Clear title is very important to a successful real estate transaction and is critical in a short sale. So what exactly is clear title? Similar to owning a car, there's a title (an official looking piece of paper) that describes the car, has a VIN number on it along with your name. It also has the lien holders name on it to represent ownership of the car. Once the loan is paid in full, you get a new copy of the title with no lien holder's name on it and is proof that you alone own the car.
Just like a car, your house has a title representing ownership and just like a car, there's a place for the lien holder (your bank) to show that they have an interest in your home. Unlike a car however, creditors can add additional liens or claims to the interest in your home if you owe them money. If you didn't pay the roofer or plumber or electrician, they can put a lien on your home. It's a claim to the interest in your home for the value of the amount that you owe. Now, consider this...
You can not sell your home until ALL liens have been lifted (satisfied). That means your primary mortgage, any subsequent mortgages including a home equity line of credit or liens on the home from the disgruntled roofer or others. You simply can not transfer ownership of property without clearing title of all liens posted. Yes, the roofer can stop the sale of your home unless you both agree to a solution to lift the lien on the home prior to sale. That's powerful and you're beginning to see the value of identifying liens on title up front.
Consider for a moment that in order to bring a successful short sale to close, that banks require that there be some form of new hardship that's causing late mortgage payments or no payments at all. Also consider that most people pay their mortgage first over other debt and if your mortgage is the first bill that you pay and it's late, that there are frequently other bills that are unpaid. Liens can be applied to the seller's home that they may not be aware of, or have forgotten about. Title must be clear and remain clear up to the time the title is transferred to the new owner. Even then, there is title insurance that guarantees clear title to the buyer in the event that a claim was missed. Clear title is CLEARLY a big deal!
As an agent considering helping owners through a short sale, get comfortable with visiting town hall and doing a title run down. Press your attorney to do a full title search early in the process and ask how often they check title to make sure there are no surprises at closing.
For more information about short sales, visit my short sales resource center where you'll find other short sale topics, common Q&A and video interviews with prominant attorneys to help you through the short sale process.
To search for short sale opportunities in fairfield county:
Click short sales under $200k
Click short sales $200k to $300k
Click short sales $300k to $400k
Click short sales $400k to $500k
Click short sales over $500k
Thank you. If I can help you, don't hesitate to call me.
Tom Braunagel
203-268-4994 x3, sellit@kw.com , sellit.ctehomes.com
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