Can Properties With Title Issues Be Gold Mines For Investors?
Can properties that have title issues actually be incredibly profitable opportunities for real estate investors?
Title issues can be more risky and costly than physical issues with property condition. They can strip anticipated equity, and even block the ability to sell real estate. Yet, for the savvy real estate investor, these properties can be diamonds in the rough, just waiting to be polished for big profits.
Since 2008 the American real estate landscape has become plagued with title problems.
- Building permit issues
- Past due property taxes
- Federal tax liens
- Questions and clouds around ownership and the right to sell
- Easements and property usage rights
- Loans and mortgage liens
- Mechanics liens
- Outstanding leases
- Broken or cloudy chains of title
- Foreclosure fraud
As a buyer, if you don’t know about the presence of these issues, they can bankrupt you. Many new real estate investors don’t even know that these issues are out there, and many more don’t know how to look for them. They can especially affect those buying online and via auctions. It gets worse if buyers don’t obtain title insurance. Even getting into contract on one of these hundreds of thousands of properties, and spending money on deeper due diligence can be extremely costly. Many are just setting themselves up to lose everything.
However, if you know what to look for, and how to solve these challenges and questions, you can dust off these properties and polish them into very valuable diamonds in very short periods of time. Because of the issues, you can demand deep discounts when negotiating the acquisition of these properties. Then quickly add value and equity, simply by eliminating these paperwork problems, or negotiating them. This can often even be done before you buy and close.
What’s even better is that you probably don’t have to pay anything out of pocket to do it. Your title company will typically be more than willing to help negotiate these issues so that they can get the business and close the deal. Or many attorneys will take on these cases on a performance basis, and take a percent of what they save and make you, if they are successful.
It’s all about:
- Knowing how to spot these defects through title and lien searches
- Cleaning them up with the help of industry professionals
- Getting title insurance so that you can pass on clean title to the next buyer