When you buy a property, you want to be sure that it’s free of any debt and lien. This is where title insurance comes in. You don’t want to wake up one day, and your pool is torn down because it was built over a utility easement. Or the heir of the seller comes in and reclaims what is theirs. Title companies prevent these things from happening. Join your host, Keith Baker, and his guest, Rachel Luna, on the importance of title insurance. Rachel is the Agency Development Manager of Patriot Title. As The Texas Title Queen, she drops a ton of knowledge and discusses the parts of a title policy, what is covered, what is not covered, and why you need title insurance when you purchase a property. Learn the schedules of a title property and why title insurance is a must. If you’re a lender, you better listen to this episode.
Know The History Of Your Property With Title Insurance With Rachel Luna
The Texas Title Queen Breaks It Down For Lender Nation
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In this episode, I sit down and talk with the Texas title queen, Rachel Luna from Patriot Title Company, who has graciously agreed to come on this episode and drop a ton of knowledge around the topic of title insurance, what it covers, what is not covered and where to find things in the policy. Before we get to the heart of this episode, first, a little bit of housekeeping, number one, I’m about to lose my voice. The kids had a soccer tournament. They won the first two games and lost in the third. However, it was exciting. It was a blood pressure event. It was a good tournament. I’m proud of the kids but I shot my voice. I threw it out. Rather than waiting, I figured, “I’m going to make everybody suffer with me.” That’s the first bit of housekeeping.
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The housekeeping is finished and now it’s time to get to the heart of this episode. Our guest has been providing title insurance and escrow services for Houston area investors for about as long as I can remember. I caught up with Rachel Luna at the FlipCo Financial Meetup and was excited that she agreed to come on and talk about title insurance. For the simple reason, everyone, including me that says that you must have it, but very few people understand why you need it. I’m going to let Rachel answer that for you. I think you’re going to enjoy this. She is dynamite. She is Miss Personality. She has a pistol, a load of fun, is very energetic, knowledgeable and smart. I’m going to let her get down to the brass tacks of this episode and let’s get to the interview with Rachel Luna from Patriot Title.
Lender Nation, I want you to buckle up because we’re going to have a fun conversation about a boring topic. Our guest is coming and is going to bring all the enthusiasm and the excitement into something that nobody or very few lenders even think about and that is title insurance, exceptions, exclusions and endorsements. Welcome to the show.
Rachel Luna here from Patriot Title. It’s going to be an amazing show with some amazing information with some boring topics.
I can’t thank you enough. You are the perfect person to come on and talk about this because you’re going to bring life to it. You already have just started with this. Let’s talk about you for a moment before we get into the doldrums and the coffee stuff. Tell us about you. How did you become the Rachel Luna?Title insurance is there to protect you from legalities that will forbid you from your goal. Click To Tweet
The Texas Title Queen, as they call me or The Title Queen. I started this business many years ago. I was passionate about it and being able to help people grow their business in real estate and help along the way people accomplished one of the biggest dreams and purchases of their life. If it’s not investing, it’s purchasing their home for the first time or transacting a sale. Being able to be the end part of that transaction at the title company, helping people protect their investments, but also be a part of their investment.
I believe that as a title company and what we do is it’s a very important piece of the whole puzzle. I love that being that piece and I love how every transaction is different. Every single day is different. Every client is different. This business has been nothing but learning and that’s why I’m here. They call me the queen because I’ve self-educated, learned, evolved with this business and come out with solutions that can help all parties and all professionals in the real estate business in general, to help grow in their knowledge in real estate, but their knowledge and title and why it’s so important. That’s why we’re here.
We only met in person after the COVID thing, but I have seen you around in the Houston area for years helping investors and homeowners. In fact, Rachel has a new branch, so they’re expanding. Is business good?
Business is good. I’m expanding in Woodlands. This is going to be our Woodlands location. We’re off of Sawdust over here and 45. We’re in a conference and there’s not much going on in here because we’re setting up IT and getting phones implemented. We have a new conference room. We’re getting this set up. There are computers over here on the floor. We’re setting up stuff. It’s a new shop, but it’s all a process. I’m excited. I love opening up a new location to service and expand for our customers out there who need us in other areas of town.
