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Legal Disclaimer: I'm not an attorney, and the information here shouldn't be interpreted as legal advice. Be sure to consult with a qualified attorney in your area to ensure you’re acting on the right information regarding your situation.
When you're in a conversation with a buyer and they say, “Yes! I'll take it!” What are your next steps in how to close a land deal and get the cash in your bank account?
When a buyer has expressed interest in purchasing your land and they're ready to move forward, the next steps can go down one of two paths:
- Closing With a Title Company
- Self-Closing
Here's how each method works.
Option 1: Title Company
Step 1: Prepare a Purchase Agreement and have both parties sign it.
The first step in closing a land deal with a title company is to prepare a Purchase Agreement and let the Buyer and Seller sign it. If you don't already have a Purchase Agreement template, you can use the same template you used when you bought the property. Just switch your name and address to the Seller's place instead of the Buyer's.
For a title company to do their job, the Purchase Agreement is like their instructions on what to do. You need to get this document completed and signed before they can get started.
Step 2: Send the fully executed Purchase Agreement to your title company and let them handle it.
Most competent title companies will communicate with both parties and handle all the complexities until the transaction is complete.
Keep in mind, however, that one of the drawbacks to closing a real estate transaction for land with a title company is that they often move slowly. If you set a closing deadline for 30 days from now in your purchase agreement, some of them will wait around for most of that time and scramble to close at the 11th hour. If you want them to stay on the ball, you may need to call and email them every few days to make sure your deal keeps moving.
RELATED: The Fast (and Slow) Roadmap for Real Estate Investors
Option 2: Self-Closing
Step 1: Prepare a Purchase Agreement and get it signed by both parties.
You don't technically need a Purchase Agreement if you go the self-closing route. Still, it's a helpful formality to ensure everyone is on the same page. Ultimately, the only thing that needs to happen is that the buyer sends you their money, and you prepare the deed and any supporting documents and send them in for recording.
Step 2: Request the Buyer's funds.
Without a title company, this step can be tricky because there is a natural trust gap between the buyer and seller. You can work around this gap with a mobile notary, sending some well-made Loom videos, and/or using an online escrow service like SafeFunds.
Step 3: Prepare and sign the deed and any supporting documents.
Again, more detailed instructions are available in our guide to How to Close a Cash Land Transaction In-House (Full DIY Instructions!).
Step 4: After receiving the funds, send the deed for recording and supporting docs to the municipality. The transaction is done once the deed is recorded and the supporting documents have been sent to the municipality!
That said, closing a land transaction in-house has its share of challenges. It's not advisable to self-close deals unless it absolutely doesn't make financial sense any other way.
The Benefit of Title Companies
Closing with a title company makes a ton of sense if you want to avoid the hassles of doing it all yourself. Title companies handle the legal details, conduct thorough title searches, and provide title insurance, protecting you from future claims against the property. They also act as a neutral third party, which helps build trust and ensures everything goes according to plan.
If you're looking for a list of investor-friendly title companies throughout the U.S., check out our directory of community-curated title companies. And if you know of a great one that isn't included, feel free to add them to the list!
On the other hand, self-closing can save you money and offer more control over the process, but it requires more involvement and a solid understanding of the paperwork and legalities. For many, especially new real estate investors, using a title company is the safer, more straightforward choice.
Ultimately, it comes down to what you’re comfortable with and which method best suits your situation.
Are fourplexes a better investment option compared to other types of multifamily properties, such as duplexes or apartment buildings?”,
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Not necessarily. It depends on a variety of factors.