How to Find a Wholesaler Friendly Title Company
I am so excited to be back here with you. I get questions all the time about the title. “Who should I use? How do I find a great title person? How to find a great title company? What are some ways to find an investor-friendly title company? What should I be looking for in a title?” It’s all of these questions. Honestly, some of the questions about fees because even though you are usually making the buyer pay the title fees, oftentimes, that gets factored into the sales price that the buyer is willing to pay, which if the fees are way too high or way off, then the assignment fee that they are going to pay is going to be changed with that. With that said, I decided to get a good friend of mine, Ben Schaefer, who is the Managing Attorney at Aedis Title. He owns a massive law firm as well. I asked him to come in to answer all of these questions. I’m excited to jump into it. Ben, thanks for being here.
Chris, I’m happy to be here. What can I do for you? Let’s talk.
Let me ask this question first, title. Let’s say I’m a new investor, what is it that I should be looking for in my relationship with a title company?
Some of those things are obvious, customer service. You want people who are going to be able to pick up the phone, answer your questions, knowledgeable people. Sometimes companies in some states are required to have attorneys on staff. In some, they are not. Virginia does not require, for example, a title company to employ attorneys and to have attorneys doing closings to be involved in all aspects of title and settlement. You want to pick a title company that does have an attorney or attorneys on staff working to answer questions and tell it to be available, especially where you doing investor deals. There are lots of added complications that go along with that. It’s a company that has an attorney on staff that leads and knows how to structure those transactions.
If you are doing that type of deal, novation, assignments, it’s a title company that does those types of deals because that’s not every title company. Few title companies, in fact, specialize in that type of work. That’s something you want to talk about with your title company before you send them contracts. Third, a company that’s able and willing to talk to you about the contracts and how to structure them before that contract goes out before it’s signed so that they can be structured initially at the very beginning of the process. That third one would be then communication lines and a title company that’s willing to work with you even before the process gets started to make sure that it’s done the correct way.
Let’s get into that really quick. In a law firm, what is the standard for billable hours? Not title but let’s say just a law firm. If somebody were to call you and say, “Ben, I’ve got an issue. Let me hire you on retainer.” What is the standard for billable hours there?
We bill out anywhere between $250 to $500 an hour depending on the type of person in the firm is doing it associate up to senior partner.
I thought it was so amazing when I’ve got into real estate and started investing in the early 2000s. I remember talking to an attorney like, “Am I going to get a bill in the mail?” She was a title attorney. I would ask questions on some of the hairy deals. She was so willing to talk to me. I know some of the title companies that I have worked with on and off since, the attorneys were less willing to talk to me whenever I called early in my career. How does all that work?
Title companies are like Switzerland. They’re the unbiased third party in the middle.
If you are the title attorney on that, are you charging billable hours when you are helping them work their deal, helping them structure their deal? How does that work versus a standard law firm? I’m only talking about standard regular deals. I’m not talking about like, “Help me build out my LLC docs or anything like that.” I’m talking about, “I’ve got a deal and it’s going sideways. I need to talk to somebody about this.” I know that some title companies are less willing to do that and are part of the investor-friendly piece of a title company oftentimes. I know that you have been willing to hop on the phone with people when deals have been going sideways. That’s what I was getting at because not all title companies are created equal.
It’s having an attorney or somebody very knowledgeable in this space to be able to give you advice on how to structure deals beforehand so that they can clear title, those escrow issues aren’t there, the county tax liabilities are presented the right way to the clients. Being able to have that expertise, to answer those, either specific issues or in the abstract generally. How does one go about this? How does one structure this? How can one put this deal together? That’s very important and invaluable. It’s important when that advice comes as well. That advice is way more valuable when you are trying to structure a dealer and envision how that’s going to happen then.
We have already signed contracts. We are a month in and trying to close. We are trying to decide. We find that there are problems and issues. There might be regulatory concerns, structural issues or one of the parties doesn’t happen. At that point, the title company’s hands are tied. We are, as the title company, constrained by what the contract says. As much as we can inform and help out beforehand in terms of how to structure a deal, the better it’s going to go, the fewer problems ultimately that are going to come up.
I had an investor that I was talking to who wanted to adjust something. Their contract wasn’t right but he couldn’t go back. He’s like, “If I go back to the seller, then the whole thing is going to blow up.” It might blow up if you don’t adjust it. It was this massive thing. What you are saying is get into business with a title company that’s going to look at your docs and make sure that what you are doing is not going to get you in trouble and not going to be a rough situation. If you don’t find a title company that’s going to help you like that, you should probably find another one that will.
