REI Wealth Mag issue 57 - The Best of REI Wealth | Page 84

Due diligence is a must when it comes to purchasing real estate . Though a preliminary search can be performed at no cost before making your decision to proceed – it is my opinion that a full title search and insurance are necessary prior to final purchase .

Please note : Securing title insurance is an important step . Though title insurance for cash transactions is optional , it is mandatory when the buyer must obtain a mortgage to purchase the property . In my professional opinion , an investor should always acquire title insurance . According to Wikipedia , “ Title insurance is a form of indemnity insurance predominantly found in the United States which insures against financial loss from defects in title to real property , and from the invalidity or unenforceability of mortgage loans .”
Due Diligence Questions & Answers
Q : Should an investor perform due diligence on every property before purchasing ?
A : Yes , and no . When an investor is looking at several possible deals at the same time – and not sure if they will go through with a specific contract , holding back could be wise . For example , it would be prohibitively expensive to perform even a Letter Report ( average cost is $ 150 ) on every single property . These actions are also time consuming : even a title report will take 3 business days to be issued .
With that said , there are times when some basic due diligence is an important decision factor ; for instance , when an investor is considering a property coming online at a foreclosure auction . The investor will want to know what potential issues there might be on title ( liens , judgments ) and whether the title would be marketable .
Q : Is it necessary for a title company to perform the due diligence for any sales contract ?
A : The investor can actually perform a lot of their own basic due diligence without hiring a title company or spending any money . Checking with the appropriate government offices ( most of them can also be accessed online ) for some basic discovery is the simplest way to gain confidence in proceeding with your purchases .
Photo by Anna Nekrashevich from Pexels
Q : Which government agencies do you recommend searching to complete due diligence ?
A : I don ’ t check with all the government offices for each property . If my discovery at the Recorder of Deeds Office comes out clean ( with no red flags ) I will stop there ; unless I see a spotty history of liens and releases on title . This is also a useful means of locating properties undergoing issues that have kept them off the MLS . Here is a list of searches available in the public domain , and what you can expect to find :
1 . Recorder of Deeds Office – Will have record of liens such as : Mortgages , Federal & State Income Tax Liens , Sewer , Water , Judgments , HOA ( Homeowner ’ s Association ); and other property document history . 2 . Collector of Revenue – Lists any Back Property Taxes and Tax Liens 3 . Building Inspections Office – Data on any building violations and inspections .
4 . HOA – If the property is within a subdivision or a condo development , there are probably Homeowners ’ Association Dues .
5 . Clerk ’ s Office – Mechanics Liens ( filed by contractors for unpaid work on the property ).
6 . Comptroller – City liens , for unpaid taxes and fees .
Due diligence is a must when it comes to purchasing real estate . Though a preliminary search can be performed at no cost before making your decision to proceed – it is my opinion that a full title search and insurance are necessary prior to final purchase .
MEET LAURA ALAMERY
Laura Alamery is a local real estate investor of 30 years & consultant with extensive experience in several aspects of the real estate business ­ she has pioneered several strategies from personal experience that she now teaches nationwide , even to other mentors !
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