Houston, we have a problem......and I can't find my title policy!

Hi Diane, Hope you can help me with this one. I am about to sell my home in which I bought late 2006 and was a HUD home, the title company was a franchise to a large company still in business nation wide First American title company but looks like the office did the title went out of business like I have been told by the currant title company that handle the transaction for the sale of my home they said the old title company made a mistake/error regarding previous home foreclosure that was turned to HUD because the loan was FHA. I lost all the paper work/documents the one I got from the old title company and the currant title company asked for such document and told that I lost them. They will not disclose what kind of error but told they discovered the error and the old title company did not. Now I am not sure if my home will be sold and closing date will be in few days and not sure of the nature of the error it can be something to do with the loan from the bank who gave the loan with FHA approval for the previous owner but what I know the bank tried to sell the home before turned over to HUD, my question, who will be held responsible for this kind of error if the sale of my home will not take place? Is it the parent title company since one of it's offices/franchise went out of business? What should be done and keep in mind that I lost all documents regarding my title insurance. My home is in PA since I know each state has it's own law.

Any help you can give will be appreciated and thank you for your time reading this email.

Best regards,

M

Morning M,  I have two thoughts.  First, the title agent who says they found an error has an obligation to be specific about their finding.  Tell them you want an email explaining the problem and a copy of the title insurance commitment they issued for the new buyer so you can see exactly what they reported as a problem.  If you are working with a real estate agent they should be able to help you get this information.

Next, the parent of the old title agency you worked with is the actual title insurer.  Contact First American immediately and file a claim giving them all information you have available.  Without a copy of your title insurance policy or your HUD-1 settlement statement, they might give you a hard time but if so, you could also contact the PA Dept of Insurance and explain that you lost the paperwork and that First American should have a system in place to be able to find your insurance policy with your name and address.  That's a last resort, though.  Try to get First American to figure out who has the custody of your old file.  If the title agent you used was owned by them, First American may have your file in their custody.  So contact them asap and file a claim.

Once a claim is open, First American will either show the new title agent that they are incorrect, or offer indemnification, or step up and fix the problem.  If it's a problem that has to be fixed, it might take time.  If that happens, they may offer to give your buyer title insurance while they do the fix. That is a legitimate offer that the buyer can consider.

Good luck!

Diane

What? No owner policy!

Hi Diane, 

I moved into a house and thought my lawyer had included a buyer's title insurance policy because I asked for one. However, it turns out the lawyer was in a conflict of interest situation as he was also the lawyer for the mortgage company. The lawyer had had me pay for title insurance for the mortgage company and admitted as much when I questioned him about it at a later date.

I need to make a claim because an inspection of my home by a city inspector found several building code and by-law infractions in renovations, construction and structural work that was done before I purchased the house. I was presented with an order to have them remedied. 

This would be a huge expense expense for me so was glad I had purchased title insurance - or so I thought I had done.  I purchased title insurance after I received the order from the city and the policy date is my possession date for the house. 

 

Will the policy still cover these violations? Or, is my only recourse to sue my lawyer?

Thanks in advance for your help,

J

Morning, Jim:  Well, I guess the good news is that there's a good chance these items would not be covered by an owner policy.  I think it depends on whether you would have purchase enhanced coverage and what type of enhanced coverage is available in your state.  Zoning violations and by-law infractions are often exceptions to coverage.

I think you should have an attorney review your transaction.  I wouldn't think too much about the conflict of interest angle as this is very common with the attorney's serving both the buyer and the lender.  I would mainly look at his fiduciary duty to take care of you with the same level of care that he gave the lender.  In PA a buyer has to sign a hard worded waiver to skip the owner policy. Perhaps your state has a similar document.

Good luck.

Diane

M has an interesting question about a shared retaining wall. Who is responsible for fixing it?

Hello Diane,

I just saw your blog and it caught my eye on a situation I am going through.

Last summer 2013 I closed on a house.  A couple months ago, my neighbor (who's backyard faces up to mine --- I'm on a hill, her yard is at the bottom of it) started complaining about a retaining wall that divides her backyard and mine.  This wall is deteriorating and buckling on her side.  She says the wall is 100% my property and I need to fix it.  The wall is made of concrete cinder block and runs from one end of the block/street to the other, dividing all the houses on my block from the houses on her block.  The wall is connected so there is no "stop and end" in each person's yard.

