Cloud on Title: Understand Cloud's will increase your Profits, as a Real Estate Investor
Hey gang, this is Mike with My Real Estate DOJO today’s lesson is about what is a cloud in the real estate business when it comes to title searches and title policies. So let me go ahead and define what a cloud is.
A cloud is anything that impairs the title to a property. In other words a cloud is anything that throws a red flag for the title company, which makes them now want to insure the title policy. It is very important that as an investor you get a clean title, because if there is no title policy, then usually all the retail buyers will not be able to buy your home, because they can’t get title insurance.
If they can’t get title insurance, then you as an investor can’t sell your property and buyers go through retail, which means they need to borrow money from a lender and a lender won’t give them money unless the title company provides title insurance or title policy to your property. Now pay attention, this i the most important part. What a cloud does, it just dirty ups the water, dirty ups the exchange.
Here are some tips to think about, which are kind of confusing, so pay attention. Judgement is a lien on a property, which clogs up the title chain. Again, a judgement will clog up your title. What I want you to understand is that not all clouds are actually lien. Why would I say that? Let me repeat that!
A judgement will cloud up your title, but not all clouds are actual liens. A lien is you have the power to execute and foreclose on the property. Just because there is a cloud on the title, doesn’t mean that the person has the power to close on the property. Let me give you an example. I have a video on the top about how to protect your property.
And in that video I explain to you two steps that you can use as an investor to protect your deals, whether you are selling them or buying them yourself from other shady investors, or the seller changes his mind down the line and he invested money in the property in the title searches etc. One of the ways you follow a memorandum at the county clerks office, another way is you fall on your contract at the county clerks office.
Now whether you go to the county clerks office and fall on your contract, what that does is the title. Pay attention, remember what I said is that not all clouds are reinforceable as liens, because not all clouds are liens. But all liens are a cloud. In this case that we talked about, when you fall on the county clerks office moneys up or throws the flag at the title company, therefore they are not going to provide the title policy.
You don’t have the right, if you follow up on the memorandum to foreclose on a seller, rather than an actual lien. So the difference between a cloud and a lien is a lien you actually have an executable or a remedy, for example you have an actionable right. You can take action.
But when you fall back on a memorandum, you’re purchase agreement contract at the county clerks office, even though you cloud up the title, you don’t have execution power to go foreclose on this seller, you do muddy up his title, so he has to pay you to release it, which protects you from losing deals.
This is the most important part about being a real estate technician - you have to know the ins and outs of the business and I just provided you with some free information about cloud and what a cloud is and how you can use it to benefit when you’re buying or negotiating with a seller.