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Working with a title company?

Ideal3211 | Posted in Business on July 13, 2008 01:24am

To All:

I am a DIY and am going to be breaking ground on my new home, hopefully, very soon. I am going to be working with a GC. He wants to involve a title company. Before I speak to him about this I want to be educated on what I am talking about with him. Let’s assume I know nothing. Please tell me all you know.

Thank you,

Ideal3211

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Replies

  1. Hudson Valley Carpenter | Jul 13, 2008 03:26am | #1

    Title companies perform title searches on real estate and sell title insurance to the purchaser of real property.  Banks require a clear title and title insurance as a condition of lending mortgage money.

    What's this GC's interest in working with a title company as part of your contract with him?

    1. Ideal3211 | Jul 13, 2008 02:19pm | #5

      The GC wants to have the Title Company handle all the money. The construction loan will be put in escrow. The Title Company makes all the payouts. He tells me that it is better because we both have more protection on the $. He also does not have to take care of all that paperwork. Does this sound right? Does he benefit more than I do?

      1. Jim_Allen | Jul 13, 2008 03:54pm | #6

        It's equal protection. He might not be "taking care of the paperwork" but he will be providing good paperwork, without ommissions if he wants to get paid. Bob's next test date: 12/10/07

        1. mrfixitusa | Jul 13, 2008 05:30pm | #9

          In another thread I told you about a buyer signing a loan document last week which stated the bank would not allow rent to own or someone else "owning" the house.I don't have a copy of that yet but I will try to get it and get back to you.Now to the current topic.Several weeks ago I dropped off a contract at a Title Company.The woman at the front desk was very friendly and we talked about real estate.She told me that she was there filling in for the receptionist who was at lunch.I asked what her job is and she said "sales representative" and she gave me her card.she said "it is my job to talk to realtors or anyone I can about the services we offer at XYZ Title co"She asked if she could meet with me and any of my co-workers to talk to us.We did so a week or so later.Anyway, my point is that title companies have someone whose job it is to do the marketing.If you have questions about title co services you can contact the title company and meet in person with the marketing person.In the above situation she and I ended up having coffee and one of the things I asked her was "do you handle rent to own transactions" and she said "yes".She had started working as a realtor, a few years later quit and went to work at the title company and was a closing officer, and then was promoted to marketing.she indicated she was licenses as a "closing officer" and I did not realize that licensure was involved.Anyway, that is an option for anyone to go to the title company marketing person and ask your questions.If you're friendly and polite they may even give you an ink pen or letter opener with their advertising.How can you beat a deal like that.

          1. Jim_Allen | Jul 13, 2008 06:08pm | #10

            "Anyway, that is an option for anyone to go to the title company marketing person and ask your questions."I agree. Not all title companies offer all title related services just like each remodeling company decides where their expertise is. Bob's next test date: 12/10/07

      2. Hudson Valley Carpenter | Jul 13, 2008 05:10pm | #7

        As a homeowner, I'd want the right to inspect and approve materials and fixtures as defined by contract before payments are made. 

        I'd also want payments tied to specific completions which have been inspected and approved by the building inspector.

      3. User avater
        BillHartmann | Jul 13, 2008 05:14pm | #8

        Are you paying "cash" for the construction. If there was a construction loan I would think that the bank would be the one doing this.In any case I would want a local attorney that does realestate or construction work to review the contracts..
        .
        A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.

  2. Jim_Allen | Jul 13, 2008 03:49am | #2

    I think he's the one who has to educate you about his wishes/needs.

    He probably wants you to escrow the money and give the escrow agent specific instructions as to when to make payment. Typically that involves reaching certain goals and providing certain documentation to get the funds released.

    If the agreement is structured properly, you won't have the ability to stop payment if you decide to get uptight about something. The payment becomes automatic and doesn't necessitate your input.

    Smart GC....

    Bob's next test date: 12/10/07

    1. User avater
      BillHartmann | Jul 13, 2008 03:57am | #3

      Around here I have seen cases where the property is deeded to the builder and then when done back to the HO.I don't know why that is done. I assume that in those cases the construction loan is in the name of the builder.I don't know what the advantages and disadvantages of doing that are..
      .
      A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.

      1. Jim_Allen | Jul 13, 2008 04:11am | #4

        It sounds like the builder is getting a construction loan based on the build contract. He's using the property as security for the construction loan. The bank wants to be first and wants a direct connection to the builder, the lot and all control over the construction loan process. Bob's next test date: 12/10/07

    2. Mooney | Jul 14, 2008 09:13pm | #14

      "

      107006.1 

      After receiving the quotes on a granite countertop my wife and I determined it was clearly out of our price range and would settle for an alterative. We told this to the contractor who has done a lot of work for our family in the past and is trust worthy.  He said he would do the job at cost for us. We agreed as it was a 1/3 of the quote price. Two of the three pieces of counter top were under measured and cut with fault lying with the contractor. I received the bill and it is 60% over the bid price, clearly the result of his mistake. On one hand the bill is still less then the true value of the counter top, but on the other hand we would not have agreed to do it for the final price on the bill. If I don't pay it he will be eating that cost. The other issue, although some what related is the workmanship is not great. From a contractors perspective, what is a fair way to deal with this?"

