Are You a Technical Investor?
by Bryan Wittenmyer
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 doesn’t 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 you’re getting closer to handling some of this stuff yourself without
“training wheels” so to speak. You’ll 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, you’ll move into some slightly
more advanced documents like Options to Buy or Deeds.
Let’s take just a quick minute for a mini-lesson on transfer documents. This is
basic but worth covering. There are 4 primary transfer/conveying contracts in
the world:
1. Bill of Sale - personal property is sold with a bill of sale
2. Assignment Contract - Contractual rights are transferred with this document
3. Deeds - Real estate is transferred with this document
4. 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, I’m 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 lawyer’s 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 that’s how you interpret what
I’m explaining, you are wrong. I’m 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 don’t 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 isn’t 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 don’t forget a notarized signature of the seller).
Now for another mini-lesson. Legal words confuse you? While a legal dictionary
is worth it’s 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 notary’s office without lawyers or title companies.
These were low dollars down type deals where I was typically taking title
“subject-to” 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 you‘re in doubt or risking
serious money. I can assure you this is worth learning if you want to become an
elite investor.
Bio:
Bryan Wittenmyer has been investing in real estate for the past 15 years. He's
not the new kid on the block. In the past five years he has written extensively
in the real estate field. His articles have appeared in Creative Real Estate
Magazine and the Real Estate Entrepreneur. Bryan served on the board of
directors of the Real Estate Investment Association of Berk's County for 3
years.
Although Bryan hasn't attended formal university studies, he keeps himself
educated reading a plethora of books, newsletter, journals, and listening to
hundreds of audio tape lectures. He jokingly considers himself to be an
information junkie. You can also benefit from his years of practical business
experience, having managed several income stream businesses, ranging from
automobile debt instruments to appliance paper. He also has bought numerous real
estate debt instruments - he knows the income stream business.