What you should know about title insurance

Welcome, ladies, to The Real Estate Investor Show, providing inspiration, strategies, and insight to empower women investors to live balanced and financially free lives. Now, here are your co-hosts, Liz and Andresa Guidelli.

So in today's episode, ladies, we have Rachel Luna. She talks all things about title, company's title insurance. And although it's not the most glamorous topic, don't stop the recording here. We do get into some great nuggets around how you set yourself up for success, what's negotiable, what's not negotiable. So I think you're going to get some great insight into that.

Yeah, she also shares what is changing in this industry, where we're going with it, and how can you really look at title companies as a part of your business.

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Welcome back, ladies.

This is Liz and this is Andresa.

Welcome back to The Real Estate Investor Show, where we are focused on empowering women globally to live a financially free and balanced life. And, and we do that through so many different ways. We, we, uh, free Facebook community. We have meetups across the country, we're at 55 right now, a few in Canada. We have an eXp team, we have a Strive membership where we offer mentorship, accountability, and Andresa and I just stand for women getting what they need in the way they need it to create the financial freedom on their own terms. So that is what we're about. That's what we stand for, right, Andresa? And that's what we focus on every day. So excited to have Rachel on our show here. We're Rachel, so appreciative of your time and excited to jump into your story and learn a little more about what we need to know when it comes to title and what we don't know already. So thanks for being here.

Oh, well, thank you so much for having me. Good morning, ladies. It's, it's a, it's a privilege and a pleasure to be here and a part of this community this morning. So yes. So let's talk about title. Title, title, title.

What's the tea about, huh? Well, before we get there, I love, I love your enthusiasm for title because that's not always the case. So before we go there though, Andresa is gonna share a quick tip, something coming up for her, and then we'll jump into you. In a moment here, Rachel. So excited to do that.

Yeah. In our investor community, we get a lot of different questions, right? And we are so grateful for all the moderators that we have and other women that jump in to give support. One of the questions that we got this past week was, "How much should I make as a profit in a rehab project?" And the answers were just great, amazing, right? Many of them were saying, "Oh, 20%, 30%." And I was like, "Wait a minute, That is just a basic, like, no thoughtful, what we were taught about, what we should make at the end, or the scraps at the end. There's not even a profit line on our numbers, right? It's whatever is at the end. And I encourage women to really, like, take it to the next level. First of all, doesn't— you set what that looks like, right? And I will share with you guys here what do I consider when I am looking at profit. So a couple of things that I want you to consider: the size of the project. 20-30% profit on a small project is very, very different than a 20-30% profit on a larger multimillion-dollar project. How much of your time is worth? My time was worth something different at the beginning when I got started than what it's worth right now. Way, way different. So think about that. Are you doing it by yourself or you have a partnership? Think about this, right? If you put 20% or 30% as your target profit by yourself, could be fine. But how about if you are doing it with a partner and you're splitting that? Is 15% to you a good thing? And you are the only one that can answer. And the last thing that I would say, Liz, and I, learned a long time ago this. It should be a line on your numbers. Profit, it is not, and it should not be the last line when you are running the numbers as the result of everything else. That's what you got. No, you should put a line item and establish how much you want to make. If it is number, if it is a percentage, whatever that is, it should be a line item. And then at the end, you're going to see if that works or not? How far are you from the project? Who is involved? Have you worked with general contractors before or not? Is this our first time working with this person or not? There's so much beyond lists, and I think we fall into the trap of wanting this one recipe that fits all, and there isn't that. So I encourage you women to get into conversations and come up with what works for them and go for it.

Yeah. So important. It's so important. It's actually a great topic for a mini-sode, Andresa. I just wrote, I wrote something down around, you know, what does that look like? Because it's different for everyone and it can feel a little heavy, right? In terms of making that decision of whether to go, whether not to go. So I love that. Great, great suggestions. Great input. So without further ado, Rachel, thanks again for being on our show. Appreciate your time. And, you know, we always like to kind of kick things off asking you the question, you know, well, first off, what propelled you to get into title? Insurance work? That's, that's an interesting business. And I'm curious how you landed there.