My survey didn't indicate this wall.  I contacted my surveyor about this and he revised it to show the wall.  He said it now shows the wall is on the property line both hers and mine.  My neighbor showed me her survey and hers shows the wall is all on my property.  (No history of this wall's construction can be found as it was built in the mid 1950's.)

I went back again to my surveyor and he is revising the survey yet again (for second time since my closing in 2013).  

My question is: who is responsible for fixing this wall if both surveys are different ? Regardless of this, wouldn't I be able to file a claim with surveyor or title insurance because my original survey did not represent this wall on it ?  Had I known about this wall before my closing, I would have waited on purchasing this house.

Trying to avoid an expensive lawsuit here and my neighbor is starting to get everyone involved that lives on both sides of both blocks.

Thank you,

M

Hi, M:  Thanks for sending your question.  I am always interested in these types of situations.If this is an old plan chances are that the developer constructed the retaining wall for the benefit of lot owners above and below the wall.  It may have been a requirement of the local government who approved the plans but in any event, I think you are unlikely to find someone to take responsibility for the maintenance of the retaining wall. It's just one of those things that no one pays attention to until there is a problem. It's sort of like a private road.  Many have no maintenance agreements, they are just there.  Once the road falls apart, then lot owners have to come to an agreement or let the road go to pot.

I would pursue - with the help of a competent attorney - finding an agreement amongst all of the lot owners above and below the wall.  Afterall, if the land slides, the houses on both sides will be damaged and it serves no good purpose to let the wall fall for lack of agreement when some shared cost of maintenance will help everyone.  I hope this helps and good luck.

Diane

too bad the seller did not have title insurance

We have a title insurance order in process and our examination revealed that the seller bought the property from a bank who had foreclosed.  As usual, the our title examination included a review of the foreclosure to make certain that the bank had done everything correctly.  They did not.  Crap.  The bank's attorney had failed to give good service to a lien holder.  Crap.

The prior owner had a 2nd mortgage with Beneficial Consumer Discount Company. For some crazy reason the bank's attorney gave service to Household Realty Corp.  Now these two entities were under the same corporate family at the time, however, they are still two different entities.

Our seller is an estate. The deceased purchased the property from the bank for cash and did not opt to purchase title insurance.  Too bad.  If he had, someone might have noticed the flaw and fixed it a long time ago.  The estate attorney says his client probably thought the bank knew what they were doing and opted to forego any title examination - with or without title insurance.  Not a smart move. A buyer must always be savvy and have title examined and covered by a competent title insurer - even when paying cash for real estate. The first and primary purpose of title insurance is RISK AVOIDANCE. Look for problems and fix them before you buy.

Let's say the seller had purchased title insurance and his title insurer had missed the error in the foreclosure.  That's certainly possible.  A secondary - and just as important - reason for title insurance is that HUMANS MAKE MISTAKES.  The bank's attorney made a mistake and it's possible that a title examiner could miss it.  You could have a situation in which you are trying to sell real property and a problem isn't discovered until your buyer has a title insurance examination performed.

If our seller had an owner policy, we could have asked for indemnification and closed.  This is a reasonable circumstance for indemnification.  The error involved an entity under the same corporate umbrella.  Several years have passed and there has been no collection effort on the Beneficial mortgage.  It is reasonable to presume that Beneficial thought they had been served and were divested.  This is a technical flaw in title but a flaw none the less.  Indemnification coverage from a prior owner policy would have done the trick, but we have no title insurance to fall back on in our transaction, so what do we do?

In this case we offered our buyer - who is also paying cash - an option to allow us to put an exception in their owner coverage.  We did this with a suggestion that they negotiate with the seller for an escrow to be held pending the attorney obtaining acknowledgement of good service from Beneficial.  I don't want to insure over this because I'm not certain that the attorney will be successful.  Our buyer, however, is free to assume the risk.  The buyer decided to go for the escrow. They asked the seller to put $6000 aside for a few months during which the seller's attorney would attempt to get the acknowledgement.  If at the end of the period, the attorney could not, the buyer would get to keep the money.

Our seller stands to lose $6000 if this matter is not resolved.  They are lucky that they have a cash buyer willing to assume the risk.  Too bad the seller did not have title insurance.

A wants to know why she should have to pay a tax that the title company missed.

Diane,

Thank you for answering this email in advance.

I closed on my home 10-30-2013.  A clean Title was transferred.  I am now getting contacted by the title company stating I owe some property taxes.   The property taxes in question is from a sewer and recycling bill that was not paid in July (a bill I did not receive because I was living out of state) that automatically was applied to property taxes at the end of the year.  

