The deed is the defense, or the marketing trail is the problem

Question

I've been reading my own file backward, the way an examiner would. On a double close I end up with a recorded deed into my entity and a deed out, and the standard claim is that this makes me a principal rather than someone brokering another person's property. In several states that's the whole basis for doing it this way, and how any licensing statute applies to a given fact pattern is a question for an attorney in that state rather than for me.

What bothers me is the sequence. The deed exists at the end. Six weeks earlier I posted the property to a buyer list with photos, an ARV estimate, and a price, and at that moment I owned nothing but an equitable interest under a contract. If the statute cares about marketing property you don't own, the deed at the end doesn't rewind the advertisement at the start. If it cares about who holds title at the moment of sale, the advertisement is background noise.

So the practical question is what a careful operator should change. One camp says take title and stop worrying, the ownership is real and it's the fact that governs. Another says the paperwork protection is only as good as the marketing that preceded it, so you market your own buying capacity rather than the specific house until you're on title. Both cost something. The second one slows down your buyer matching, which is how you find out whether the deal works at all.

bmoreno23 · Answer

I started from zero six months ago and this is the first post that made the licensing question concrete for me. So the risky moment isn't the closing at all, it's the email I send on a Tuesday with a house in it that I don't own yet. That reframes my whole buyer list plan, since my plan was basically to send houses.

omar_haddad · Answer

On the renovation side I get sent these emails constantly and about a third of them are from people who plainly don't have the property tied up at all. Those are the ones that draw attention. If you've got a signed contract, real earnest money, and a closing date, and you're going to actually take title, you look like a buyer having a bad month at worst. Your point about sequence is right though, @warrant, and I've never once seen anybody talk about it in those terms.

diane_kowalski · Answer

The land side has a version of this that's less forgiving, because raw parcels take longer to move and your marketing window before closing is measured in months rather than days. I've been reading state statutes for the holding side and the language differs enough between neighboring states that I gave up trying to generalize. What I do now is describe what I'm looking to buy and let interested buyers identify themselves, then bring specific parcels to them once I'm under contract and funded. Slower, and I don't know if it's the right call legally, which is why I asked a local attorney before setting it up that way.

The deed is the defense, or the marketing trail is the problem

3 replies