Congratulations. That’s good news to hear. Let’s start off with what is title insurance? I demand it as a lender. I always demand a lender policy. Explain why am I crazy?
No, you’re not crazy. You’re being a smart man. I advise all to do the same. Title is protecting your investment. We do our due diligence from the sovereignty of a property. If you’re a lender and giving money out to someone or if you’re someone purchasing a property, you want to know what is on that property. Just because you see the person who signed the contract is the person that’s registered in the CAD or the tax records and their name is on that. Let’s use Harris County, Montgomery County, or Tarrant, it says, “XYZ person.” They’re on the tax roll there and they’re on the CAD and they signed the contract, it doesn’t mean they’re the only person that’s entitled to that property or there are not any other issues.
What it does is protect the consumer, the lender and all parties of the transaction because you don’t know what exactly is going on with an individual, their personal finances or if they’re filing for bankruptcy. There are so many variables I can go on and on why you need title insurance to protect yourself. Your money or investment or purchase could be in legality that will forbid you or not allow you going forward to sell the property, do a refinance cash out on that property because there might be some other encumbrances that prevent that in title that was not caught because there was no insurance and due diligence done prior to.
It protects you because there are so many variables. In Texas, especially because it’s a community property state as well. That’s another wrench in there but there are so many variables of why a property can get. It could be an insurable, number one, but it could also be a bad investment when you thought it was a good investment. That’s preventing bad investments. Why do you get titles? It’s to prevent a bad investment, is the bottom line.
Texas being a community property state, that divorce may not be final. That spouse may have a legal right of 50% of that property or a son or daughter. The black sheep of the family could come back all of a sudden say, “That was granddaddy’s house and I’m entitled to something from it.”
“There’s an interest that belongs to me. Where is it? Why didn’t I get paid? Who sold this? Where’s my money?” Go to the title company, but no. If you don’t have title insurance, you’re like, “You owe me money,” and then there could be the whole legality. That was what, at the end of the day, ended up being a bad investment that could have been prevented. At the end of the day, if you’re asking me, why do you need title insurance? It’s to prevent you from making a bad investment.
For one, I don’t pay it. The borrower does. That’s better, but it is a small price to pay to avoid letting your money be held hostage. Getting into that, we’ve got to clear up this title. It’s going to take the lawyers a couple of years, “No. I only loaned it for six months.” I can foreclose all I want. It doesn’t matter. I won’t have clear title to that property if I have to foreclose. For me, it’s avoiding holding your money hostage.
You want to make money on your money, not have it tied up in legalities because of not being informed or not doing your due diligence. Not allowing a third party, like the title company to do the due diligence to protect your investment, to protect you so you can get your money to be in and out and move onto the next project, borrower or whatnot.
That’s the beauty. If there is something that’s missed, that’s why there is title insurance. It’s to remedy the situation and make everybody whole.A property should be clear of debts and liens for the new consumer. Click To Tweet
That’s why the title company does its job. In the case that there is, you’re insured, protected and that’s why the title companies have underwriters. That’s why they’re an insurance company. That’s why you pay them to protect you and then fix the wrong. It gives you the mind.
For everyone, a title company is no different than any other insurance company. They’re going to be regulated by the state, whatever state they’re in. They’re going to have to follow the rules. They’re probably going to have standard forms from that state that they use, at least to get started and then things change and go in all other areas. That’s what we’re going to go into all other areas. When my borrower finds a property and I agree to borrow, he opens the title. He begins the title search with Patriot Title and then we get a title commitment.
That title commitment is going to talk about any exceptions that won’t be covered in insurance. There are exceptions and also exclusions. Anyone who has an auto policy or a home owner’s policy is going to know that certain things are going to be excluded. Radioactive waste coming from your garage would be excluded from a homeowner’s policy, for example. When you get a title commitment, the title company had gone through, done their research and due diligence and said, “We can trace it all the way back to sovereignty,” which I like to say is when we stole it from Mexico or the Indians, either way, you want to look at it.
Whenever we say, “We’re putting a fence around this land and I’m calling it mine.” You go all the way back. You get a title commitment and there are certain things that the title won’t cover. If somebody hasn’t paid back taxes, for example, the title doesn’t come in and step into that. As part of the closing process, the title company ensures that those taxes are paid or deferred, however, credit is given to the buyer. The bottom line is those taxes are going to be handled at closing such that exceptions will come into play. Before we got on the line, I had a bit of a thought about this.