Here is my issue; On the HUD-1 Settlement statement, #404 there is a credit for 2 months November and December (The bill comes out once a year in July).  The title company knew about the taxes owed, why did they not say anything about it at the time of closing?  Is it not the Title Company's responsibility to exercise Due Diligence?  It is not the title company's responsibility to investigate into the property and disclose what they find?  They found it, just didn't disclose it. I, the seller, should not be held liable for non-disclosure of information that was not discovered in the process of that investigation.  The  finding of the unpaid portion of the property taxes was not addressed at the time of  closing therefore would not be my responsibility.  Isn't that why we pay a title company and why we buy Title insurance?  Since the title was transferred free and clear at the time of closing The title company  is liable for anything that comes up Correct?   I, in no way, shape or form knew anything about this until January 4th 2014.  And the only reason I am being contacted is because the title company doesn't want to pay for their error.    If the research was done correctly this would have been noticed.  

A

Hi, A:  Thanks for letting me help you with this issue.  You are expressing the frustration that many consumers share when confronted with an error discovered after closing.

Let's start with the basic function of title insurance.  The insurance is for the benefit of the insured.  In the case of most purchase transactions the insured are the buyer - new owner - and their mortgage lender.  The insurance is not issued for the benefit of the seller.

Human error is one of the most common sources of title insurance claims.  Mistakes can happen at any stage of a transaction.  There may be mistakes at the courthouse, in the pre-closing examination, at closing or after closing.  The job of the title insurer once an error is discovered is to rectify it under the terms of the title insurance policy so that the "insured" parties are not injured.

The fact that the taxes were missed in the closing process does not negate the fact that you owe the tax.  It's a bit like a clerk giving you the wrong change.  You can't say gotcha and keep the extra any more than you would expect a clerk who shorted you to do the same back to you.  If the title insurer had made an error by charging you too much tax, you'd expect a refund, right?

So, here's how this is playing out.  The title insurer is making a demand to you to pay the taxes that you rightfully owe.  If you fail to pay the tax, they will pay it so that the insured are protected and then they will go after you in court.  In the end you will pay the tax.  Paying it now is the least expensive way to handle it. 

If you are in a bind and don't have the money, ask them if they will accept payments.  Some will, some won't.

I hope that answered the question.  Best wishes and I do understand your frustration.

Diane

title claim tip....

If you are selling your property and your buyer's title insurance agent says there is a pre-existing lien that you need to pay and they want you to just pay for it then file a title insurance claim later, DON'T DO IT. Sometimes the buyer's title insurance agent is wrong.

The first job of a title insurance company when faced with a possible lien is to determine if the lien is valid.  If the lien is valid and it's covered by your title insurance, then they will pay it for you.  If, however, the title insurance company determines that the lien is not valid, they will explain this to the buyer's title insurance agent and help you to proceed with your transaction and close.

If you simply agree to pay for the lien and expect to recover from your title insurance and it is determined that the lien was not valid, you won't recover your funds.

We most often see this in PA with municipal services.  There is a 3 year window for filing municipal liens for things like water and sewage service.  If the municipal authority fails to file a lien in that 3 year window, they can't attach the unpaid balance to the property.  Just because they ask for the money on a lien letter doesn't mean that it must be paid.  A simple discussion with their solicitor usually resolves the matter.

We have a pending claim in our office concerning PA inheritance taxes.  In this case an attorney/title insurance agent who was representing both buyer and seller in a transaction found what he thought was a valid lien, paid it from the seller proceeds and then told the seller [our insured] after closing to recover the funds under their policy.  The claim isn't formally resolved but from the moment it hit our office and we sent it to the claims department, at every level each person who reviews it, says it isn't a valid lien and they don't understand why the attorney paid it.  He could have held the funds in escrow while his sellers filed a claim.

So, don't let the money out of the door before talking with your title insurer.

Do your closers carefully review the owner/seller affidavit when it is being signed?

This case, see attached link, which I found through the wonderful tool of Lexology - thank you Christopher Smarts, made me think about the importance of this affidavit review.

I wondered as I read the case whether Speisman read the affidavit and intentionally withheld the construction status from the title agent or did he do what many may do and that is to simply sign where indicated thus committing fraud without knowing he had done so.

