My cash buyer wants to use his own title company — what do I do?

Why a buyer might prefer his or her own title company

A cash buyer might prefer his or her own title company for several reasons, often rooted in comfort or existing relationships. He or she might have a long-standing relationship with a particular title agent who understands his or her business model or specific closing requirements. This can make the buyer feel more secure about the process.

Another reason could be that the buyer believes his or her preferred company offers faster service, lower fees, or greater flexibility. Sometimes, it's simply a matter of convenience, especially if the buyer deals with high volumes of transactions and has an established workflow with one firm. For some, it is about having a trusted third party in what can be a complex transaction.

Your priority: controlling the closing process

As the wholesaler, your priority is to control the closing process to ensure your assignment fee is protected and the deal closes on your terms. This means selecting a title company that understands assignment contracts and is investor-friendly. A good title company will also handle the seller professionally and discreetly.

When you choose the title company, you dictate the timeline and ensure all parties are on the same page regarding the assignment. This control is vital for mitigating risks like the buyer trying to circumvent your assignment or the seller becoming aware of your fee prematurely. It's about maintaining a smooth and predictable path to closing.

When to consider the buyer's title company

You might consider allowing the buyer to use his or her title company if you have an established, trustworthy relationship with him or her and have closed many deals together. If the buyer is highly experienced and reputable, and his or her title company is known to be investor-friendly, it could be a viable option. However, this should not be your default position.

Another scenario is if your preferred title company has a conflict or cannot meet a tight closing deadline, and the buyer's company can. Even then, proceed with extreme caution and ensure you have clear, written agreements in place. Never compromise on the security of your assignment fee or the transparency of the closing process.

What to check if you agree to a buyer's title company

If you do agree to use the buyer's title company, you must perform your own due diligence. First, verify that the title company is licensed and reputable in the state where the property is located. Ask for references and check their online reviews, just as you would for any other vendor.

Crucially, confirm that the title company is experienced with assignment contracts and is comfortable with your role as an assignor. Get a clear understanding of their fees and who is responsible for paying them. Obtain a copy of the preliminary title commitment and review it carefully for any issues. Most importantly, communicate your expectations regarding your assignment fee directly and ensure they understand their role in protecting it.

Steps if you need to insist on your title company

If you decide to insist on using your own title company, communicate this firmly but professionally to the buyer. Explain that you work with a title partner who is familiar with your process and can ensure a seamless closing. Frame it as a benefit to the buyer by highlighting the efficiency and experience of your chosen company.

Reference your purchase agreement, which often specifies who selects the title company or allows for mutual agreement. If the buyer pushes back significantly, be prepared to explain that this is a non-negotiable term for you. A reliable buyer will understand the need for a wholesaler to control the closing environment. If he or she does not, that might be a red flag for the deal itself.

Protecting your assignment fee

Your assignment fee is the core of your wholesale business, so protecting it is paramount. When dealing with a buyer's preferred title company, ensure your assignment agreement is clearly worded and recorded if necessary, according to state law. The title company should acknowledge receipt of your assignment agreement and understand its role in disbursing your fee at closing.

Never rely on verbal assurances. Confirm in writing that the title company knows how to handle the assignment fee on the settlement statement. This might mean having a separate line item for your fee or ensuring it's included in the total closing costs in a way that protects your interest without revealing too much detail to the seller. Always review the preliminary settlement statement before closing to ensure your fee is accurately reflected.

This is not legal advice.

This content is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.