It’s like, “The property is being conveyed clear of debts and liens for the new borrower.” The title company at closing will ensure and assure the lender and the new purchaser that the property that they’re receiving is going to be free and clear of debt and lien and not to exclude taxes, HOA, any other underlining lien holders that might be on the title, or that might have any derogatory authority to foreclose that would affect the new owner. We make sure that all debts and liens are paid in full so the new borrower who’s getting the property is receiving it with only their new lienholder or obviously as a free and clear investment to pay in cash. We do ensure that all debts are paid in full upon conveyance. Conveyance is transfer title.
Conveyance means a transfer of title from one party to another or one person to another or entity. Another example is conveyance or the right of possession if the house is sold, and let’s say there’s a tenant or a renter in it. That new owner has to honor the lease that the tenant is under until the completion of that. However, if there’s a problem with that title that is like, “It has nothing to do with the title of the property. That’s the property.” That is an exception to anything as well.
Tenants, anything with the physicality of the property in reference to being a landlord type of situation. Our insurance is only to protect the title, the actual debt in the lien, the conveyance of a predecessor-to-predecessor, owner to owner throughout the years, to make sure that every owner conveyed that property without any debt or lien or clouds in the title. A conveyance is a very clean and clear pass-through of the owner to owner throughout the years. We’re here to ensure that no one from many years ago was going to come and have some right to your property that you purchased here many years later.
We make sure that all of that is a clear conveyance of title throughout the years for you, the end buyer and owner, to have a good title. In reference to somebody living in the shack behind the house, we have nothing to do with it. That’s something that’s negotiated in the contract process. We are here to show the history, the debt and the ownership conveyance. The ownership lineage of title now in reference to who lives there and how or damage that’s contract stuff.
You don’t care about the use of the property. It’s just the conveyance of the title.
Also, the deb. That there’s nothing there that’s going to come back and the paperwork.
Wells Fargo is not going to come back and say, “We’re going to foreclose now. I don’t care if you just bought it.” That’s not going to happen.
We made sure Wells Fargo got paid off in full. That’s what we do. Some exclusions are he’s talking about this vision, which would have been landlord stuff, but it would be some of the city stuff. Some of your exclusions to title would be city easements, some right of ways that the property might be backed up to a utility right away. Those are some of the things that are excluded in the title because of the fact that the utility districts and the counties have the right to do what they need to do for the community.
If your property happens to fall in an easement, then that would be excluded from your title. We cannot ensure that the city won’t come in on your property and dig up an easement or something to put new pipes or new fiber optics that might affect your property. That would be considered an exclusion. Those are usually on Schedule B. I’m discussing Schedules, A, B, C, and D.
Let’s run through the schedules of a title policy.
As we left off, you open the title, then we get the title back. The title commitment is ready from Patriot Title, and we send you out your title commitment. Your title commitment is ready. Here’s a copy of the tax certificates, the preliminary taxes of what we’ve found. These are all our findings. This is what we do. This is our due diligence. The commitment I consider was like your Bible of what we do in due diligence. It’s going to have everything on that commitment and the tax certs. This is what we’re based on in our due diligence. This is all our research available now.
Schedule A is going to show you basically who is purchasing it. That would probably be yourself or your client, who the lender is, who’s lending the money. If they ask us to put it on that front Schedule A and what their loan is going to be for based on the contract that you provided us. At the very bottom, it’s going to disclose who the vested owners are. Why that’s so important is that it has to be the same person who signed the contract. Why?
Because someone who signs a contract has to be an owner of the property, let’s say Gerald Jr. signed it, but it’s Gerald Sr. who’s the owner of the title. Gerald Jr. is not the owner. Gerald Sr. is, so Gerald Jr. should not be selling this property or doesn’t have rights to sell that property as it states in the title at this point. There could be some variables that may be Gerald Sr. died and now he’s an heir. We’re going to a whole different spectrum of things.
