Friday, April 23, 2010

We just closed a most interesting $1200 transaction.


A month or so ago I received a call from a nice lady who wanted to buy a vacant lot which was being marketed by a bank after foreclosure.  Her intentions were to build on that lot.

The price was low because the property is in a distressed part of town but that's okay we are seeing lots of renewal in our metro areas where potential homebuyers are finding bargains.

What bothered her was that the real estate agent was encouraging her to NOT buy title insurance since she was paying cash for the lot.  In fact, she had already given the real estate broker the entire purchase price as hand money.  The real estate agent insisted that the foreclosure had cleaned the title and that there were no liens.

She wanted to be sure so she found our web site and gave me a call.

I explained that buying title insurance is a good idea no matter what kind of property you are buying and further said that our examination would check to make certain the foreclosure was done properly and we'd report any liens that had survived the process.

She then told me that the city had demolished the house that sat on the lot and she heard through the grapevine that the cost for demolition was owing.  The real estate agent and the seller's attorney denied that this was the case.

I made explicit notes for my staff to watch closely and NAIL the demolition issue prior to closing.  I wanted an affirmation by the city that there was or was not a pending lien for demolition.

We completed our title examination, having uncovered current property taxes owing and a $1023 municipal lien outstanding for sewer service.  Otherwise the city reported no other pending items.  JC called the city and asked the treasurer's office about a lien for demolition.  He was told no other monies were owing.  He moved forward with the HUD and worked on closing.  We do lots of doublechecks when we are working with distressed properties, so he called again and asked again.  This time he spoke with different person who transferred him to another department and THERE he found that there was a pending lien of $6000.

He notified all parties that we were holding the documents and funds in escrow while we worked this out.  The seller's attorney and the real estate agent all called foul and wanted us to file and disburse.  We said no.

We spoke with the city solicitor who apologized profusely saying that they had never considered reporting demolition liens to the treasurer's office so that they could be reported on municipal lien letters.  YOI.  DOUBLE YOI!

Anyway, they fixed that pronto and since the seller's attorney was all up in arms, I asked why this wasn't handled as part of the sheriff's sale.  He said the demolition took place after the sale.  I asked if the seller [the bank] had received notice and he said YES.  There was a public hearing and that the bank had received a letter by certified mail and the property had been posted.  He agreed to send me this evidence.

In the meantime, the attorney for the seller argued that since the lien had not been filed in the courthouse, it wasn't valid.  I said that they have three years in which to file and YES, it is a valid lien.

Once the attorney had the evidence of notice in hand, he agreed that the seller would pay the lien.  Yesterday we verified that the city had received the funds and we closed.

How about that?  Thank heavens this homebuyer was savvy enough to NOT believe everybody and to think for herself and buy title insurance.  Also, thank heavens she was savvy enough to give me a heads up on the demolition lien because we might not have found it and that might have lead to a title insurance claim.

In this case, her title insurance policy would only be for $1200 - the purchase price - so it wouldn't have covered the full amount of the lien and there would also have been the question of her having been told about it prior to purchase which might have ended in a claim denial.

The good news is that it all worked out and the city is EXTREMELY happy to have a new home going up in that neighborhood and we are happy to have a happy customer.

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