I realize that from the title insurance company point of view, it doesn't really matter because he signed the affidavit and has a responsibility to read before signing. I do wonder, though, if the closer had looked him in the eyes and read the mechanics lien language, if the borrower would have told the closer about the construction. I think there is a good chance that he may have. It is hard to lie when someone is looking into your eyes and challenging you on a specific point.

We train our closers to look directly into the eyes of a consumer during certain points in the affidavit with the hope that doing so will make them reveal a problem if one exists.

In the case of Speisman, had he spilled the beans, the closing would have been cancelled and perhaps the loan officer might have been angry, but the title insurer would have been protected and in the long haul the borrower would have been protected from himself.

What do YOU think?

interesting discussion..Don does a good job helping this homeowner.

http://www.biggerpockets.com/forums/95/topics/81560-title-insurance-admits-they-are-wrong-but-i-have-some-questions-on-what-to-expect-next

interesting twist on a claim

Not long ago I posted about a new owner wanting to make a claim on the policy of the person who sold her the property.

Our insured did call us and we opened a claim for him but informed the new owner that we wouldn't be communicating with her.

The claims attorney noticed that the new owner is the same person who had been foreclosed upon by the lender who sold the property to our insured.

Guess what?  Shortly after our closing he deeded the property to her for a buck.

Well, isn't that interesting.  The claim was denied.

making claim on a prior owner's owner policy

No can do.

If you have a title problem and you do not have an owner title insurance policy, you cannot make a claim on the title policy of a prior owner.  You have to take action against the prior owner and the prior owner, if they choose to file a claim, may contact their title insurance company.

A couple of weeks ago I was contacted by a consumer who we insured back in 2006.  At issue were unpaid delinquent taxes from 2005.  I asked him to send me a copy of the statement he had received showing taxes outstanding.

I always want to see the correspondence a consumer has received.  Sometimes there is a misunderstanding that can be resolved simply by reading the statement.

In this case, he had the current owner send me the statement and the new owner of the property contacted me.  I explained that all of my communications would be with our insured, even though he didn't own the property anymore.  She would have to deal directly with the prior owner, our insured.

I did some preliminary work and found that the 2005 delinquency statement we had obtained did not include 2005 school tax.  Apparently during 2005 the school district was in the process of changing collection services and though both the municipality and the local tax collector directed us in writing to the company we contacted, the 2005 school tax data was not yet in their hands.

I opened a claim in the name of our insured and the matter is under review by a claims attorney.

R wants to know if a tax proration error is covered by title insurance

So I bought a house on Jun 26, that was the day we closed.  I just got the property tax bill from our county and it was rather high, and I don't remember any credits coming my way at closing from the Jan 1-Jun 25 timeframe.  I went back to look and still don't see anything.

My question for you -- since I didn't take ownership until Jun 26, I assume I'm not liable for property taxes from Jan 1-Jun 25, right?  Should those have been prorated and charged to the seller at closing?  Even if they were estimated at the time since final property tax bills aren't issued until Oct 1?

And if this was a human error of some sort, who's responsible for the screw up?  The title company?  And how would I go about getting reimbursed so I'm not stuck with the entire 2012 calendar year tax bill?  Can I invoke title insurance for human error?  I assume these are the types of things title insurance is used for?

Your thoughts?

Thanks

R

Hi, R:  The method of prorations for taxes and whether or not prorations take place is set out in the sales contract.  The title agent would look at the contract and set up prorations or not based on what buyer and seller agreed to.  In the absence of such instruction from a contract, a title agent would typically do whatever is the custom for that area.  The responsibility of the buyer and seller, then, is to review these figures and then by signing the settlement statement, acknowledge acceptance.

If the county tax bill is based on a calendar year, and the bill doesn't come out until October for this calendar year, then it would make sense that the seller would have given you a credit for January 1 thru June 26.  This credit would be on page one of the HUD-1 on the bottom half of the page.

If the county tax is based on a fiscal year, the dates may be different and it is possible that the October bill is for a fiscal year that started after June 26 but in that case you would have given the seller a credit for the county tax to adjust for what they had paid beyond closing to the end of the fiscal year.

Tax prorations are typically not covered by title insurance.  However, they may be covered by a Closing Services Letter if you are in an area where such letters cover consumers.  In PA the letters DO cover buyers.  The basis of a claim under the letter is that the title agent did not follow the written instructions.  In that case you would have to show that you gave written instructions for prorations and as I mentioned before, these are typically in the sales contract.

