement company.  There were a whole bunch of names noted in this effort.

Wholesale company (markets off-market homes)

LLC company (sells house to me)

Indiv. Seller (sells house to LLC)

Title company

Settlement company (coordinates closing)

Have I been ripped off from wholesaler?

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