Title Issues causing Nightmare

Member since 2019 · 10 posts · 1 vote

I bought a house in Austin, TX in July with full cash and spent about $60K renovating the property. I have a buyer for this property, and we are scheduled to close next month. My title company alerted me that the paperwork from my initial purchase of the property looks incomplete.

This property was bought using double closing.

1) Seller A sold it to Wholesaler(Big company) using Title company A

2) Wholesaler sold it to me using Title company B

I found the incomplete paperwork is with Title company A not recording the deed since the County rejected the POA for seal not being clear. The deed for the second closing from the wholesaler to my company was completed in July and recorded.

After my discovery of the issue, Title company A recorded the deed yesterday transferring the deed from the seller A to Wholesaler, but POA is not recorded yet in the county. They are working with the initial seller to fix the POA issue but I don't know how long it will take.

1) Title company B issued me the deed and owner's title insurance. Will I be able to claim the funds through the owner's title insurance? How fast or slow is this process?

Any other advice or suggestions that I should be doing?

1 Reply

100 views

Most Popular Reply

Tom GimerBusiness Member

DMV · Member since 2017 · 3k+ posts · 3k+ votes

@Wayne Brooks Here's my take on this... there is no "nightmare". Stop losing sleep. Nobody is collecting any $ from either title insurer or anybody else for that matter (unless there is some fraud involved). This POA problem -- a document affecting title not properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered -- or some similar definition in the policy form at issue, is a covered risk. Everything is gonna work itself out.

The A-->B deed recordation (albeit late) fixes the chain issue due to the doctrine of after-acquired title.

So here's what happens next. Since the insured buyer is trying to resell, the title insurer on the B-->C transfer will step up and insure the next transfer while the POA recording issue gets resolved. @Peter Walther I think would be a good resource for more info as to how things like this work out.

Gimer Law516 Reviews

Website View Page

4 Reply

See this reply in the discussion

25 Replies

Jump to latestLatest

Sort by

Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
3y
@Tom Gimer ??
1 Reply
Caroline Gerardo
Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
3y
Title Co A didn't clear or issue clear title. Title Co A has to fix the missing pieces and there is no way around this, when you go to sell the new lender will not accept a bond around it. You maybe didn't get ownership. This is why wholesaling is not easy. Hopefully if there is a mortgage it's current. Have you ordered the payoff?
2 Reply
Harris Harris
OP
Member since 2019 · 10 posts · 1 vote
3y
Quote from @Caroline Gerardo:

Title Co A didn't clear or issue clear title. Title Co A has to fix the missing pieces and there is no way around this, when you go to sell the new lender will not accept a bond around it. You maybe didn't get ownership. This is why wholesaling is not easy. Hopefully if there is a mortgage it's current. Have you ordered the payoff?

I bought the property with cash. No lender involved. Do I have a valid claim under title insurance to recover the funds?
0 Reply
Harris Harris
OP
Member since 2019 · 10 posts · 1 vote
3y
Quote from @Wayne Brooks:

@Tom Gimer ??

Any advice or suggestion how to navigate the situation?
0 Reply
Caroline Gerardo
Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
3y
Title Company B issued preliminary title how many days after Title Co A? Names of both title companies? They may be underwritten under the same master owner.
How many days have passed since you filed a claim?
Why is the original seller who signed the power of attorney not available?
BUT for devil's advocate. What if Power of Attorney for original seller isn't valid? What if original seller was elderly, distressed, bamboozled? Then you may have a BIG mess.
2 Reply
Harris Harris
OP
Member since 2019 · 10 posts · 1 vote
3y
Quote from @Caroline Gerardo:

Title Company B issued preliminary title how many days after Title Co A? Names of both title companies? They may be underwritten under the same master owner.
How many days have passed since you filed a claim?
Why is the original seller who signed the power of attorney not available?
BUT for devil's advocate. What if Power of Attorney for original seller isn't valid? What if original seller was elderly, distressed, bamboozled? Then you may have a BIG mess.