If there is no basis for a title insurance claim you could speak with an attorney and consider suing the title agent for negligence. Again, though, I think you'd have to show that they were given instructions and did not follow them.

Prorations of taxes are not mandatory as part of a real estate transaction.  They are negotiated by agreement between buyer and seller.

Hope this helps. ;)

Diane

Title insurance does NOT cover the seller.

Last week I was contacted by a seller in a transaction we had closed last month.  He was concerned because he had received a notice of tax sale for the property and thought we had paid all of the delinquent property taxes.  I asked him to fax or email the tax sale notice which he did.

The first thing I noticed was that it was for a different tax map number. My immediate concern was that this may have been a parcel that they intended to sell but had not clearly identified it as part of the transaction.  The tax sale notice was for a Lot No. 108.

Our file was scanned so I was able to quickly determine that we had insured the conveyance for two lots - 107 and 108 - but they were both a part of ONE tax assessment and it was a different tax map number than the number on the tax sale notice.

Ah-oh...a merger...an undiscovered merger - likely not discoverable by a regular title search.

If you don't operate in the rural counties of Pennsylvania, you might think a merger of a two tax parcels would be clearly notated by the tax assessment office and thus easily discovered. That is the case in some counties but not all. In the rural county in which this property is located, the tax assessment office makes no such notation and so unless an abstractor stumbles onto something, they won't find it.

I asked our abstractor to re-check the assessment and get back to me.  He did and reported that in 2010 our seller had sent a letter to the tax assessor asking that the two lots be merged into one tax assessment.  The following year -2011 - both lots were billed under one number.

The delinquent taxes we collected from the seller at our closing were for years 2009 through 2011.  We did not know at the time of closing that there was outstanding additional taxes for years 2009 and 2010 under a different map number.  It would have been helpful if the seller had noticed but he didn't.

I contacted the seller and advised that he needed to pay the tax.  He refused and insisted that the title insurance should cover this error.  I explained that the title insurance protects the buyer and the lender.  I further explained that the seller gave a warranty to the buyer and signed affidavits for us that acknowledged he is responsible for the taxes and that if he doesn't pay, we will pay and then sue him.  I said this nicely, not in an angry way but with no wiggle room.

To help him better understand I said that if we had known about the tax parcel merger, he would have paid this additional money the month before at closing, right?  He's just paying it now, instead of then, nothing more, nothing less, just a month later.

So, I contacted the lender and the buyer - they know I am giving the seller a week to pay before we step in and take care of it.  I am hopeful the seller will ante up, but either way, the owner and lender are protected.

This is a good example of a title insurance claim - one that doesn't get logged at the title company or show up in the statistics.  We just resolve it and move on.

query: what is the liability to a title company if a heloc winds up in a first position through their error

That's easy.  A mortgage lender who is insured in first position but finds that they are in a subordinate position can make a claim against the loan policy.  This type of discovery typically surfaces during a foreclosure action.

The liability of the title insurer is whatever it takes to fix that up to the amount of the loan policy.

abandoned road ownership dispute

Hi Diane,
We own a property that sits on an abandoned town road in Connecticut. In the original deed dated 1947, the owner of the land from which our property was originally subdivided, transfered all right, title, and interest to the center line of the road to our property boundary as extends along the length of the boundary along the road. This language is consistent throughout our title lineage. Our neighbor who is the grandson of the woman who was the original seller on the deed in 1947 and shares the same sir name, inherited a very large remaining land plot, previously a farm, in 1963 when this seller died. In his probate deed, he does not acknowledge the sale of this portion of the road and adjoining property and refers exclusively to the co-ordinates on a newly created subdivision map which he ordered dated 1963 excluding any language in his deed as to his boundary as the center of the road  and makes it appear that the road is an "easement" vs. abandoned road that he created to run through "his property".  In past history, he has tried unsuccessfully to relocate this road to afford him enough land acreage to secure a building lot which the road is preventing him from procuring as it stands. Recently he decided to build on a portion of land on the other side of our road (he has enough land for one lot) and submitted a map to the zoning department claiming ownership of the entire road and adjacent property to our property line...this map was certified by the zoning department with no reference to the language of our deed or our stated boundary as the center of the road and is subsequently he is claiming all the property from the center of the line of the road to our boundary which is about 15 feet from the road and 250 ft along our boundary.  Our attorney has requested that the surveyor acknowledge our deed, and revise the map accordingly but the owner and surveyor who are friends, are ignoring our request. My attorney is advising us to do a "quiet title action" to clarify the language in our deed but this will cost us a lot of money and put our deed up for question before a judge. My attorney asserts that there is a "cloud" over our deed due to this situation. My question is....will our current mortgage lender's (major bank) title insurance have their attorney fight to clarify this for us, or will our title insurance pay their attorney to defend our title to remove this cloud over our deed. Because we are still under mortgage for 18 years, do we have the right to defend this title that the bank technically still owns? 
Thanks,
J


