I have recently come across some real estate transactions where there have been issues in selling a property because the title is not “clear” and issues with the condition of the property.
Very early in my real estate investing career I had a negative experience (expensive too) where I have since followed two rules that has saved me a ton of time and money. These are:
- Never buy a property without an inspection.
- Never buy a property without a title insurance policy.
Some real estate investors (usually new to the industry) tell themselves it is an expense they don’t need since the next buyer will do an inspection. The problem is everyone says they don’t want to get into a lawsuit situation but you are setting yourself up for one when you sell a property and there are things that come up later that should have been shared (also legally known as “disclosed”) about the property. This is where most folks that end up in court is all about. If you would have just shared some information that was crucial to the sale.
I call a home inspection an investment and not an expense. For the price of a home inspection you can have the comfort of knowing what you are buying and eventually selling. Yes, there are legal ways to protect yourself but even if you do, you still have a possibility of a lawsuit which could have been avoided or mitigated.
Let me be clear. The home inspection can be but not always be a tool to help negotiate the transaction. But for me the real purpose is so I reduce the likelihood of any surprises I should know about before buying a property.
The other thing that everyone should do when buying any property is to purchase a title insurance policy. Here again, I have experienced a time when the title insurance policy helped clear up a title issue so I was able to sell the property without delay. Please note that there are some States that use real estate attorneys to close real estate transactions and they offer title insurance policies. The key here is to ensure that there are no title issues that would preclude you from eventually selling the property. You don’t need a family member or contractor coming to you later indicating that they had an “interest” (basically money is owed to them) that will prevent you from selling or again up in court. Hence the insurance policy.
I hope this makes sense. These two have saved me a ton of headaches and money. Please consider adding these to your checklist of purchase steps so when the time comes, you can sell the property without delay.
Happy Investing!
