Recently an experienced rehabber told me about a fairly novice mistake he made last year.
(To protect his anonymity, let’s call him Gary.)
He was lined up to purchase a former storefront with two residential units above it, but the owner made Gary agree to a closing 40 days later. His real estate title company Philadelphia was handling that and preparing for closing day.
Meanwhile the ambitious rehab plan was to gut all three levels and create three attractive, highly desirable rental units.
Believing that it was an all-but-done deal, Gary completed the scope of work, got contractor bids and lined up a hard money loan. Knowing how much work would have to be done in a short window of time to rehab, rent out and refinance this property, Gary got impatient for the closing day and started prepping. He put a deposit down for a bin and scheduled the rental of some equipment. Gary ran across a big sale and purchased the bathroom flooring and various bathroom fixtures for all three units.
Gary was obviously geared up and ready for this job so he was quite taken back when the real estate title company Philadelphia reported that they had found multiple judgments against the seller. It did not look like the title would be clear for closing day.
It’s not good when the owner feigns ignorance, claiming to not even know about the liens. Thus the title of this article and the moral from Gary’s story: Wait for clear title from a real estate title company Philadelphia before spending a lot of money on your fix-and-flip. Or to quote the old adage: Don’t count your chickens before they hatch!
Now, luckily, in Gary’s case, the owner changed his tune and worked cooperatively with the title company to pay off the debts. Gary agreed with the owner to postpone the closing day so that everything could be cleared up. The real estate title company Philadelphia was able to resolve all the issues and came to the postponed closing day with a clear title for Gary.
It is all too easy for us as real estate investors to assume that our deals are going to work out perfectly as planned. We need cautionary stories like Gary’s near-heart attack to remind us not to be spending money on our flip projects before getting the clear title from the real estate company Philadelphia. We’re often buying houses from sellers who are in distress—that’s a great opportunity for us to get a discount. But it also means these sellers have a higher risk of having liens against their property, judgments and other potential title issues. Always give your title company time to work through any title issues and issue title insurance before you start spending much money on the project (if you really can’t wait for closing day!).