It’s important that you look at Schedule A because it tells you who is the seller and if that person who sold it is the same person that signed your contract and/or is there someone else that’s on the ownership as well as the person that’s under contract? There’ll be multiple owners, but only one signed your contract. That’s another. Who’s this other person? I know you Gerald signed it, but who’s Sally? Why didn’t Sally sign the contract? Does Sally know that you’re selling this property? Where’s Sally? What this does is open up your knowledge of who owns this property. Just because you see Gerald on taxes and on the contract, but there’s a Sally that some way along the line got herself in the title with Gerald.
That’s where we start our due diligence and it’s important for all parties to know that vested ownership is important. Schedule A is important for that because you get to know who truly owns the property. Sometimes it is just who was on the contract, “Yes, I’m the owner. I sold you the property.” We find investment deals, good deals always have a little bit of hair on there. There’s always a curveball somewhere. We were very meticulous in making sure we do our thorough due diligence to make sure that you guys are protected and the right people are facilitating the right pros on the contract and on the sign and sell.Title closing is a must if you're a lender or doing private lending. Click To Tweet
Schedule A is who owns it and who’s buying it? Schedule B is going to be your exclusions. If we’re making exceptions, we put it to Schedule B. That would be in reference to utility easements, any county right away that might particularly pertain to the property. It could be some deed restrictions that might be on there that might be particularly applicable to this property. Those are the most common. Deed restricted communities that would be utility easement, right of ways and Harris County easements.
Those are going to be your most common exclusions because all of those entities have the authority to do certain types of facilities to the property or with the property that we insure. Back on this exciting topic on Schedule B is where I was, but there are some exclusions because you want me to discuss that too. There are some exclusions. Those exclusions would be some survey issues. If there’s a fence line, that’s off. There’s an encroachment on that fence line, we will still insure the property, but we’re going to make an exclusion. That’s going to be an exception.
We would exclude that from the coverage because that particular fence line could be off by a few feet, inches, but here again, the neighboring fence, your fence is over their property by two inches. We cannot ensure that neighbor is not going to come and say, “You need to move your fence over two inches.” If that fence has been there for 40 years, we’re not going to prevent a sell because of a fence being two inches over or half of six inches.
That’s something that we have to disclose to all parties, the lender in particular like, “Are you wanting to lend on this property? The fence has been there for 40 years. We see in surveys. We’re going to make an exclusion. We’re going to make an exception to these few centimeters because there’s an encroachment and that’s going to be put on Schedule B, but are you going to proceed forward?” Yes, they are because the fence has been there forever. There have been many sales before ours in the history of conveyance that there have been exclusions and exceptions to that fence.
I’m using that particular scenario because it’s the most common one in the city of Houston, Metro Dallas or Dallas, El Paso. Any large Metroplex get changed around, things happen throughout the years. The fence is the most common exception that title companies make on a regular closing basis because of the fact that the fences are something that got built years ago. Maybe they didn’t have the proper survey at that time or the technology to do that survey. They might’ve built it off a little.
To prevent enclosing because of a minute situation, a fence line is something that we allow the lender to make a decision on. As a title company, we will not insure it. We make an exception to that. Now, if the lender decides they don’t want to insure it either and they don’t want to go through the loan because we’re not insuring it, that’s a decision of the lender that they can very well do. That’s going to be a lender decision.
Two inches of a fence on somebody else’s property line doesn’t bother me. Half a garage on somebody else’s property, I find that very bothersome. A good friend of mine said, “Full disclosure, everything’s fine with title except come to find out half of the garage or a third of the garage was on someone else’s property.” A neighbor found out about it. He was wanting to sell, carve out that little bit. I was like, “Find somebody else that will handle that.” I’m not going to rectify it, get it clear and they never did. I didn’t land on it. My money didn’t get tied up in that. I don’t have to worry about that.
That could be obviously cleared out. There could be some indemnities to that. There are always solutions to things. That’s why you have to have a title partner that knows ways to assist you to get things through when odd situations happen and give you knowledge. Those situations can be worked through. Clearly, there are ways to get those things done. If you want me to lend on that now and you guys don’t have a plan of action, I’m not giving my money on it. I’ll move on to the next deal. The title company could still insure on that. Honestly, we will still insure it because we are going to make an exception to that garage.