There's a lot more money to be made in investing than the title. We're definitely a value-based business, but in a nutshell, I really, you know, it's investigative work, it's research, it's challenging. Every file is different and every transaction is different because there's different people involved, which is— I truly enjoy because I learned something new every single day in this business. And you think you've learned this all and you just don't. There's something new that occurs every single day within our company that I just continue to learn and grow my knowledge in this business, real estate, title matters, probate matters. Just, I mean, the list goes on and on and that's what I really enjoy. It's an ever-evolving business that I continue to learn in and I'm able to help people get across the finish line, you know, get closed and, you know, ultimately be financially successful and have financial freedom at the very end with whatever project, home they're selling or whatnot. But I actually worked at, in a title company as a clerk many years ago, went on to work for sales for a builder. Then I went back to title working with the builder's title company that closed our deals. And I ended up staying in title thereafter for the rest of my years. And I basically worked myself up the corporate ladder and then evolved into going into my own agency here. And it's been 6 years and I have over 26 branches in the state of Texas.

Rachel, let's break it down, right? Because to me, title is just so connected with real estate and it's not like, oh, should I do it or should— it's not even a question, right? But I do see many investors, in my opinion, it is a mistake, many investors going for it without researching. And let's talk about the risk about it, right? If you know the risk, can you still go for it? Fine, but I don't think people are aware of it. Can we break that down?

Yeah, there's a huge risk when you're purchasing a property or doing a real estate transaction without title insurance, which is insuring you, the buyer. So if you're the investor and you're buying a piece of property and you're trying to cut some corners in reference to closing costs, you're possibly cutting into your pocketbook because you might not know the future unforeseen liability that that property might have. That will ultimately lay upon you and your pocketbook. And so that's what the title insurance company does. We're insuring, we're writing insurance. If anything comes up, we as a title company are liable to pay that. And we have the full accountability once we do our title due diligence, close the file, give you a policy number. If something, anything comes up, and I'm going to be quite honest, I've seen it very more often than you would imagine where people are, especially investment deals. They're buying property from heirs, and, you know, there's taxes there, and they're going to buy it without— I've seen it several times— without title insurance. But these heirs did not— this is just an example that happens all the time— did not notify the taxing authorities that the person was deceased. The taxing authorities did see these heirships filed, then they take title. Well, guess what? Thereafter, that conveyance has been completed, they do a rollback tax up to 5 years, which could be an enormous amount of money. And guess who's left holding that bag? You, the buyer, now the new owner. And that's an unforeseen liability. How would you know that, you know, that the tax authority was going to take it upon themselves to, you know, view the legal paperwork and roll back those taxes? I've seen it go up to $30,000 in rollback taxes that this new owner has to pay, and they're liable for it. That's just one circumstance. I can go on and on about different, you know, different unforeseen liabilities that you cannot— just because you get a a deed and they just deed it over to you, there's just so many unforeseen liabilities, liens, judgments, people that are, you know, have claims to the property that you might not be aware of. You know, there's just so many issues. And I always just say, you know, get the title insurance. It protects you. It's the right way to go, especially if you're investing and putting your money into a deal. Do not risk your money. Always go the safe route. Investing is already, you know, a risky type of business as it is. Let's limit your liabilities.

Right?

So insurance is the way to go always. And then when you sell the property, your end buyer is highly likely going to want title insurance. And even if they're buying, if they're buying with a lender or bank money, if you're selling it retail, then they're going to demand, they're going to require title insurance. And then if you didn't have it on the front end deal, you could possibly have issues with the title company closing it. You know, they might not like your deed. There might be something unforeseen in your paperwork that you might have not done properly, or your attorney might've not done it right because they're not doing title insurance deeds. They might be just doing doing the regular legal deeds from the civil side of things, which might not be recognized by companies, which can also be a liability. So we just go the right route the first round and secure your investment and secure your assets. That's what I say. Yes. I get passionate about that. So yes.

