If you wanted to learn how to prepare a deed, perform a title search, draft a strong option contract, or understand how to fix a bad title, where would you go? It's hard to answer, because, frankly, this information is tightly controlled by title companies and lawyers. Go into any bookstore and try to find this sort of highly protected information. You won't find it. Believe it or not, it's tough to find even in most law libraries.
Title companies and lawyers consider this hidden knowledge a major profit center, and they're not about to share it with you just because you're a nice person. For one, lawyers don't have time. They are in one of the most high pressured, time-driven industries. Spending hours explaining a process to you isn't nearly as profitable as punching a few computer buttons – and out comes a boilerplate document that they'll sell for $250. Title companies won't tell you either, because it just doesn't make sense for them to give away trade secrets that earn them many hundreds of dollars per customer!
Title companies and lawyers are good people just like any other group of business people. In fact, they are a part of every investor's team. Always have been, always will. I need lawyers and you need them – they are invaluable to society. What I'm suggesting is that serious investors begin to take a new form of control over their deals by having a strong understanding of the more technical side of investing. Sound boring? Let me tell you why it's not.
Serious investors know that most outrageously underpriced deals are distressed deals. There is some sort of tangled up mess involved. Either the property is trashed, or the finances are trashed, often both: back taxes, judgments, liens, questionable contracts, etc. Most deals, especially those private, sleeper deals, have problems that need to be understood. If you, the aggressive investor, are able to intelligently understand the paperwork, title search, and closing procedures, you can craft deals that the conventional folks may not understand. Colossal deals. High equity. Cash flow.
Let me give you a true example, a few years ago I found a foreclosure deal that was excellent. The terms were pay the owner's back mortgage payments to reinstate the mortgage and give the owner $55 to deed me the house (it was trashed and nasty). Knowing the fundamentals of title searching I immediately performed a title search. I wasn't happy about what I found. A $5000 lien along with the defaulted mortgage. I did some further legal research and discovered this type of lien was not to be feared. It was a particular type of lien that almost never is pursued. Plus, I know the lien's statute of limitations. With this and other knowledge I decided to take title anyway. Voila, a few years later, the lien is gone!
Now friend, you must never, ever do this unless you know what you're doing. Underline that twice in your brain. This is not an arena for dabblers. But, the more you learn about the legal facets of these distress deals, the more money you'll save in professional fees, and the more money you'll make by maneuvering these rough but highly profitable waters. Also, remember, the bigger the stakes in terms of total dollars involved, the more legal counsel you need.
Okay, back to why this information is hard to find. There isn't a huge market for this type of specialized knowledge. This is for elite investors only. Not one-time real estate buyers. This information makes absolutely no sense at all for the occasional homeowner or buyer!
If you start hanging around real estate investment associations and clubs you will eventually meet some elite investors. These are the guys who really know their stuff about the inside world of distress property. And let me tell you, these guys are tight lipped. They might throw you a few crumbs now and then, but the real secrets of judgments, defaulted mortgages, title searching is off limits to the uninitiated. They too want to keep this information to themselves.