If anything comes or that neighbor says, “You guys got to tear down your garage.” “We got title insurance on this.” “No, we made exceptions to that garage. You will see it on Schedule B because that garage was on the neighbor’s side. If the neighbor tells you to tear down your garage and build a new one on your side, then we’re not accounting for the cost of that garage and whatnot, because we insured the land that you own between these boundary lines. That garage over the land that we insured on. We gave the title insurance on this square here. That garage is over here. We’re not ensuring that because that’s over on his side.” If you want to put it in black and white, that’s as easily as it can be explained right there. That garage is not insured because it falls over the line of what we say, “We’re insuring this lot and block.” That garage is over there on that block next door. I’m not insuring that. That’s how you would determine an exception or an exclusion.
It doesn’t happen often, but it does happen.
It does, but not so often. In the Houston Heights area, there’s a lot of those scenarios happening around 9th, 8th, 7th Street by Alexander. If you’re familiar with that area, there was a replat with the city. We’ve been all over these. I’ve been here years ago, but they shifted some of the plats because there’s the Bayou Running Trail right there. Some of those properties got shifted over. That’s a big legality with the City of Houston, but that’s something interesting. We’re a part of that feature title. We were part of the city cleaning out. That’s an interesting story. That’s another episode.
What do you have for Schedule C?
Schedule C is debt and lien. It’s what’s on the title. It’s what’s owed, where the money is, foreclosures, liens, tax suits, child support liens, and judgments if there’s a bankruptcy, divorce or probate. Anything of public or county records that are referenced to the owner of that property or to any predeceasing owner of that property, anything that’s attached to that property or to the owners or previous owners of that property will be right in Schedule C.
When we go into the title, it’s our Bible and how we base our due diligence. We look at A. We skim over B. There is nothing big, no red flags. We go right into Schedule C because it’s where we’re going to start the insurance piece of it. It’s where we find, is there a debt? Is this seller have outstanding liens due to child support? Does he have any franchise taxes that are attached to his name from the previous business? Does he owe the IRS money? Have there any federal liens that have been attached to the title because he hasn’t paid his taxes or is there any mortgage?
Is there a second mortgage? Is there a pool loan? Did he take out a loan to build a pool and there’s a loan on there for a pool? Anything that could have been or added on to the title, through an individual or through a loan type of base would be on Schedule C. Schedule C is the debt or any debt that could be attached to the property. That’s where we start paying off and clearing title from Schedule C.
The Schedule D tells you the premium, the amount and all of the parties to the title company or insurance. Who are the important people there, who your underwriter is and all of the logistical stuff for the actual title company and the title underwriters is going to be on Schedule D? Most important is A, B and C. Schedule D is the fine print. What’s important is it tells you about what title insurance is and all of our bylaws and laws on Schedule D.
A, B, C and D obviously, I want all of them to be in alignment, but I’m looking for any exceptions and obviously, you’re taking care of the debts and liens at closing. That alleviates that worry for me and that’s why I like title closing at a title company.
It’s a must. If you’re doing private lending, if you’re a lender, it’s a must. You must enforce on it and you must demand that any borrower closest to a title company. If anything, you can get lender’s coverage as well. As a hard money lender, you could also request lenders’ coverage to protect your loan as well, besides the borrower’s owner policy. As a private lender, you can also get lenders coverage, which will protect your investment as well.
I forgot to mention in the beginning, there are basically two title policies. There’s one for the buyer or the borrower, whoever’s purchasing the property. The buyer policy or borrower policy is usually for the amount of the sale. Whereas the lender’s policy is usually for the amount of the loan. I like to put a little contingency in there just because you never know. Since it’s an insurance policy and if I want an extra 15%, that’s wrapped into the premium. It’s calculated out. My lovely borrower pays for that premium and now I have my title policy. As long as my money is out, then that title policy is in effect to protect my money.
I always encourage any private lenders to get lenders coverage to protect your investment and your loan into the property as well. I think that’s something that a lot of private lenders are not doing. They’re getting educated to do now, but they were just basing their loan criteria on the borrower being able to get the owner’s policy. If they’re paying for it, I would say, get the lender’s policy as well to protect your investment.
It’s a must. You don’t do it without it. There’s no loaning without it.
If the borrower’s paying for it, it’s a no-brainer. Title insurance, there’s the four Schedules, A, B, C, and D. All of them are very important, but for exclusions and exceptions, it’s B and for curative, debt and lien, it’s C. Those are very important to very important schedules in them. That’s basically how we base our due diligence if a property is insurable or not. We base that off on our commitment and those schedules.
