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Buyer and seller sign all papers, buyer gets house, seller gets big check. Everyone's happy.
Seller realizes only after depositing check that there is still an open HELOC in seller's name, and it still has money (debt) in it.
Seller goes back to HUD sheet and realizes that the payoff amount listed for a second (HELOC) loan probably corresponds to an "old" HELOC (that had been closed some time ago) and not a current HELOC (that had been opened since).
Seller thinks perhaps somewhere in the process, someone really goofed. (The bank gave wrong info? The title clerk mis-interpreted the info? The seller's realtor did not filter the info properly? The seller didn't catch the error?)
Seller wants to go to bank ASAP and pay off HELOC, close out officially, etc. as this (from seller's layman understanding) would accomplish the two "open" issues:
free the title officially for the buyer
get the bank the money they should have gotten.
Seller is not sure whether this could open a can of worms, and what those worms might be.
Seller has no desire to "lie", but would want to answer truthfully (e.g. if banker asks questions when closing out HELOC)... there was no malicious intent by anyone.
Seller wants to fix it properly.
Is there any advice for someone who might eventually find themselves in this situation?
(Seller might understand that he/she should have paid closer attention to the process, rather than leave the details to the realtor/bank/etc., thereby potentially avoiding an error of this kind.)
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,309,298 times
Reputation: 6471
I'm betting I wouldn't want to be the title company on this one, assuming a policy of title insurance was issued and the preliminary title report was looked at closely but the parties involved.
Hypothetically, the seller should pay off the HELOC (as it is his obligation) and then call the bank and ask for a reconveyance deed.
I'm betting I wouldn't want to be the title company on this one, assuming a policy of title insurance was issued and the preliminary title report was looked at closely but the parties involved.
Hypothetically, the seller should pay off the HELOC (as it is his obligation) and then call the bank and ask for a reconveyance deed.
Wow, this one is a mess and it is my understanding if the buyer wanted to push it they could have title pay of the HELOC because as it stands title is not truely clean. Seller should at minimum contact the buyer and let them know the issue with title. Then contact a lawyer as to what is the best thing for them to do and any agent that is hypothetically caught up in this mess should be careful in how much they involve themselves. And should inform their broker immediately. Of course I would pay off the HELOC if I was the seller and so I think that the seller of course should pay off the HELOC.
I'm betting I wouldn't want to be the title company on this one, assuming a policy of title insurance was issued and the preliminary title report was looked at closely but the parties involved.
Hypothetically, the seller should pay off the HELOC (as it is his obligation) and then call the bank and ask for a reconveyance deed.
The seller might have guessed that it was the title company that screwed up, so that confirmation is some solace.
(The seller might think that in hindsight there was something he/she could have done if he/she was more informed and had paid more attention to the details, but at the same time, the seller might be annoyed that there is a reason for all these players around the table, and it's what they are hired for - to make sure these things are correct).
The seller might hypothetically thank you for your feedback.
Wow, this one is a mess and it is my understanding if the buyer wanted to push it they could have title pay of the HELOC because as it stands title is not truely clean. Seller should at minimum contact the buyer and let them know the issue with title. Then contact a lawyer as to what is the best thing for them to do and any agent that is hypothetically caught up in this mess should be careful in how much they involve themselves. And should inform their broker immediately. Of course I would pay off the HELOC if I was the seller and so I think that the seller of course should pay off the HELOC.
If the seller just discovered, and was intending to pay off the loan ASAP, would it be necessary (or unethical) to involve as few people as possible (i.e. not contact the buyer, lawyer, realtor, etc.)?
Someone majorly screwed up, but by paying it off quietly, does it at least minimize the damage, and close all the loops?
Seller might be severely annoyed and just want it to go away.
A friend of a friend of a friend thanks you for your input.
If the seller is a "good guy" who wants to pay off the HELOC and close the account, there shouldn't be a problem. Pay it, get a satisfaction of mortgage (or whatever the equivalent is in your state) and file it. Done.
The title conveyed to the buyer would have been subject to the existing lien, which would have had priority over the buyer's mortgage (if there was one). But once the LOC is paid off and the associated lien released, what's the big deal?
Yeah, it's true that the title insurer is probably on the hook, but they would just pay it off then go after the seller (incurring lots of attorneys fees along the way, which would also end up being paid by the seller, probably/maybe). No doubt a lot of folks screwed up. But it should be fairly easily fixable if, as you say, the seller is willing and able to just pay it off and follow through with the filings.
Oh yeah, of course let the buyer know. Solve the problem ASAP. Then if you tell the title company, they probably won't care, since no one is going to make a claim against the policy.
If the seller just discovered, and was intending to pay off the loan ASAP, would it be necessary (or unethical) to involve as few people as possible (i.e. not contact the buyer, lawyer, realtor, etc.)?
Someone majorly screwed up, but by paying it off quietly, does it at least minimize the damage, and close all the loops?
Seller might be severely annoyed and just want it to go away.
A friend of a friend of a friend thanks you for your input.
A friend of a friend of a friend should contact title let them know about the error and tell them they are willing to pay what is still owed only if they get the apprioprate paper work and are not charged any accrued interest payments.
If the seller just discovered, and was intending to pay off the loan ASAP, would it be necessary (or unethical) to involve as few people as possible (i.e. not contact the buyer, lawyer, realtor, etc.)?
Someone majorly screwed up, but by paying it off quietly, does it at least minimize the damage, and close all the loops?
Seller might be severely annoyed and just want it to go away.
A friend of a friend of a friend thanks you for your input.
That HELOC is on the books somewhere. The title really needs to be cleaned and not by the title company that did the original one.
The seller hypothetically has an appointment at the bank today, to close the HELOC.
If the seller requests the proper paperwork, what might the seller do with it? Contact his/her own realtor for help?
Is it as simple as going to a courthouse somewhere and giving it to someone? Or can only a title company "officially" clean a title?
The seller, or maybe it's a friend of a friend of a friend, hypothetically cannot express enough gratitude(!) to those who have responded so far with their input.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,309,298 times
Reputation: 6471
Hypothetically, I'd say you're welcome.
Once paid off to a zero balance, a HELOC still exists and if it were to stay on record, it would still cloud the title. The bank should theoretically close the account and record the reconveyance.
I'm impressed that so many of you have so many friends.
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