Hi, J:  I would suggest doing two things:


1.  The surveyor is working for the other landowner.  You need to get help in another direction.  Have your attorney send a letter to the municipality advising them of the boundary line dispute - include the evidence you have in your chain of title.  Your attorney should warn them to delay approval due to pending legal action and suggest that they may be at risk of a lawsuit should they proceed with approval of your neighbor's application after having received constructive notice of the dispute. I suggest this be sent via certified mail.  You could also write this letter yourself if you prefer.  Remember I am not an attorney but I think this approach will be helpful because most municipalities are afraid of lawsuits and most try to treat citizens fairly.  If they show favoritism to this other landowner, you could recruit assistance from the local media to shed light on that.


2.  The loan policy does not cover you and would not cover the lender in this case unless they were foreclosing.  ASAP open a claim with YOUR owner title insurance company.  Their legal department will look at the situation and make a determination whether to defend your title.  Key to this is to review your owner policy and look at the legal description - often on Schedule C.  Does it include the disputed area?  If it does, then they have insured that you own this land and you have standing to expect coverage.  If you do not see this disputed land in the legal description, there is likelihood that you won't be covered.  In either case, open the claim and let them review your case.


There may be state law which specifies how abandoned town roads move in ownership.  Be sure that your attorney has researched this angle because recitation of such a law, if it is in your favor, might help resolve the matter favorably for you.


Hope this helps.  Good luck!
Diane

replace a lost owner policy with a duplicate original

Hi Diane,

I saw your blog and hope you might be able to answer this question.  I bought my home 7 1/2 years ago and title work

was done at that time.  By who I can't remember and I inadvertently destroyed the original policy while getting rid of old paperwork.

I did contact the closing attorney but his office might not have those records.  Is there a way to obtain a copy of the original policy?

It seems even though there was clear title when I bought it, now in selling there are judgements from the previous owners.

Any help would be deeply appreciated.

Sincerely,

A

Hi, A:  If the closing attorney was the one who issued the title insurance, you can request a duplicate original policy directly from the attorney.  If he is uncertain how to issue a duplicate, he should call the title company underwriter.  They all have a procedure for producing duplicate originals.  Mortgage lenders often make this request when their loan policies get lost in transit.

I would be really surprised if the attorney doesn't have any records from 7 1/2 years ago.  Everyone uses computers now and even if he destroyed the paper files, I can't imagine that there isn't something in his software.

Frankly, I've never encountered an attorney who didn't keep all their paper files. I call law offices all the time to ask questions about old files when we are trying to resolve title problems.   It's just a matter of giving them time to go find the file as it might be stored off site.  You might offer to pay for their effort.

Hope this helps. ;)

Diane


PS  You should also look for the HUD-1 Settlement Statement which should show that you paid for coverage and it should also identify which title insurance company was paid.  The attorney may have records of checks issued from the closing funds which could tell you who got the title insurance premium.

Finally, if you cannot establish proof that you have title insurance, you may want to hire a competent title insurance attorney to review those judgments.  I find often that sellers are asked to pay for liens that are expired or not valid.  Defend yourself before paying.  Delay closing until you have exhausted your defense.  If you close and pay the judgments expecting to recoup damages later there is a good chance of getting no help.

Is the deed goofed up or what?

Hi Diane,

I saw your blog and thought you might be able to point me in the right direction. Here's my situation (located in PA):

About 10 years ago the previous owner agreed to transfer 1000 sqft of land to the neighbor. From my understanding, this should have been done by sub-dividing and then the neighbor re-joining the parcels. However, the land in question was too small to be sub-divided. Instead, a corrective deed was issued—basically an addendum to my deed—carving out a portion of my land and assigning ownership to the neighbor. 

Is that a legitimate use of a corrective deed? It doesn't seem right that my deed has an owner of record (me) with another owner of a sub-parcel specified within.

Some extra bits: SOMETHING was recorded at the county but it doesn't seem to have been done right. The transferred portion does not have a map# assigned to it and is not part of the neighbor's deed either.

