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As I understand it, there is no way to be absolutely sure that you have a clean title. Which is why you are offered title insurance by the company that did the title search. But the catch is that the policy has exceptions (basically escape routes for the insurer).
That is why the buyer's lender (mortgage company) always gets assurance from the actual underwriter (the closing letter) as well as puts on additional endorsements to cover themselves. The buyer has no such assurance from the title insurance underwriter or typically does not get additional endorsements. This is not much of a concern when the buyer does not have a substantial down payment. But we are putting a large part of our savings to put 20% down. Hence my worries.
The scam might involve disputing the deed after settlement, or loading the title with liens that become part of the public record only after settlement/closing. The title insurance company has its escape hatch and does not bother. The new owners are left contesting the claim on their own limited resources which results most likely in their giving up.
As I understand it, there is no way to be absolutely sure that you have a clean title. Which is why you are offered title insurance by the company that did the title search. But the catch is that the policy has exceptions (basically escape routes for the insurer).
That is why the buyer's lender (mortgage company) always gets assurance from the actual underwriter (the closing letter) as well as puts on additional endorsements to cover themselves. The buyer has no such assurance from the title insurance underwriter or typically does not get additional endorsements. This is not much of a concern when the buyer does not have a substantial down payment. But we are putting a large part of our savings to put 20% down. Hence my worries.
The scam might involve disputing the deed after settlement, or loading the title with liens that become part of the public record only after settlement/closing. The title insurance company has its escape hatch and does not bother. The new owners are left contesting the claim on their own limited resources which results most likely in their giving up.
Thanks for the quick responses all.
Assuming for a second that what you say above is true, it could happen for any house purchase. Did you have this fear before you found out about the impending foreclosure?
For peace of mind you could ask whoever is doing the settlement if they know this, how they're handling paying everyone off.
Your realtor should be able to talk to the seller's realtor and have him/her go over and put a note on the door that the house is closing with suchandsuch co on suchandsuch date, name and no. of company. And so please don't change the locks and lock it all up.
You don't want that surprise when you do your walkthrough or when you have the movers in the driveway.
As I understand it, there is no way to be absolutely sure that you have a clean title. Which is why you are offered title insurance by the company that did the title search. But the catch is that the policy has exceptions (basically escape routes for the insurer).
You are correct. Title policies have exceptions and those are the most important details that you need to understand about the policy. Make sure to carefully review the commitment for the title policy. Better yet, have a qualified real estate attorney review the title commitment to make sure the exceptions are acceptable.
But your concern about a potential "scam" seems unwarranted. They are selling the property prior to being foreclosed upon, so the bank should be paid off in full in order for you to get clear title. There are also forms for the Seller to sign to attest that no further liens or encumbrances have been placed on the property. Just retain a qualified real estate attorney to guide you through this closing and you should be fine.
Assuming for a second that what you say above is true, it could happen for any house purchase. Did you have this fear before you found out about the impending foreclosure?
My realtor told me that the title company was 'reputable' and I should rest easy. My title commitment was done almost 2 months ago but they sent it to me only when I insisted. When I pointed the mistakes on the title commitment, my realtor pooh-poohed those, insisting the the title company is 'reputable' and they never make mistakes?
I was seriously considering getting a survey about a week ago. One of the title company employees misled me into believing that the survey would cost thousands of dollars and would never be completed in time. When I finally called the survey company last week, they told me that the survey would cost about 500 dollars and would take about 2 weeks. Two weeks that I don't have now. I would have paid the 500 dollars for my piece of mind.
You are correct. Title policies have exceptions and those are the most important details that you need to understand about the policy. Make sure to carefully review the commitment for the title policy. Better yet, have a qualified real estate attorney review the title commitment to make sure the exceptions are acceptable.
But your concern about a potential "scam" seems unwarranted. They are selling the property prior to being foreclosed upon, so the bank should be paid off in full in order for you to get clear title. There are also forms for the Seller to sign to attest that no further liens or encumbrances have been placed on the property. Just retain a qualified real estate attorney to guide you through this closing and you should be fine.
When I caught the title commitment mistakes, I asked my realtor, who then proceeded to call me names. I contacted a real estate attorney who tells me that they can do nothing if the settlement is 2 days away and advises me to postpone. When I asked the listing agent (through my realtor) verbally, he flatly refused, threatens that I will be in default and lose my earnest money.
Why does the seller go into foreclosure on this property when they and their immediate family own at least 3 other free and clear properties, including a beach property? They make calculated decisions; good for them. But makes me really suspicious when they didn't disclose they stopped making payments and must have had bank notices in plenty.
When I caught the title commitment mistakes, I asked my realtor, who then proceeded to call me names. I contacted a real estate attorney who tells me that they can do nothing if the settlement is 2 days away and advises me to postpone. When I asked the listing agent (through my realtor) verbally, he flatly refused, threatens that I will be in default and lose my earnest money.
Why does the seller go into foreclosure on this property when they and their immediate family own at least 3 other free and clear properties, including a beach property? They make calculated decisions; good for them. But makes me really suspicious when they didn't disclose they stopped making payments and must have had bank notices in plenty.
I don't know what the scam is either; don't know how you see you are damaged except that you feel you may have waited until the bank sold the property which could have been a long time away.
I would say you were damaged if after closing...or today at walkthru...you couldn't get in because one dept with that foreclosing lender didn't inform another dept and they locked the house up.
Do you know for sure the seller hasn't been talking to the bank lately to let them know the house is closing soon.
I'm not sure why they would have to tell you. As long as they bank is getting paid and they didn't have to sign off on it (shortsale) it seems like information that is irrelevant to the sale.
I'm not sure why they would have to tell you. As long as they bank is getting paid and they didn't have to sign off on it (shortsale) it seems like information that is irrelevant to the sale.
The sellers disclosure law in this state says that a seller has to disclose any legal action or threat of legal action against the property to the buyer.
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