Title Companies – Can’t Live With ‘em, Can’t Live Without ‘em

We have not officially closed on the house I am writing about yet.  I got an email from the title agency’s processor today asking me all kinds of odd questions – am I purchasing this house or is it an investment?Who should go on the title, the LLC or the IRA Holder?

I am borrowing the funds from a private lender who is using funds from his self-directed IRA.  The paperwork for the IRA distribution has been completed and processed and the money was wired to the title company already.  This, evidentally, is freaking her (the processor) out because she can’t figure out how this is all working.  Who is the money coming from and why isn’t it coming from the LLC???

The processor called me to tell me that the IRA holder will have to pay a penalty since he is withdrawing funds early.  Wrong!  After I explained the whole self-directed IRA business, she proceeds to say that the title must then go in the name of the IRA since that’s where it’s being funded.  Wrong again.  I explained to her that the funds are basically being loaned to the LLC and that the house is the collateral.  I thought that would make it simple enough.  Evidentally not.  She can’t wrap her brain around it.  The attorney in the office is going to review it.

Why does the title company really care where the money came from?  I just don’t get it.  They were wired funds earmarked for this house.  I told them I will be bringing a mortgage to the closing and that I want them to record it (warning that they should put the charge on the HUD).  Why is that so hard to understand?  Why in the world is it necessary for the processor to know how this IRA money is funding the deal? They have the funds and the IRA holder ok’s and initiated the money transfer. How aggravating!