There are exceptions and exclusions that the title won’t cover, however, there are, in certain cases, things that you can pay to endorse into the title policy. It’s going to cost a little more. Instead of going so far into the weeds, what are the most common endorsements that you see brought on?If you're buying an investment and the title company does its job, there should be nothing to worry about. Click To Tweet
We’re talking about a survey. That would be your endorsement for the survey. Private lenders, when you’re writing up the contract, we consider that as a cash transaction. It’s like hard money, private lending. We all write up the contract as cash. Most investors do. That’s a request for the lender to request survey coverage. Cash borrowers and private lenders don’t necessarily ever request that survey coverage. Here again, we’re talking about knowing what you’re lending money on and giving coverage on a survey. I believe that if you’re lending inside of the city lot and block, you could request survey coverage. It’s $100 and something. It basically covers everything inside the property.
If we gave you survey coverage, we’re ensuring that everything within that property is insured. There are no encroachments and exceptions. We’re not making any exceptions to the survey. It was very important that our underwriters review your survey as well, besides any utilities. We will let you know if we’re making exceptions. The survey coverage is very particular and specific to any exceptions that we would insure and cover.
Let’s say we gave you survey coverage and there was an encroachment. We didn’t inform you and make an exception to it. Let’s say that garage situation that we’re talking about and the title company did give you survey coverage. We did make an exception to that garage. We did see it on that coverage. We would, in turn, have to pay for that neighbor’s garage because we gave you survey coverage and didn’t make an exception to that encroachment. We didn’t inform all parties.
You bought a house with title insurance and survey insurance, then, later on, you find that there’s an issue. Your garage’s 3 feet in the neighbor’s yard. Nobody at the title company and no one informed you. You’re like, “The title insurance is a good deal.” We sold the property. The title company, in turn, is now on the hook because, number one, we gave them survey coverage and didn’t inform you of that encroachment. We didn’t make an exception to it. That would be something that the title company, in turn, would have had to be paid for if we didn’t notify all parties based on this survey review.
We don’t necessarily request a survey because we’re doing our due diligence on the debt and lien of the property and how the property was conveyed throughout the years. Survey coverage, you’re going into the actual physicality of this in the block. We’re insuring this land here but once we get a survey, it’s specifying all the structures and fixtures on that land. If there’s a pool, that pool got built over a utility easement that now we see. We can insure this property because now see the gas company can tear up your pool because you didn’t build your pool properly. There’s an easement that you build the pool over.
You’re going to come to the title company saying, “We have survey coverage. Why didn’t you tell us our pool that we bought this house was over the gas line?” Now here we are three years later, they want to tear up our pool. They’re going to come and tell us that we have to pay for that, the title company. There are so many variables, a barn, a pool, a shack, a driveway, a porte-cochère, a pergola. There could be so many things that could be attached to a survey coverage that a title company was responsible for once we give you that survey coverage.
Title companies are not supposed to be saying, “Get more coverage that we’re going to pay for.” If you’re buying an investment and the title company does your job, there should be nothing to worry about. The title company gets that endorsement. The environmental endorsement is going to be the environment of the property. We’re going to a little bit more land, like, “This property is not in an industrial district.” There haven’t been any environmental infractions that will affect that the property in itself. There’s not like a chemical plant three blocks away from your house. It would be your environmental coverage that would hinder your property.
There are different endorsements that we can add on. They are variable to the loan. Not every endorsement is going to be for a purchase. You guys are going to refinance home equity, cash out. They all have different endorsements that would be applicable in that type of purchase. A lot of people don’t know that. You can’t ask for all the endorsements. They might not be applicable to your transaction. There are gaps in endorsements. There are over 50 endorsements, but not all of them are applicable to each transaction. That’s very important. Endorsement is a whole other topic.
What’s the most common?
I want to see a survey on any property I lend on.
Order a survey. You want to know what you’re lending on. I don’t know why people don’t order a survey. People would order a survey for maybe a lot of purchase, but I would say to always get a survey. You want to know what you’re buying. If the title company is going to give you insurance on what you’re buying, you want to know what you’re buying. I don’t do any real estate without purchasing a survey on the property that I’m purchasing. Lender’s coverage, if you’re a private lender, requires lenders coverage, and definitely give it a survey endorsement on your deal. Those are going to be the most common, easiest to obtain, and common business practices. Your partial lenders do it. Why wouldn’t a private lender do it?
