Live and Learn Lesson: When to Submit your Contract to the Title Company

I’ve closed several deals and have intensively researched and followed many other investors’ transactions to avoid those hard lessons that are learned by experience.  They’re inevitable; but I’d like them to be as few and as minimally damaging as possible.

Here’s one for you that I never really processed before now: Do not submit your wholesale contract to the title company before you have your buyer.  Maybe it’s obvious to everyone. And there are exceptions; but mine wasn’t one of them.

Two weeks ago I put a house under contract.  The ARV was $105-115k. The as-is value was about $80k. And I had it under contract for $53k.  A great deal, right?

The unique facet of this deal was that it was currently rented to long-term tenants for slightly below market rent, and the sale of the property was absolutely contingent upon the tenants being able to stay for 3 more years.

So yeah.  I had a difficult time finding a buyer.  And in the end, the seller was so nervous about the quality of the buyer that she backed out.  (I’m sure there are negotiating and deal-structuring lessons in there for me as well, but I just haven’t realized them yet.)

But as soon as I got it under contract, I submitted the paperwork to my closing agent.  It was a great deal…it would close quickly, and I wanted to have the title work ready, since in my experience title companies can get backed up around the holidays.

My mistake.  I’ve always waited until I had a buyer under contract (or an assignment contract signed) before submitting the paperwork, and I should have done that this time too.  Now I have no deal, and a $350 invoice for the title examination.

Boo. But, hey, now this doesn’t have to happen to you!

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Filed under Deals, Education

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