The Role of Title Companies in the Hard Money Lending Process
By Michael Main
A hard money loan should act in a similar manner as a traditional mortgage. Some aspects of real estate investing and commercial real estate borrowing are no different from buying a home. In both cases someone wants to borrow money to purchase a property, or to take money out of a property they already own. That means there are at least two, and often three parties involved, a borrower, a lender, and a seller. It is no less important in business real estate transactions than it is in buying a home for both parties to protect themselves.
Using a title company to close is a key part of the process in protecting everyone. Title companies can provide a title commitment and tax certificate up front. This will let all the parties know if there are any existing liens recorded against the property, and if any taxes remain to be paid. A buyer wants to make sure there is not a cloud on title when they purchase a loan, and the title commitment provides an initial check to prevent that. A title company will also hold the earnest money down payment on a commercial real estate purchase, just like on a home loan. This guarantees a buyer that their money has been accounted for, and is secured for the closing.
Title companies also provide an invaluable resource for closing loans. They provide the closing statement that breaks down where all the money is going to and coming from in the transaction. When conducting the closing, a title company guarantees all parties sign the required documents. They also have a notary there to provide notary services where required. They’ll provide the recording services with the county clerk’s office, and they will also issue an insured closing letter and a title policy, guaranteeing the closing was conducted correctly, and protecting each party’s interest in the property with regard to previous and existing liens. Perhaps most importantly, the title companies collect and disperse all the funds in the transaction, giving everyone a single point of contact from which to send or receive funds.
As a hard money lender we work with various title companies. In Austin, we often conduct closings with Stewart Title of Austin, LLC. Gaye Pierce is the Vice President of their office located at 1313 Ranch Road address in Austin. We have closed many loans with her office, and always receive exemplary service. Both Paradise Settlement Services and TranAct Title in Houston have conducted several closings with us for one of our Fix-and-Flip customers. Kayla Tran at Paradise and Lola Taylor at TransAct operate out of their offices on Richmond Avenue in Houston, and provide great service to us and our borrowers. Building relationships with title companies has helped us and our customers protect ourselves in these real estate investment transactions, and conduct quick, efficient closings.
Anyone involved in the commercial real estate and real estate investment business is well served to use a title company in their business. Here at Larry the Lender we consider it the best way to close.