Wednesday, May 15, 2013

consumers - PLEASE - do not invest money into a house before you get the title insurance commitment

We had a title order come in.  The transaction had been moving forward to closing and suddenly they remembered to order title insurance.  The order came in with the request to set up closing as soon as we could.

When the abstract arrived I hoped for a nice clean title so these folks could have a fast closing.  What I saw when I opened the report was a foreclosure in process and numerous state and federal liens and judgments related to a business failure.

What were these folks thinking?  This isn't a title that can be rushed to close.

Wait - I tallied up the liens and even without payoff figures in hand the total was far more than the agreed sale price.

I called the listing agent and found that the seller had no idea that personal judgments and liens would attach. They thought all they had to worry about was the mortgage.

I called the buyer and got a very disappointing report.  The buyer has been living in a mobile home on a rented lot.  They have already sold the mobile home and given notice to vacate the lot by the end of this month.  In addition, they have invested $2000 in this property by making numerous repairs.  They say the sellers wanted a fast closing and the real estate agents had pushed them to make the repairs as quickly as possible to clear municipal hurdles prior to closing.

Neither the real estate agent or the mortgage loan officer suggested to the consumer that they wait for the title insurance commitment.

Why would everyone ASSUME that the title to the property is clear if no one checked?

I had to tell a tearful and angry buyer to make arrangements for another place to live at the end of the month.  It will take time but we'll see how the payoffs come in and whether this transaction can be saved.  In the meantime, the foreclosure process is moving forward quickly.

Our consumers, the buyers, are in a quandary.  Should they just move on and find a different house?  Will they ever recoup the $2000 they sunk into this house? Maybe they should wait for the liens to be divested by foreclosure and buy the house later, eh?  Do they want to live with their parents for all that time?

All of this could have been avoided if the consumers were thinking for themselves and told the real estate agents to back off and wait for the title insurance commitment.

FOLKS.  Please be a savvy consumer.  Don't sell the house you live in before you are sure you have another place to go.  Don't put money into a house you don't own unless ALL contingencies have been eliminated and you have a full disclosure on the situation.

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