What is Equitable Title (HA 005)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hello.
Steven Butala: Welcome to the House Academy show, entertaining real estate investment talk. I’m Steven Jack Butala
Jill DeWit: And I’m Jill dDewit, broadcasting from sunny southern California.
Steven Butala: Today, Jill and I talk about what is equitable title?
Jill DeWit: What is equitable title?
Steven Butala: Equitable title is a financial interest in property, but not illegal interests. The easiest way to explain it, and I’ll get into great detail later here after the question, is a mortgage on a house. You own the house. You’re on the title. You’re the legal owner of the house, but the bank’s got equitable title in case you stop paying. Equitable title and financial interests are often used interchangeably, but we’ll get into it.
Jill DeWit: Well, we’re done now. Aren’t we?
Steven Butala: We could be if you have other stuff-
Jill DeWit: All right. Thanks for listening.
Steven Butala: If you have other stuff to do today, you’re all set.
Jill DeWit: You can go now.
Steven Butala: Because we don’t.
Jill DeWit: Yeah.
Steven Butala: We don’t have anything else to do today. Jill and I-
Jill DeWit: No, nothing.
Steven Butala: This is what we’re supposed to do today.
Jill DeWit: Thank you.
Steven Butala: Before we get into it. Let’s take a question posted by one of our members on the houseacademy.com online community. It’s free.
Jill DeWit: Jeff asks, Do you ever buy a house without title insurance or use a self-close, like with land? That’s a great, great question. The answer is no.
Steven Butala: That’s my answer, too.
Jill DeWit: You could. I mean that’s what’s so crazy. People go, “Wait, wait.” I’m sure if we were like “erch” you know, hitting the brakes right now. Seriously. What do you mean, self-close and buy a house? I mean technically you kind of could. You kind of could.
Steven Butala: You could.
Jill DeWit: You, have a beautiful cabin in the woods and it’s tempting. Because what if you’ve got a beautiful cabin way out in the woods, and it’s on a piece of property that you really only get $5000 for it kind of thing, so it you makes you think, going “Why would I even do the title insurance? Because I’m only buying it for $5000. That’s going to add another $2000 to the whole thing.” But, we just don’t want to do it that way, especially with the way we are buying and selling because we are not the end user.
Steven Butala: Yeah.
Jill DeWit: I would only consider it if I was going to be the end user and it’s a silly little cabin that’s falling down anyway, and I’m only going to go out there and camp, and hunt, and maybe use the outhouse. So that’s what’s interesting. People don’t know that you can do that though. We don’t, and I don’t recommend that.
Steven Butala: There’s some basic rules we have around the office about self-closing. Number one is the property is not worth, and we’re not paying more than $5000. These are loose rules.
Jill DeWit: Right.
Steven Butala: They’re not hard and fast rules.
Jill DeWit: Right.
Steven Butala: Number two … and I have self-closed houses in the past, before Jill, because they were so untenable that they weren’t financable.
Jill DeWit: Right.
Steven Butala: So the property is in such bad shape in that concurrent condition you pay … We are literally paying 500 to a thousand bucks for it. There’s no chance you’re ever … you’re going to get a loan or the person that you’re going to sell it to is going to get a loan. But even now, I think if I had to go back, I probably wouldn’t close with title because you’re breaking the chain. Let’s just be honest here. You’re breaking the chain of title, so on a piece of land that’s not that valuable, this is fine. You do it all the time. It’s very regular for us to do it; houses, no.
Jill DeWit: The thing about land, too, is so many of the transactions up until us, let’s just say, were all done maybe self-close, and it’s not that big deal, but now you’re going to say … “Now I’m buying a piece of dirt, rural vacant land because now I’m going to finally build on it. Now I need title insurance, because now something’s going to happen.” You’re usually borrowing the money to fund whatever you’re going to build, and they’re going to require it.
Steven Butala: If you’re paying 1000 bucks for a piece of dirt, you’re going to add two almost $2000 in title fees, so now your acquisition costs on a thousand dollar piece of land is $3000? It doesn’t make sense.
Jill DeWit: Right.
Steven Butala: Today’s topic, what is equitable title? ‘
Jill DeWit: We’re all about title today. T
Steven Butala: This is why you’re listening.
Steven Butala: Equitable title, like I said, the greatest example is a mortgage company, but here’s how we use equitable title. There’s an adverse possession. You cannot adversely foreclose on a piece of property, or go through judicial or administrative foreclosure unless you have equitable title. How do you get equitable title then? Well, there’s lots of ways. You can buy a tax lien. You can buy a tax lien, and now you have a financial interest in the property, and if the statutes are all lined up against that, you can go through a judicial foreclosure action, hopefully after you try to contact the owner and you really want to just work it out with them.When we talk about optioning, that’s equitable title, and now you have equitable title. Here’s an example of how some of our members very successfully wholesale houses.
Steven Butala: Hey seller, I’d like to buy your house for a hundred thousand bucks. Yeah, buyer, a hundred grand is not going to work, but I’ll tell you what, 120 will. I’ll tell you, seller, I can do 110, but I’m going to have to do an option on it because it’s just too much cash for me to come up with. But I think I do have a buyer at 140 so if 110 works, what do you say we sign this option here, and then I’ll go contact my guy, and if 110 works for you, then we’ll put the whole thing together. That’s equitable title, once he signs that. You have a financial interest in a property and you are able to make decisions.
