Private real estate investing can be a safe investment. Consider the high interest rates that can be earned by using other people's money. But nothing is completely worry-free. So as a private investor you should do everything you can to make your investment safe. By working with hard money lenders, private lending has become one of the fastest ways to generate extra income. A savvy private lender doesn’t use their own money or credit, they use other peoples.
So after the search for the right property, the negotiating and all the other aspects of buying property, you may be tempted to reduce the amount that you pay for a house starting by questioning every item on the list of fees and charges that you are expected to pay at closing. This is where getting a title insurance policy will protect your interest. You are about to make a big financial commitment by purchasing this house. Can you only imagine that If you didn’t have the title checked first then discover that somebody else has the right to share this property with you? Or perhaps that you did not get the entire area that you thought you were purchasing? Even worse, you were given a fake title?
To protect your investment, you need to consider some insurance policies. The main two insurances that you should automatically require when you are a private real estate investor is title insurance and property insurance. Both of these policies protect your investment and are paid for by the real estate investor.
A title search will show exactly what is included in the property you are buying such as the amount of land, additional buildings, etc. A title insurance policy will trace the history of the title from the most recent person who handles the deed and going backwards in its own history. This search will give you an idea of how the title came to be in the current grantee's hands.
A title search also will prove that any encumbrances of the title have been paid in full and if the title is a real title with signatures that are not forged. In most cases the buyer pays for the title insurance fee. This is sometimes negotiated so that the buyer and seller agree to split the cost.
As a private investor, you may be purchasing this property with plans to sell within a year you can request the title company for “hold-open” policy on the property. There most likely will be a small fee by the title company, but this is common practice for private real estate investing. What this does is instead of issuing a policy based on the first transfer (from seller to you) it will be left open to issue a policy on the second transfer (from you to the buyer).
From the lender’s prospective coverage of lender’s title policy will include checking for additional liens on the property. If there are any unrecorded easements and access rights to the property a title search will bring this to the front.
So while private real estate investing is a safe way to generate an income, always protect yourself with title insurance. After all, you don’t want to get ready to sell this in the future and find you you’ve been repairing and upgrading a property with a fake deed!