Does a cloud on the title mean a thunder strom is coming?

By
Real Estate Agent with Keller Williams Lynchburg 0225227139

Today 24 hours prior to closing a transaction I find out that there is a cloud on the title.  It is pretty simple.   Sometime in 1964 someone somehow failed to get the proper documents filed in order to release a deed of trust in the amount of $16,000.  The loan had been assumed a few times and during this same time this area was annexed from the county to the city so have the title work was recorded in the county and the other half was recorded in the city. 

I was kinda surprised about the cloud since the property had been re-financed a couple times in the past two years.  Wonder who did that title search?  Obviously it was over looked.

Well more research reveals that the lender is no longer in business so there is no way to pay the debt if it was not paid.  If I was a betting gal I'd bet it was paid and someone just screwed up along the way and during the time the neighborhood was annexed papers got shuffled and lost.  Not surprising really now that I know more about the situation.

 So how do we clear this problem up?  Does the seller have to pay the $16,000 even though it really was not their debt? Does the buyer? The purchase agreement requires that the seller provide a clean title to the buyer.  Well, luckily we have a solution called title insurance.  The title insurance will insure over the cloud and insure (guarantee) a clear title for the lender.

It cost a little extra but since I represent the buyer I recommended the buyers get owners title insurance to insure over the title of their equity.  Which in this case about half the value of the home.  This is a one time fee but the insurance last until the end of time.  Meaning even after you no longer own the property and are with your maker.  It even insures your heirs from any liability.

Clouds on title is not that uncommon.  I've run into it many times. People are human and mistakes are made.  That is why we do title searches and that is why we have title insurance to cover our human mistakes.

I was a little upset that I did not find out about this until 24 hours prior to closing.  Okay, I was a lot upset.  The attorney tried to tell me that we could not close on time and bla bla bla.  Well I had to put a little fire under his you-know-what and we are going to close tomorrow at 4 p.m.

 

Posted by

Nannette Turner Saunders, Associate Broker

Short Sales Coordinator

Keller Williams Realty

1709 Laskin Road

Virginia Beach Va

Comments (10)

Guy E. Gimenez
The PowerHouse Group - Austin, TX
ABR, CRS, GRI - Broker & Investor (512-731-5613)
We don't use attorney's for buyers and sellers (well. it's not mandatory) in Texas, so it's up to the agents to review the title commitments for issues and inform their buyer to object to those issues as allowed by the contract.  I too find problems quite frequently, including one for $5,000.000 on a 200K home.  The developer never got the lien released and it applied to this particular property.  What a mess it could have been since my guy paid cash for the home and the developer's solvency was questionable at that time.
Apr 09, 2008 12:31 PM
Nannette Turner
Keller Williams Lynchburg - Lynchburg, VA
Online Marketing Home Ownership Advocate Specialis
In Virginia real estate agents can not do "title searches".  We don't have to use attorney's to close however I like using an attorney because you just never know what is going to happen.
Apr 09, 2008 12:34 PM
Rob Muller
ReMax Town & Country - Canton, GA
Cherokee County Real Estate
Not fun! Glad you will be able to close.
Apr 09, 2008 12:43 PM
Nannette Turner
Keller Williams Lynchburg - Lynchburg, VA
Online Marketing Home Ownership Advocate Specialis

Rob actually it was not that bad.  A little drama but this transaction has been riddled with drama from the beginning.  See my last five posts on this transaction.

click here

Apr 09, 2008 12:45 PM
David Saks
(retired) - Memphis, TN
Any claim, unreleased lien, any document or an encumbrance that could spoil the title or make the title doubtful is a problem. Good work uncovering the cloud; but it still remains to be seen how the cloud is lifted with either a suit to quiet the title or a quitclaim deed from whoever if it crops up in the future. Just exactly how the title company handles this would be interesting to follow. Thanks for posting your story. Good questions surface.
Apr 09, 2008 12:59 PM
Guy E. Gimenez
The PowerHouse Group - Austin, TX
ABR, CRS, GRI - Broker & Investor (512-731-5613)

In Texas, agents don't do the actual title searches either, they can only review them and the associated documents.  I also close with an attorney and have for years.  I'm not one that likes to climb up the chain of command when something goes south...I want to work only with the decision maker...the fee attorney.

Apr 09, 2008 01:20 PM
Nannette Turner
Keller Williams Lynchburg - Lynchburg, VA
Online Marketing Home Ownership Advocate Specialis

David In this case title insurance insures over the lein.  So if it does rear it's head in the future the insurance will cover it.

Guy I had to fax and email the closers, attorneys and every other Tom, Dick and Harry associated with this transaction to light a fire and get it done.

Apr 10, 2008 12:45 AM
Tara Colquitt
Tara Colquitt, The Credit Woman, LLC - Philadelphia, PA
Credit Counselor
Nannette: After reading a few blogs in succession my only comment: Southern belle my foot! You are a firecracker! Your clients are lucky to have you. You are a closer!
Apr 17, 2008 11:13 PM
Nannette Turner
Keller Williams Lynchburg - Lynchburg, VA
Online Marketing Home Ownership Advocate Specialis
Tara LOL Girl part of being a southern gal is being a firecracker or a you know what buster.  Thanks for so many great comments. I've enjoyed every one of them!
Apr 17, 2008 11:16 PM
Anonymous
Linda Aparo

Our company specializes in locating officers to sign releases, assignments and subordinations in all 50 states.  If you are having problems with obtaining a release or discharge of your mortgage or other lien that appears on title, give us a shout and we will do all of the leg work for you for a flat fee, plus recording costs.

You can e-mail me at linda@finaltrac.com

or visit our websit at www.finaltrac.com

Jun 11, 2009 05:26 AM
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