My desire isn’t to increase the size of my property. However, this has been a sticking point for getting a proper survey and I’m concerned there could be liability if an accident happens on that land. Additionally, property taxes were never adjusted to take this change into account.

Does this sound like an improper deed modification to circumvent the subdivision minimum? Would a title company get involved in something like this?

Thanks

J

Hi, J

It's a bit hard to know what you mean by an addendum to your deed because it sounds like the deal with the neighbor pre-dated your deed. 

It is possible that subdivisions may not have been required in your county ten years ago [some counties have a casual way of dealing with subdivision] or perhaps the local authority considered this was an incidental boundary change.  In that case a subdivision may not have been required. So, let's say it was properly done but in an unusual way that just seems odd but your title agent may be able to explain the logic of it.  I would call them and request that they review your file and explain how they dealt with it when they did your title examination.

It is also possible that there is a mistake and that your title agent missed it.  If they cannot explain it to your satisfaction, consider making a claim against the policy.  That would move the file into review by a title company attorney who might be able to resolve a problem or at least make sense of it.

Good luck.  I hope this helps.

Diane

living through a title insurance claim is no fun

hi came across your website, which I really enjoyed reading, I have a question maybe you can help me.

I purchased a property with a small house on it right after we closed some siblings of the previous owner started fighting about it, so my title insurance company hired a lawyer and this is been in court for over 3 years, 2 months ago we were granted the motion and we won the case, but today we got a call that they are appealing, which they have 6 months to prepare if they will go to the appeal or not, my question is as follow I am pretty much fed up, i need to renovate and put in a lot of money in the house, I know normally i should wait till everything is over and done with, but its just so long and i'm living like temporary cause i didn't want to put it any money just in case we lose,...

so now my question is, what are my rights? can I put in the money fix up the property now? and hold the title insurance responsible if something goes wrong, or do I have to put my life on hold for so many years?

thanks appreciate if you can help me with any answers,

S

Hi, S:  Wow, that's a frustrating case.  This is the unfortunate side of title insurance claims.  A title insurance claim process can really interfere with your use and enjoyment of a property, even when you win.

I can't give you any comfort about improving the property.  That's a risk assessment you have to make.  Your title insurance is limited to the amount of your coverage and if you improve the property beyond that amount, you won't be covered.  Keep in mind that the legal fees have accrued against that coverage.

I hope folks who read about your case realize all title insurance is not equal. The type of search and knowledge and motivations of the examiner that laid the foundation for the title insurance policy play a major role in the level of risk assumed by the consumer. It is entirely possible that in your case the examiner was highly competent and simply made an error.  It is also possible that there was an automated search or a title examiner operating under a conflict of interest. 

I wish you well and if it were me, I'd be interested to know if the title agency was owned by any interested party in your transaction.  If so, and if I felt like taking this to a different level, I'd try to find out if the examiner found the risk of sibling interest and chose to insure over it without discussing the risk with you.  The conflict faced by examiners working in closely affiliated businesses is huge and one we have a hard time getting regulators to grasp.  These examiners may be working for a company that is getting a large sum of money from the real estate transaction and if the examiner finds a problem that will cause the buyer to walk away, could cost them their job.  I'm not saying this is what happened in your case but it's the most likely reasoning that comes to my mind other than simple human error, which could just as easily been the case.

Thanks so much for reading and sharing your story.  I do hope it works out for you and you can relax and enjoy your home.

D

open your mail! ;)

This is a shot in the dark, however, any information would be helpful.  I have a fairly confusing situation.  I refinanced my home in 2007.   When we originally bought our home in 2000 it was listed as 2 parcels.  2 years later we went through the proper process of obtaining a building permit to put a manufactured home on the 'empty' parcel for my father-this was signed off through the county.  Little did we know that their had been a financial segregation (FS) put into place by previous owners, this was supposed to have been 'lifted' at the time of sale but was not, in addition the county should not have allowed a building to be placed on the FS parcel.  My original lender routinely paid the taxes for both parcels per my request  without any questions asked.  When I refinanced in 2007 I asked for the same convenience of having my taxes and insurance paid with my P&I payment.  It was recently brought to my attention that my new lender had not been paying on the taxes for the 'other' parcel.  It appears that there was a mix-up in the legal description; the lenders legal description does not encumber both parcels, however, the county legal description does encumber both parcels.  In order to avoid foreclosure on the property the lender paid the back taxes and gave me 1 year to pay them back, raising my mortgage payment another $1400.  This has proven to be a financial hardship.  In discussion with my mortgage company somebody had suggested that I file a claim with the title company.  I did contact the title company and they are saying that they have documentation by the lender requesting that the 'other' parcel be removed from the deed of trust.  I am confused as to who is responsible for this mess.  The lender, the title company or both?  I apologize for the lengthy question.  There are many factors that further complicate this situation such as the county not having lifted the original financial segregation and the fact that I chose not to open my tax statements assuming that they were getting paid along with my parcel/home taxes until it was too late.