No, no, it makes sense. You know, the women listening are investing, right? They know that many of them probably would agree there's value, right, to title insurance. I'm curious though, is title insurance created equal? Meaning if there are different types, I mean, I, I know what I've done in my tenure, but I'm just curious. I, you know, I think about it. I'm like, what are the mistakes? What are the things that we miss when we're working with a title company and making sure we get the right insurance? Just like every insurance, right? Could you pay too much? Could you pay too little? You know, what, what are the mistakes? What are the things that you've seen investors make when it comes to getting title insurance, even for people who are You know, I have a few deals under development.

Okay. So title insurance, the actual insurance rates is prorated. So those are set rates by the sales price of the transaction. So that's not going to change. That's set by the state that you're closing your properties in. It's insurance law. It's called a title insurance rate premium. You can look online for your state. They're set by the state, the premiums and how much they're collecting per the sales price of the property. Every state has a different set premium rate. Now what changes and differentiates is the escrow and the legal fees are allocated for the transaction and any ancillary services like tax certificate, the attorney that they use to generate the deed work for the transaction, or what the title insurance office agency charges just to, you know, render their services, which would be considered the escrow fee or the settlement fee. And that would basically be a set rate. That, that agency uses, but those are the rates that differentiate. The actual premium amount, which is, I always say it's usually about 1% of states usually say around the 1% rule is usually about 1% of the sales price is generally where the rates are across the USA. But what changes in a transaction is going to be your escrow settlement fee, your legal fees, which are related to the attorney that's drawing up all the documents for the transaction and then any ancillary services, which be tax certificates, survey companies, and those third-party companies that are giving their invoices to the title company to close your transaction. So those are the different fees that can change and fluctuate in every transaction. So as women investors out there, I would always ask your title company, what do you charge for your legal fees? And what do you charge for your escrow settlement fees? Those are the two fees that can really get you if you're doing multiple transactions and they do have a higher fee collective rate than another company, a competitor up the road. Those are the fees that you shop for as a woman investor or investor in general that you could save some money on. And if you're doing 10 transactions a year and you're able to save $250 or $300 a transaction, well, that adds up really quick, right? So you would just gotta think of the numbers here. And so that's where we could say those dollars could be some new windows, that could be landscaping, that could be some added finishes to a property that you're doing just to make those savings across the board if you're investing in that type of value. So, Definitely your settlement escrow fees, your legal fees, the attorneys that are using to do their services. And then always question some of the title fees if you want to. What survey company? Okay, what's the survey price to order the survey for this transaction? It's something I'm needing. Okay, could I have 3 quotes for 3 different competing survey companies so I can get the best rate? Uh, you could save $20, $30 there off a survey company. You know, they're just using one for convenience factor, and that's the guy that sends the cookies every week when there's another surveyor that can give you the same quality of servicing work. And, you know, they're $30, $40 cheaper just because they're not delivering cookies to the title office. And those are places where you can shake savings off across the board.

All right, Rachel, I love how much oxygen you use and how many words come out of your mouth. You save a lot of oxygen. I was like, is she breathing? Are you breathing, Rachel? I love it. But I don't want to interrupt you because those are so Good nuggets for women that are listening that you do have options, ladies. It's not this like, oh, shove it and then you take it. Let's talk about the changes with the industry. What have you seen with COVID What are the changes that are here to stay, or did it affect it some way, shape, or form, the title industry?

Well, I'm going to definitely say this. The title industry has definitely evolved. We are a very antiquated business. We're still on pen and paper. We're still on ink and paper. So that's something that we keep saying that we're trying to evolve out of, but unfortunately, signature, the banks want it, and that's just where it is at this time. But what we have been able to evolve into is doing online closings. We're able to do virtual closings. That is something that we're able to do now that we actually didn't do pre-COVID. It was very far few between and limited. The banks had to open up some of those restrictions on that. So we're able to do that now. And we're also able to receive earnest money through virtual. So Pam is one of the platforms that a lot of people use, and there's different other platforms that now title companies are using third-party secured banking entities to receive earnest money to drop into our escrow accounts. So people can just scan with their phone, drop it into this third-party secured account, and then they give it in turn to the title company. And so those are some of the things that have evolved our industry. You no longer have to walk into the title company, give a cashier a check. You no longer have to, you know, pay these servicing wire fees, wiring the money. You can actually get your personal check, scan it in just like your bank app. And then it goes to our third-party servicer and all title companies are doing this and that they in turn give it to us title company. So now we're actually receiving photo checks of our buyer's earnest money. That's something that has evolved. We're doing online signings now. We're letting the sellers sign, you know, virtually and we're letting the buyers sign virtually and it is not going away. It's here to stay for sure.

