|Are You a Technical Investor?
If you are what I call a "technical" investor, you can feel good about
yourself because you are among an elite group. What is a technical investor? A technical investor, or
more specifically--a real estate technician, is an investor who has the knowledge and skills to
understand the legal side of real estate documents and conveyancing. In fact, a real estate
technician has the skill set of being able to handle a transaction starting with drafting his or her
contracts to performing title searches, legal research, drafting deeds, and even handling their
own closing of a deal.
Sounds a little intimidating doesnít it? Yes and no. Like any other skill you learn
this in parts and not all at once. First you get comfortable with the legal words and phrases, then
you learn about the content and structure of the documents. Next, you learn the application of these
documents and when it is appropriate to use them. Then, you watch others use these documents (at
your closings with lawyers and or title companies). You further educate yourself by asking lots
and lots of questions to the folks using this information--soaking up and taking notes of what
they are telling you).
Now youíre getting closer to handling some of this stuff yourself without "training
wheels" so to speak. Youíll probably start out drafting some simple documents like assignment
contracts. An assignment contract is a contract that conveys (sells/transfers) ownership in some
contractual right like an agreement of sale, lease, note, etc. Keep in mind, virtually any contract
can be sold unless assignment is forbidden within that contract--although there are a few exceptions
too technical to explain here). Next, youíll move into some slightly more advanced documents like
Options to Buy or Deeds.
Letís take just a quick minute for a mini-lesson on transfer documents. This is basic
but worth covering.
There are 4 primary transfer/conveyancing contracts in the world:
- Bill of Sale-- personal property is sold with a bill of sale
- Assignment Contract-- Contractual rights are transferred with this document
- Deeds-- Real estate is transferred with this document
- Leases and Licenses-- transfer temporary use of property or intellectual property.
People often look at drafting a deed as if it is some mystical document that none
should ever dare draft unless they have spent thousands of hours in law school. Well, Iím going to
break the news to you: a lawyer probably did not (almost never) draft your deed--his or her
secretary or paralegal did. Better yet, the lawyerís secretary used legal software, which drafted
the deed--they just filled in the blanks!
Okay, okay, I can hear folks saying it now "He is telling me not to use title
companies or lawyers in my real estate deals." If thatís how you interpret what Iím explaining,
you are wrong. Iím simply saying you can take a whole lot more control of your own deals, especially
distressed deals, if you know the technical side of this business. Too many investors are way too
ignorant of the legal and contractual end of this business.
Lawyers and title companies can be a great part of your team, but remember, they are
extremely risk adverse by the very definition of the service they offer (insurance and
advice). Many times, I donít know--is NO.
By learning to be a technical investor you have a savings in legal fees (by doing much
of your own legal research and by having a knowledge of the law as a business tool), and
you have the intellectual tools to do a deal all by yourself in those unique occasions when a deal
has to be closed yesterday.
Back to our discussion on deeds. In short, a deed is an amazingly simple, yet,
powerful document. It really isnít that difficult. You need a grantor/seller, grantee/buyer,
subject property, legal description (obtained typically from prior deeds), consideration (something
paid), and perhaps most important-- a granting clause (and donít forget a notarized signature of
Now for another mini-lesson. Legal words confuse you? While a legal dictionary is
worth itís weight in gold, you can get by quite well with a good quality standard dictionary. Most
legal words are explained in regular dictionaries. Just look down in the definition where it
says Law: then it will give you the legal meaning. If you do not understand the words in the
explanation then proceed to look those words up also. Like untying a knotted up
rope you will eventually "translate" the legalese.
In closing allow me one case in point. Over the years I have closed several of my own
deals right in the notaryís office without lawyers or title companies. These were low dollars down
type deals where I was typically taking title ďsubject-toĒ existing liens. My risk was low and time
was of the essence, so I did the deals with lighting speed in as little as one day!
This stuff is very powerful. Get educated. Do not hesitate to get legal counsel or
advice from your title company or lawyer whenever youĎre in doubt or risking serious money. I can
assure you this is worth learning if you want to become an elite investor.
Copyright 2004 Infoleverage
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