Here’s a brief overview of how binders work.
During our travels, we work with a ton of wholesalers, flippers, and investors, and they’re always asking us, “What is a binder? What does it do for me?” Even regular residential agents sometimes ask us what binders are. If you’re asking yourself the same thing, we’ll break it down for you.
A binder helps investors cut costs on their homeowners policy when they sell a property, and they’re typically for investors who don’t want to hold a property for more than two years. After two years, the binder is null and void. Purchasing a binder requires you to pay full price for the property plus an additional 10%. So if you buy a property for $500,000 and sell it for $700,000, you only need to pay the title policy on the $200,000 difference.
A binder typically saves investors hundreds (sometimes thousands) of dollars on the flipside transaction, which is why most of them get one. Most of them don’t hold onto properties for longer than two years, and they obviously want to save money, so this is the best way to do it. A binder doesn’t cover the full ALTA Extended Title policy, but it does cover the California Land Title Association policy, which is a two-year coverage for investors.
If you’d like to know more about how binders work or have any questions at all about this topic, we invite you to reach out to us. We’d love to speak with you.