Great. Especially because it facilitates so much for, especially for investors that are out of state.

Yes.

Or it is just a transaction and let's just get it done instead of— where do you think this is going though, especially with different types of currencies and NFTs? Where do you think the industry is going to go?

So I do, you know, that's something that I am really involved in, crypto and Bitcoin. That's something that's really, really evolving. And I definitely, I'm on a couple panels that we're discussing that right now here in Texas. And we're actually in the midst of writing some with our underwriters, some parameters to protect the insurance piece of it, you know, making sure whatever happens between the consumer and the bank in the exchange of their currency, that the title company itself is not in any liability for maybe any disputes of what they feel the value of the exchange is. And that would be the title company's only concern if there is some kind of devaluation where the consumer feels they didn't get the right, I guess, currency exchange for the per dollar for their cryptocurrency. And that would be an argument they would have reversed in transaction at the title company or something like this. This would be the only liability factor for the title company actually. And so we're actually in the midst of writing different type of hold harmless paperwork and whatnot, because there are several banks that are accepting the exchange of bright currency to purchase real estate. We are right now in the middle of writing particular legal paperwork to provide to those consumers at closing table to limit the liability for us as a title company, because we are just insuring the property. We're not in any way a part of how that currency was given to us in the transfer to us to exchange and pay out all parties of the transaction.

So you believe that that's where things are going, that it would be much more common, those transactions? Would they still need a title company in the future?

I believe title companies are here to stay. It's just one of those things because of the exchange of how quite often properties are exchanged and the privacy acts of the sellers and buyers and us being able to do our due diligence to rectify the seller's matters on the sale, which is something that, you know, gathering Social Security numbers, getting payouts for liens and any type of judgments, child support, IRS. So yes, cryptocurrency is here to stay. I only believe it's going to be a new way people are going to be purchasing real estate transactions, and it's going to be a new way of modernizing currency in real estate. Today and ongoing in the future, it is going to be changing and evolving in that direction. So yes, cryptocurrency and all of the above in reference to Bitcoin and everything else, it's here to stay. The title industry, which is a very, very regulated, conservative industry, has acknowledged it and now is changing the way we are doing business to accommodate the progression of the future. So having said that, yeah.

Yeah, that's great.

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Rachel, I wanna circle back if we can for a moment about when investors work with title companies. And obviously they get a title insurance and You so eloquently talked a little bit about, you know, where we can negotiate, what we can ask for and what are just, you know, kind of standard. But, you know, in my investing days, always worked with title companies and ones we built relationships with before I purchased a property. You know, we found an off-market deal and we wanted to, you know, just kind of get, you know, title run on it to see what's coming up, what liens are on the property, those sort of things. And I always suggest that to, to the, you know, our members and, you know, in our STRIVE members, I always suggest that to women. To do because, you know, you almost like a title company is a partner. It's like a partner on the team, right? However, there's a way to do that versus me just cold calling a title company and saying, hey, I got like 4 deals that I want you to run title on. You know, time is money, right? You know, companies aren't going to be like, yeah, I got nothing else to do. I don't even know you. And let me just go do that for you.

Right.

So how can women navigate that? Because I think having a title company you have a relationship with As you are looking at off-market deals before you make the offer, before you, you know, really say this is something I wanna make an offer on and how much I wanna make an offer on is a value. We also don't wanna waste title company's time. So do you do that? Have you seen investors do that in a sense, like almost like a consultant, like concierge, like, and what does that look like in your experience with all the investors you work with?