Getting a survey and having survey coverage is the same. This is going to be fun for you because you’re in Houston as well. To me, it’s like flood insurance. If you can’t afford a few hundred dollars to protect me, then you’re not my borrower, number one. Do the math. You’re buying a six-figure house and you can’t come up with a few hundred bucks at closing to make sure your lender is going to be good. You’re an investor as well. You’ve been around in the community. Real estate investors are a notoriously cheap bunch of people. They don’t want to spend any money.
I will not confirm, but I do not deny. Investors are a very frugal bunch of folks. I do believe every penny does count in a transaction. I do agree with you guys on that. There are certain places where you squeeze and spend. Making sure you’re having a solid, valid investment is someplace place where you spend a little. You can squeeze a little bit on landscaping and window finishes. You do spend a little on your investment of title and survey and knowing what you’re purchasing and ultimately what you’re going to end up selling, you’re buying and flipping.
The number one core value is ROI, Return of Investment and that is what insurance is for. If anything happens, my investment will come back to me. If I loan $100, my first priority is to get that $100 back.
That’s important, getting a return on your investment and making sure you’re protecting your investment. This is called back to, why do you need title insurance because you don’t want to make a bad investment. You want to get a good return on that investment.
People say, “You don’t need it because of this and that.” It’s always that one time. You never know when that one time is going to come around and kick you in the backside.
There’s always the time when you get these good deals that come from the title company. It could have been that one time, but it wasn’t that one time. It was like, “Title’s not clear yet. They’re still working on it.” You’re that borrower still at the title company or that investor or whoever the wholesaler guy who’s selling it to your guy or whatever, “We’re still trying to get titled good to go for your guy to buy it, for you to lend on.” They’re like, “Title is not clear. The title is not ready.” There is a reason why we’re still trying to fix whatever the issue is.
There is a good title. Your guy can go and do what he needs to do. Everybody makes a turn on money and move onto the next deal. That could have been that one deal your guide bought, you lended on and the title company didn’t get the title or the title company didn’t do a good job or whatnot, and that could have been an issue. If they bought cash from someone and you lent on the money. All of a sudden, there’s a big issue on title there that didn’t get fixed. Once the money is distributed and everybody’s moved on, good luck getting people to pay your money back.
Once that deal is closed and the money’s exchanged, that’s why we hold the transaction hostage until everything is done and good to go to close because once money is exchanged, good luck on getting money back from anybody that’s already taken it and it’s on their way. Wholesaler, seller, whoever that, even from the entities, trying to get money back from the taxing authorities is a hassle. We want to make sure that when we’re at the point to fund and close, that it’s ready to go and there’s no backtracking once we’ve done the due diligence and the title is ready.
That could have been a transaction and that could have been a bad one, but because we’re all waiting for the title to get ready to close, the title is doing the work. That’s preventing a bad investment for all parties. Sometimes we do it fast. We’re doing an heirship affidavit. People dying, with that will. We are trying to figure out what county, getting death certificates, getting things filed a record. Making sure we have a good conveyance of the title. That’s a lot of work to make sure that when you’re getting it, you’re getting it free and clear. You got it rightfully so with no encumbrances. You can move on, flip it and make your money, pay your hard money guy and move on to the next deal with no issues. Sometimes title takes a minute. It doesn’t always happen like this. There might be a lot of issues to clear.
I’m talking about my personal residence. It took extra few days to make sure everything was cleared up on a few things. Once it was done, we close. Everybody’s happy. We move on.
People don’t have an ideal expectation. We can get deals of title is good. We can close deals as quickly as 3 to 4 days, cash transactions. If the title’s bad, it can take up to six months to gather up a whole bunch of information to get it ready to close. It could be waiting for the judge and the county to sign off on something or for us to get approval from a bankruptcy court to release the sale. There could be so many variables that would prevent a good title, a transaction happening and finishing out with the title being approved. It could be as quick as 2 to 3 days. It could be as long as 6 to 8 months, depending on different entities and variables.