Regards,

T.


Morning, T:

I'm not sure about the FS because we don't have that in PA, however, on the issue of the taxes and encumbering the second lot, I can comment.

Lenders do not pay taxes on land that they have not mortgaged and so the current lender cannot be faulted for not not paying them for you.

There may have been some reason why the lender did not want the second lot in their mortgage.  We don't know, but the real problem in all of this is just basic communication and taking the time to read documents you sign.

Presuming there were no written [pre-closing] disclosures that described the land or the tax figures, there were at least two documents presented at closing that, if read, would have alerted you.  The mortgage document contained a description of the land.  The initial escrow statement gave you tax figures.

In a refinance transaction, the title company is insuring the lender and they are taking their instructions from the lender.  There is a presumption that you and the lender are on the same page.  A good title agent will keep their eyes and ears open for possible misunderstandings and help the lender and consumer resolve potential errors, however, this is a courtesy and good service and not part of the insurance.  I don't see a title insurance claim here.

If you've not read the book or seen the movie, I recommend looking for The House of Sand and Fog.  It's about a title insurance claim and based on a true story in which the homeowner neglected to read her mail.

Humans can have misunderstandings and consumers have an obligation to read over documents or risk being legally bound in an unexpected circumstance. This seems to be a hard lesson learned.  I wish you well.

Diane

prior owner continued to use an open line of credit

This is the title claim we title agents are trained to avoid.  We take the extra step to freeze the line, if possible.  We have the seller sign a statement requesting that the line be closed and satisfied of record.  This is what we are supposed to do.  Yet, when we recently processed a refinance title insurance application, we were shocked to uncover a situation in which a prior owner [TWO owners back] was using a line of credit attached to our consumer's house.  How could this happen?

We started our investigation by contacting the bank and asking them to satisfy the mortgage.  That's when we found out that the line had a balance and was still in use.  WHAT?  The bank refused to satisfy or assist us beyond a courtesy call to the borrowers asking that they call us.

We then made contact with the title agent who handled the sale that included the supposed payoff of the mortgage.  This title agent is the one who SHREDDED her files and so we had no evidence to show the bank that they should have closed the line and satisfied the mortgage.  [Two ex-employees of the SHREDDER did offer some help by somehow getting into the computer system and reprinting documents so we had a clue about the contents of the HUD-1 and the policy.]

Next we made contact with the title agency who handled the next sale, the one where our consumer was the purchaser.  We asked if they had discovered the unsatisfied mortgage and they said yes, however, they did not pursue satisfaction.  They requested and obtained an indemnification letter from the prior title company.

So, we had the first agency who may not have followed good standards and asked for satisfaction.  Our clue that they may not have followed good standards is that they SHREDDED their files.

We have the next agency in line who also, in my opinion, didn't do such a good job.  If they had contacted the bank they would have discovered that the line of credit was still in use.  They also seemed to have insured over this unsatisfied mortgage without even disclosing its existence to their consumer.

We obtained a copy of our consumer's owner policy and then contacted BOTH title companies and had our consumer open a claim.

We got a great response from the claims department at First American.  The attorney from the other title company was no help except that he wanted us to take an indemnification letter.  We wanted more than that and First American sent demand letters to the prior owner and the bank.  They offered and we accepted indemnification with PERFORMANCE language.  Our consumer and lender were both on board and okay with this performance based indemnity as was my underwriter.  We closed this transaction this week and the good news is that First American was able to get a release from the bank prior to our closing - much sooner than expected. ;)

using web portals to submit title insurance claims

Here are links to the claims portals for the major title insurance underwriters:

STEWART

OLD REPUBLIC

FIDELITY NATIONAL

FIRST AMERICAN

You should expect to receive a response within a week assigning a claim number.  This is followed by the assignment of an attorney to your claim submission.  If you do not receive a prompt response, then I suggest filing the claim using the old fashioned method of certified mail.