So we do have relationships with investors and we always consider it a value exchange. Of course, you know, if it's an investor that's doing lots of business, bringing us great deals that closing and they're needing us for pre-offer services, running title or checking, you know, someone who, if they're really a valid owner or not, could you do that, do this as a favor? You know, that's a customer that we've created relationships with. They've closed many, many deals with us and there's not an issue doing those types of ancillary services for them. Yeah, sure. Let's check title. We'll run it. We'll do a lien search on it. Make sure it looks pretty good. So you don't waste your time and effort going to these people's houses. Whatnot, getting all these people to sign a contract that, you know, isn't even going to be able to close. So yes, of course, we don't mind doing that for customers that are obviously sending us volume and are closing. Now, in reference to someone who's coming into the business and that is needing to create relationships, then you have to go to different networking groups. You need to go and find yourself investor meetups that are offering investor-friendly title companies. We are actually a very investor-friendly title company. We do handhold investors from the very beginning of their infancy in investing to where they're completely, you know, they're running an 8-figure operation. You know, we've created a relationship with them and, you know, we're able to help them grow their business and navigate deals so they can actually close, you know. So you do need a relationship with your title company to understand your business plan, to understand what type of properties you're buying so they can know how to look at the title and how to dissect it for you. The title company relationship, that partnership with the title company, I always say have two. You know, I hate to say that I give half of my business to a competitor, but no, I always say have two title companies because I believe, you know, you have two companies that you create relationships with and are able— maybe one company has a different title opinion than the other company. Now, if you have a company with multiple underwriters, you can get different opinions through their underwriters. There's just so many ways to dissect title here. But at the end of the day, finding an investor-friendly title company, asking your fellow investor women, Who are you working with? Who is doing your closings? How do you do your pre-contract work with them? Do they offer those services? Is there a fee for that, or is that something they do as a complimentary service for you? These are the questions you ask your other fellow women investors to create those relationships with them. And obviously, the title company is going to be more receptive if it's a referral from someone who's already doing business with them. You're leveraging your other women investors that are doing business as you're beginning your business or introducing yourself to new opportunities and partnerships with title companies that maybe might Be, you know, doing a more investor-friendly platform that you have not been introduced to up to this point. Have them do that soft introduction to the title company via email, phone call. Try to be at the right places at the right time as investor women and create those relationships because it is a partnership with the title company. They can make or break your transactions.

Super helpful. Thank you. Lots of great nuggets. Where can the ladies listening connect with you further, learn more about you?

So in reference to what I do, we are an investor-friendly title company. Our platform of our business has been based on investor business, and we've been doing title— I've been doing title for over 20 years now. You can find us on the website at www.patriottitletx.com, or you can find me on Instagram or Facebook or Twitter or everything else at Rachel Luna, the Texas Title Queen.

Awesome. We're going to transition to our fabulous 3 questions, and the first one is What's the most transformational book you ever read?

Oh, that's— wow, The Secret.

Awesome.

That's great.

In terms of routine, what is the most powerful routine that you do to create a financially free and balanced life?

I would say that this is— there's two things, actually. I am very grounded spiritually. I meditate and I keep myself centered every morning to start my day with the right attitude and with the right motivation. But also I live beneath my means.

Great.

Last one. Which woman, famous or not, has inspired you the most?

Oh, that's a good one. My grandmother, Karina Luna. She's the reason why we're here today. She believed in me and the journey and my capabilities, and the rest has been just pure motivation and drive.

Awesome.

Rachel, thanks so much for being on our show. Thanks for your time, and appreciate it very much.

Oh, thank you so much, ladies. This is an amazing platform. And for all the women out there listening, I hope you make all your investing dreams come true. The sky's the limit. And let me tell you one last thing. All the millionaires and financially successful people have— more than 80% of them have made their success in the real estate realm. And that's a lot to be said about.

All right.

Thank you so much, Rachel.

Thank you.

Bye.

Bye, guys. Bye now. Hey, bye, ladies.

Bye-bye.

Bye.

Bye now.

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Ciao.