Every deal is different. Every loan is different. How can people get ahold of you at Patriot Title and use your services?
We’re all over social media, number one, but our website is www.PatriotTitleTX.com. We have 26 branches in the State of Texas. We are expanding out of very soon. We have our newest branch in the Woodlands that we spoke about. You guys can reach me at RLuna@PatriotTitleTX.com. Visit any of our locations, find us on our website. We are here to service all and we are an investor-friendly title company, to top that all off.
We are one of the last title companies. There is a very handful of us. Most title companies are now in the State of Texas and in general rule, we do not accept transactions less than $40,000. We won’t even issue a policy on that. Most larger firms and outfits are not insuring. If you bring a contract into a title company that’s $39,000 purchase price of a lot, you got to take that somewhere else. We don’t take anything that’s less than $40,000. That’s what’s happening now. Patriot Title still does because that $39,000 property you’re going to fix, sell it for $129,000. You’re going to bring it back to me. We take all deals, good and bad. We are here to service you and build long-term relationships and partnerships, and hopefully, we’ll have an opportunity to work together.
I hope so as well.
I’m so excited about your Private Lender Academy.
It’s not going to look pretty on the first iteration, but it’s going to get out there. It’s going to get done. I will sell it at a discount and then relaunch it. I’m going to spend the money and have nice PDFs and everything else. Thank you very much. This is not a very fun topic, to begin with, but you put the enthusiasm into it. I like it because I’m a lender and I like teaching people important stuff.
Thank you so much. Rachel Luna of Patriot Title.
I want to thank Rachel Luna for coming on the show and providing a ton of value to you, Lender Nation and to me. If you’d like more information about Rachel or Patriot Title, please head over to PatriotTitleTX.com. Here’s the deal. I don’t charge money for their show, but there is a cost and I’d be extremely grateful if you would help me drive awareness to the show, to get the word out by leaving me an honest rating and review over at iTunes, specifically iTunes or Google Podcasts, Spotify, iHeartRadio, whatever platform you’re using to hear my voice.
The review at iTunes will help the most. In the world of algorithms, that’ll help me and the show the most. It doesn’t take that long and it’s a small price to pay for the value that I try to provide. You heard Rachel Luna drop all that knowledge. I told you she was a hoot. She’s a lot of fun. I enjoy learning from her and explain title insurance because she makes it fun and thought-provoking.
That’s going to do it for Episode 139 and a few final thoughts. Please head over and join the Private Lender Podcast Facebook Group. Remember to check out PrivateLenderAcademy.com for more information on learning how to become a private lender, putting the power of the banking system into your investment accounts. I’ll also answer your questions, fill out the form, and I’ll get in touch with you. As I sign off, I’d like to say that in addition to self-awareness and mindfulness, I wish you safe and prosperous private lending. I’ll catch you on the next episode. You all take care.
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About Rachel Luna
Known as the “Title Queen” of Texas, Rachel Luna brings her vibrant personality and unparalleled pizzazz to the title business. “I build relationships with my clients, not just close deals,” says Luna, a principal at Patriot Title Company. Serving clients in Houston, Dallas, San Antonio and El Paso, Luna is an expert in real estate escrow and closing services and has over 20 years of real estate industry experience.
Leading offices of managers around Texas, Luna takes a hands-on approach to encourage widespread efficiency and success. “Having a powerful team pushes our standards to manage our business in a more streamlined fashion that we could not achieve otherwise,” she explains, adding that her on-the-ground-floor style raises company morale and promotes a smoother workflow.
A former top salesperson and Million Dollar Club inductee working with a Houston-based homebuilder, Luna transitioned to the title industry over a decade ago and has since garnered a massive Rolodex of clients through referrals, networking and her social media presence. “I have a knack for connecting with people, and I strive to gain partnerships and sustain long-term relationships,” she says.
To deliver satisfactory service, Luna customizes her clients’ experiences based on their background and preferences, finding a balance of fun and professionalism that matches their needs.
In 2020, for the second year in a row, Patriot Title was named Title Company of the Year by Houston Agent magazine. “This is one of my biggest professional achievements,” Luna declares of their two-year winning streak. “For Patriot Title to be recognized means a lot to me, as we have been working hard for our clients while so many businesses are suffering. We are grateful that others have seen our dedication and efforts.”
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