Newbie confused about Title Co.'s

[Brandon Wu]

Hi Everyone,

I am currently researching the process of wholesaling and am a little confused about the process. You will see me post a couple topics, however this one will be specifically regarding the title companies.

Once you submit an offer to purchase and have the property under contract, Stephani's blog (http://www.biggerpockets.com/renewsblog/2010/02/11/wholesaling-real-estate-step-by-step/) states two major parts:

1.) "Once you have an executed contract, you will want to get a copy to your title company ASAP so they can begin title work."

What is the "title work" that needs to be started? And can this be done by a government registry agent? (they also do vehicle registration, land title searches, etc.)

2.) "On the day of closing the seller and the end buyer will show up to sign all of the documents, and the end buyer will bring funds for the purchase of the property, plus your assignment fee. Once everything has been signed and the money has been collected for the purchase, the title company will cut you a check for your fee."

With this I am very confused as to the process, sorry if I am not specific enough. But if my assignment fee is $10000, and the property is contracted initially for $50000, the cash flow would be:

End buyer brings 60k -> Title company gets 60k -> Original seller gets 50k -> Leftover 10k is sent to me?

Sorry if I seem all over the place, I am! I am very confused as to the involvement of title companies (and who they even are) with the wholesale deal.

Thanks in advance BP nation (note: this is in Canada, not sure if regulations differ)

[Brian Pellerin]

The title company is there to protect both the buyer and seller. Imagine how sad you would be if I sold you a house that I did not own, or if you paid for a house, but I didn't give you the deed (or title) to the property.

Title company checks to make sure that the seller actually owns the house. Checks the sellers proof of Identity. Verifies that there are no unknown liens against the house. Makes sure that the taxes have been paid. Makes sure that any liens that are blocking the sale are paid off at closing. And lastly gives you an insurance policy promising that they did a thorough job in the whole process. (I'm in the middle of filing a claim against one of my title policies for unpaid taxes).

Lastly, between the title company and any necessary lawyers, the paperwork is drawn up and presented for signatures. When it's all done, the deed is recorded showing that ownership changed hands and money is paid to the seller. And if a lender is involved, they ensure that the lender's paperwork is signed by buyers (with whom they've verified identities). Again, they are the middle-man ensuring that the entire transaction is executed fairly and accurately.

And when all of the above is checked and passed, you end up with what Paul referred to as: "Clean Title".

And much more and with exceptions, but this is a reasonable summary.

Your item #2 is correct.