One thing to keep in mind, once a contract is at the title company, the title company is the Switzerland of the real estate transaction. The title company sits in the middle of the deal between the buyer, the seller, the banks, the local governments that need to be paid, the regulatory people, HOS, all these different groups that are around the real estate transaction. I say it all the time, “We are Switzerland. We are the unbiased third party in the middle.”
Once that contractor comes in, we are bound by the terms in many ways. We can offer advice to either side but we can’t take sides. Coming in and getting that advice from the title, people from an attorney who knows how to structure something before, while we are still trying to figure out how to structure that is invaluable. Having that relationship, the ability to go, get hypotheticals onto an attorney, try to figure out how to structure something before everything is set in stone, and then everybody’s hands are tied, it’s an important piece.
As we are coming to the end of this conversation, there are a couple of things that I’m hearing from you. One, it’s better to find a title company with an attorney on staff but you don’t have to have that. Some states require that but it’s better to have that with an attorney on staff. Two, you want to find a title company where that attorney is accessible.
There are plenty of knowledgeable people out there that do this for you. There are plenty of processes if you don’t have a JV like I do but having that legal analysis often is very important.
Find an accessible attorney. Three, a title company that’s willing to get together with you and review your documents ahead of time. Once the contract has been signed and it has been submitted, the title company is not supposed to be helping one side versus the other. They are Switzerland. They are there to enact whatever is on the contract but if it’s before everything is signed, a good investor-friendly title company is going to be able to go through everything and say, “You might want to look at this and this.”
There are limitations about what we can do, even if it’s real parties on a transaction, even beforehand. We don’t want to look like we are taking sides or giving advice to this side versus this side. The best way to go about it is to go to a title company and say, “We have a hypothetical deal. We want to structure it in such a way. We want to learn more about the industry and how to do this type of deal regularly.” That’s where that advice can be invaluable. I agree with you. Going to a title company that has that expertise and knows how to structure that thing is what somebody in that space should be doing.
The other piece that are important as what you are saying is not all title companies will do assignments and innovations, all of that. Get with people ahead of time to make sure that they are doing that. You don’t want to get yourself into the situation where you are like, “I’ve got this contract. I’ve got to find a title company. The buyer is using this title company. I need to figure that out.” That’s it. Are there any last final thoughts that you have for anybody when they are trying to decide, “How do I get in with a great title company? How do I build a relationship?” One last piece, what is the title company looking for from the investor? As an attorney, what are you looking for from the investor?
The way the relationship works better for everyone is where we know each other and we know what the other party wants. Everybody in this space has different needs and wants. They have different access to clients. This is a great space to be in but there are plenty of regulatory hurdles. These deals have to be structured in note in the correct way to be compliant with State and Federal Regulation. Having that relationship, having an open line of communication so that these deals can be done the right way from the very beginning, that’s what’s helpful to all of the parties and make these things go smoothly.
Landing the ship here. Ben, this has been awesome having you on. A shameless plug if you are in the DC, Virginia, Maryland or even Richmond area. I’m sure Ben would love your support. Feel free to up Aedis Title. Ben, do you have a phone number you want to give out to anybody?
703-591-6314 is our main line. Nights, weekends, whenever it is, we will get back to you.
Ben, that’s amazing. Thanks so much for sharing. I’m telling you, finding the right partners like who you are in business with, who you run with, will dictate your future. Please, spend time. Get in business with the right people. Make sure they are people that are going to be abundance-minded, going to grow with you and help you grow. That is going to be a game-changer for you. In the meantime, if I can do anything to help you with any of your REI Revive type of stuff, make sure you go to the website. Click on that. Be happy to look and see if there’s anything I can do to help you monetize those dead leads but make sure that you are out there killing it. Run hard. Do good. I will catch up with you soon. See you. Bye.
About Chris Craddock
A nationally certified Life Coach in Leadership and top 20 in all of Keller Williams Realty International, Chris Craddock is the host of the Uncommon Real Estate Podcast, a Realtor, and entrepreneur who runs multiple successful businesses in the Washington DC Metro area (and Richmond, VA). Chris and his companies consistently bring in over 5 Million in revenue year after year. His team, The Redux Group, sold just over $160 million in volume in 2020. Chris has been married for 20 years and is the proud father to six beautiful children.