Jill DeWit: And you’re not representing him, by the way.
Steven Butala: That’s right.
Jill DeWit: That’s an important thing.
Steven Butala: You don’t need a license for any of this.
Jill DeWit: No, you don’t even need a license.
Steven Butala: So equitable title can be very, very powerful. All this business about buying and selling notes, it’s the same thing as a mortgage. So what you’re doing is you’re buying … There’s all these nonperforming mortgages out there in the internet, or notes. Let’s say just call them private loans. You go and buy this note, or this mortgage, or whatever they call it. They’re all synonymous. They’re all the same thing. You’ve got $100,000 house. Somebody might be living in it. And a guy selling the note on the house that he’s been carrying, it’s nonperforming, nobody’s paying anymore. The renter or the owner’s not paying any longer, and he sells you the note for 40 grand. Why would he sell you It? A $100,000 … He’s not selling you the house.
Jill DeWit: Right.
Steven Butala: He’s selling you a note for 60% less than the thing’s worth because he doesn’t want to go through the foreclosure action, and then go through all this stuff and get it back, clean it up, and get it back, rents it, and all that. For him, that inconvenience in the business set he’s in, that’s not. He’s just the paper shuffler. You can make a fortune with equitable title and that’s very, very prevalent in house investing. And then that’s, that’s the show. I had trouble.
Jill DeWit: What do you mean, you have trouble?
Steven Butala: Are we talking about land? Why are we talking about houses?
Jill DeWit: Yeah.
Steven Butala: This is the house show. I need a new shirt.
Jill DeWit: We have to put something up here.
Steven Butala: We need like a House Academy shirt.
Jill DeWit: I’m going to have to turn this mug around, so you don’t see that. I’m going to have to … It’s house day, Steven. Put on a different hat.
Steven Butala: If you go look on the internet, and look up which states are tax lien states, that’s what tax liens are. Tax liens are you slipping your foot in the door on a property to get equitable titles. so that you can now make some decisions. And again, hopefully this is all after you’ve tried to contact the vast majority of … Tax lien investing and note investing centers around dead people. When you just are trying like heck to contact these people, skip tracing and whatever, you just can’t get ahold of him. The only thing you can do is start a foreclosure action or an adverse possession action in the hopes that that’ll get their attention, and that doesn’t even get their attention?
Jill DeWit: Right.
Steven Butala: Their dead.
Jill DeWit: Exactly.
Steven Butala: And then they don’t care. Maybe. Maybe they do.
Jill DeWit: You just slip your foot in the door. They are saying slipping on the banana peel or something. Like what are you talking about? What’s interesting is people get so hung up on this term, and they think it’s a big deal.
Steven Butala: It’s not.
Jill DeWit: Like it’s for some reason it’s a mystery term. It’s not that big of a deal. I mean, you just need to know what it is, and now you know. You either have equitable title, or legal title, or hopefully both.
Steven Butala: Yeah. If you own a piece of property, you have both.
Jill DeWit: Yeah.
Steven Butala: You know whose perpetually got equity, equitable title in your property? The government, because you pay taxes. If you don’t pay the taxes, they immediately have equitable title.
Jill DeWit: Surprise.
Steven Butala: Without doing anything.
Jill DeWit: You don’t even know that-
Steven Butala: Just by default.
Jill DeWit: Yep. It’s just because you live here.
Steven Butala: Think about that.
Jill DeWit: That’s pretty … It’s pretty amazing, isn’t it?
Steven Butala: Yeah, it’s awful.
Jill DeWit: I know.
Steven Butala: But that’s a different show.
Jill DeWit: Okay. T
Steven Butala: That’s the Jack and Jill show that’s coming up.
Jill DeWit: Oh Gosh. It’s rant about life.
Steven Butala: Just anything.
Jill DeWit: Okay.
Steven Butala: Yeah. How the government doesn’t know what they’re doing.
Jill DeWit: Okay.
Steven Butala: Like she shuts me down on this show. N
Jill DeWit: No, I-
Steven Butala: On the next show, on the Jack and Jill show. It’s going to release next month. It’s going to be … I can’t wait to talk about this kind of stuff with you.
Jill DeWit: Okay.
Steven Butala: We’re to talk about Jill stuff, too.
Jill DeWit: Yeah, thanks. All right.
Steven Butala: We’re going to have to have a little bit of some rants too, probably lose all of our regular Land Academy and House Academy partners.
Steven Butala: Well, you’ve done it again. You’ve spent another 15 minutes or so listening to the House Academy show. Join us next time for the episode called The Right and the Wrong Way to Build a Relationship with the Seller.
Jill DeWit: And we answer your questions posted in our online community at houseacademy.com. It is free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: That’s funny.
Steven Butala: Equitable title is like … There’s so much stupid stuff that you don’t need to know.
Jill DeWit: Right.
Steven Butala: That just gets jammed into your brain about all kinds of stuff in life. Equitable title is actually really important.
Jill DeWit: It is. As long as you know what it is. It’s like, looking at a closing packet for a property. There’s so much jargon and jumble and junk in there.
Steven Butala: Yeah.
Jill DeWit: As long as you know what you’re doing, and these terms … so much of that is just fluff.
Steven Butala: Yeah. It’s exactly.
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