Tuesday, March 20, 2007

query: why should the seller have title insurance

DW - Please contact the seller and see if they have an owner policy. DC

That's a note a put in a file today when I examined title for a buyer. Why? Because I found a problem, actually two problems. One problem we will resolve prior to closing. The other problem is more tricky and I would like to request indemnification from the seller's title company.

Here's what I found. My seller purchased the property in 2005 from a credit union. The credit union had acquired title by deed in lieu of foreclosure a couple of months earlier.

My problems were two unsatisfied mortgages.

The most recent was the mortgage held by the credit union. They had started and never completed a foreclosure action. A "deed in lieu" does not divest the mortgage like a foreclosure action would, so we'll ask the credit union to satisfy their mortgage. That won't be too difficult as the credit union is still in operation and local.

The other mortgage is a slightly older mortgage -2000 - to a big consumer discount company. The company has been merged into another super large consumer discount company from whom it is notoriously tough to get a satisfaction. It is this problem I am hoping to resolve through the seller's owner title policy.

If the seller does not have title insurance, the closing will have to be delayed or we may be able to escrow a giant chunk of the seller's proceeds while they pursue a satisfaction.

THAT is why a seller should have title insurance. The key, though is to get the insurance when you are buying the property so that someday when you are a seller, you have protection.

Remember, title problems not discovered before you purchase real estate are most often found during the next examination, at the point of sale.

1 comment:

Diane Cipa, The Closing Specialists® said...

FYI As a follow-up, we have more info. The seller in this transaction used an attorney to search title and close the purchase of this property. The attorney did NOT issue title insurance and is NOT helping the seller clear the unsatisfied mortgages.

Our seller is elderly and thought the title was clear when she purchased the house.

How sad.

We have contacted the credit union and they have agreed to satisfy their mortgage. We're still working on the other mortgage.