      Go ahead and pay them huh?

      Tim  

      1. mrfixitusa | Jul 14, 2008 10:26pm | #15

        Tim I'm working with someone who has just bought a house with granite countertopsI have never had granite countertops and was talking to someone about them He told me some things and I went and looked at the granite and installation.I noticed the granite was glued directly to the cabinets.It's my understanding the granite should be glued to a glue block and then it (glue block) gets screwed into the cabinets to hold it in place.won't it be very difficult to someday remove a granite counter top which has been glued to the cabinets?Thanks

        1. frammer52 | Jul 15, 2008 01:14am | #16

          yes

      2. Jim_Allen | Jul 15, 2008 02:00am | #18

        Lets break it down a bit Tim.You're contract with the builder would be in writing. That is the only instruction an escrow agent would consider. The contractor and his contracted amount would be stated and accounted for before the construction loan was written. So, somewhere in the escrow instructions would be a clause that allows the builder to be compensated for the work that is completed. Generally, the payments are clumped together in larger payments rather than small individual payments for every individual component in a house. Therefore, your granite tops might be a small part of the larger "interior finish" draw. Lets say that draw is 35k. All the drywall and trim is done including the kitchen cabinets and tops and all millwork. Maybe somewhere in that larger draw schedule is a breakdown of all those components and one of the line items is "granite tops allowance $3,000". So, the builder sumbits a request for the "interior finish" draw for 35k. They send an escrow agent out to inspect to make sure there really is cabinets and tops and doors and trim and drywall. He sees it and authorizes payment. But.....you aren't happy with the granite tops and you send in a request to withold payment for unsatisfactory granite. The escrow agent reviews the instructions and reads what you and the builder have agreed to regarding how to resolve that type of a conflict. Probably, the escrow agent will pay the 35k, less the disputed 3k granite top line item. Without the escrow agreement, I'm guess you would be "Mr I'm Stubborn and I Won't Pay Another Penny Until You Change My Granite Tops....No Matter What". That would put the builder in serious jeapordy becasue you'd be holding 35k. If I was the builder, I'd have to miss my payments with my suppliers and that could threaten my entire business operation. How is that fair to the builder? Bob's next test date: 12/10/07

  3. Mooney | Jul 13, 2008 07:31pm | #11

    Banks, closing co, real estate agents, contractors, all have personal agendas that line their pockets from your back pocket. Thats there main job to collect as many of your benjamens as they can securely. They are not sources of advice . They will give it but it will be tainted to their benifit . This is clearly a move by the contractor for his own security which "aint a bad move " for him. Im not sure about you since I havent read the wording .

    You can trust your self or employ a lawyer at a minimal expense considering the size of this purchase. It might be money well spent . I figgure he will say you have all the say at this point and would structure it so you keep it .

    Its your money and you reserve the right to dictate it  or else decline .

    On the other hand Im interrested why this contractor needs this type of security. As Jim mentioned he might need a loan himself for the job . If thats true then he needs proof for his bank. He also needs a promisary note and they need such documents .

    Normally your bank sets up draws on their scheduled inspections . If they dont perform they dont get paid . If you arent happy , the work can stop and be a legal action. Its not customary a closing company has any business in it at this point but IM anxiuos to learn their angle also. Id like to hear this one fully .

    You can trust your bank in as far as their interrest in giving out money is also yours . They want to make good loans that are secure . They want you to have a product you can pay them back for but in the end if you dont pay they actually will own the product. They have as much interrest in it as you if not more at this point . My banks wont release that job as they stay in control of handing out money since its theirs . Thats why Im not sure if a closing company has any business here or any right since they dont have a dime invested .

    Tim

     

    1. Jim_Allen | Jul 14, 2008 06:11am | #12

      The banks use the title company to clear the liens and keep the title clear from one phase to the other in the construction process. No lien waiver, no check. Bob's next test date: 12/10/07

      1. Mooney | Jul 14, 2008 08:38pm | #13

        Thats done before the loan. Qualifications of one .

        Has nothing to do with a builder . Hes not borrowing the money.

        Thats why they have courts and lawyers if someone isnt happy.

        Tim  

        1. Jim_Allen | Jul 15, 2008 01:47am | #17

          "Has nothing to do with a builder . Hes not borrowing the money."You don't know that. I based my guess on the theory that the builder is getting the construction loan. Why would that happen? I don't know but I know a lot of builders use their own construction financing to build houses. It's quite common. It puts the builder in control of the entire operation from start to finish and there is no one to slow the process down in any way. If the loan is going through the homeowner, the homeowner might just decide to not sign for a draw. What recourse does the builder have then? I know lots of builders who wouldn't put themselves in that position. Bob's next test date: 12/10/07

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