Thursday, June 26, 2014

foreclosure error discovered before closing brings transaction to a halt


I have begun to do some research in regards to a delay in my house closing because of an error from the sellers title company. Here is the scenario:

I am purchasing a home that is bank owned and was listed under a real estate company.  I went thru my agent who I have been dealing with for the past 7 years.  We looked at the house 1 day after it was listed, liked it and made an offer which was held for 7 days  to see if there where other offers.  We got the house.  we began the purchasing process.  Had all documents necessary to close on the date of 6-20 including financing in 17 days.  The day before the close the title company states they do not have record of the mortgage holder being served to sign the deed over.  What there is record of is the sheriffs office served papers to a tenant that was living there and not the mortgage holder. 

The issue now is finding the owner.  My agent is telling me they may need to do a quiet title and that could take additional month or two.  I want to know if I seek compensation from the title company for there mistakes.  In the contract from the selling agency. It states that if I am unable to close on the date noted that for each additional day after that they would collect $50 per day. 

I have several appliance that are to be delivered and they will not hold any longer after this week. I am looking to get into the house as we have just added a new baby to our home.
Let me know your thoughts.

Hi, S:  This is unfortunately not so uncommon.  Title examinations performed on behalf of a buyer and.or their lender for properties sold after foreclosure often find foreclosure errors.  This is why it is so important to use your own title agent, not the one being used by the REO seller.

The problem in this scenario is the expectation of timing.  Think of the title examination as you would a home inspection.  You want the results before you make definite plans because any big problem discovered in the process might cause a delay or even a desire to get out of the contract.

Most buyers and real estate agents have not experienced the finding of serious title problems and so they ignore the risks of moving forward with plans before the result of the title examination is revealed.

On the seller side, expect them to agree to an extension but don't expect them to cover any damages you may have due to the delay.  Your choice at this stage is to wait it out or get out of the contract and look for a different house.

Sorry for the bad news but the title examiner did what they were hired to do and that is to vet the title.


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