My transaction was closed and funded on July 19th. It's double closing so I assume the first closing happened the same day as the second.
To answer your question:
I'm lookin at my policy and Date of policy is July 24 2023, Issued by Fidelity National Title. I don't have any insight on the first closing.
I have not filed the claim yet since I came to know about this issue just two days back.
The original seller I think is very old and the POA was issued few years back. Her daughter I think did the closing for sale A.
Is this mess covered under the owner's title claim. At this time, I don't own this property.
0 Reply
Caroline Gerardo
Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
3y
Get your title officer at Fidelity to pull the other file. Who is that company?
File the claim today.
Send me the prelim I can direct you. Find where seller is and daughter you need them on speed dial. Dad needs to be competent. Was POA done by actual estate attorney? Are there other heirs?
0 Reply
Harris Harris
OP
Member since 2019 · 10 posts · 1 vote
3y
Quote from @Caroline Gerardo:

Get your title officer at Fidelity to pull the other file. Who is that company?
File the claim today.
Send me the prelim I can direct you. Find where seller is and daughter you need them on speed dial. Dad needs to be competent. Was POA done by actual estate attorney? Are there other heirs?

Thank you. Yes, I will file the claim today. Title company A is not sharing any information with me since they know they messed the whole thing. Title company A and the wholesaler are in touch with the daughter to get the POA issue fixed and providing me with daily updates but I don't know how quickly these things move.
My understanding is that initial POA was done by an attorney few years back but seal is blurred and is the cause for all the issue.
0 Reply
Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
3y
@Wayne Brooks Here's my take on this... there is no "nightmare". Stop losing sleep. Nobody is collecting any $ from either title insurer or anybody else for that matter (unless there is some fraud involved). This POA problem -- a document affecting title not properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered -- or some similar definition in the policy form at issue, is a covered risk. Everything is gonna work itself out.

The A-->B deed recordation (albeit late) fixes the chain issue due to the doctrine of after-acquired title.

So here's what happens next. Since the insured buyer is trying to resell, the title insurer on the B-->C transfer will step up and insure the next transfer while the POA recording issue gets resolved. @Peter Walther I think would be a good resource for more info as to how things like this work out.
Gimer Law516 Reviews
Website View Page
4 Reply
Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
3y
I agree with the suggestion you file a claim with Fidelity immediately. Hopefully they will quickly investigate the matter and accept liability. If they do, I expect they would contact title insurer A (which very well may be Fidelity as well if title company A is also Fidelity's policy issuing agent) and see what steps need to be taken to cure the defect.
Fidelity may offer to indemnify your new buyer's title insurer or offer to reinsure the buyer without exception for this matter themselves, but I would expect Fidelity would not be willing to significantly increase their liability. For example, if your policy is for $100k and your sale price is $250k, I doubt they would agree to assume the extra $150k in liability.
Additionally, since there is a possibility there is or could be a total failure of title, your buyer, their lender or the new title insurer may not be willing to close even with Fidelity's assurances.
I hope this helps.
2 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
Quote from @Harris Harris:

Quote from @Caroline Gerardo:

Title Co A didn't clear or issue clear title. Title Co A has to fix the missing pieces and there is no way around this, when you go to sell the new lender will not accept a bond around it. You maybe didn't get ownership. This is why wholesaling is not easy. Hopefully if there is a mortgage it's current. Have you ordered the payoff?

I bought the property with cash. No lender involved. Do I have a valid claim under title insurance to recover the funds?

They will not give you the money back, they will clear the title issues and probably have to do quiet title action. Quiet title action can take several months to a year. You will not have to pay for any of this but you also are not able to sue them to collect any lost monies etc.
File a claim with your title insurance company now.
7e investments53 Reviews
Website View Page
0 Reply
Caroline Gerardo
Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
3y
Once you file the claim Fidelity can pressure Title Co A to get the power of attorney re-signed or get a better copy if one exists. Since you are selling with Title Co C (I hope your buyer is using Fidelity, if not ~ you need to make your buyer switch) the communication and process will flow better. Since you are selling for higher amount than the original policy B covered it's probably going to hold up your sale, especially IF THEY are using a lender.
We didn't see the document so we don't know what is wrong with the POA. I guess: it's blurry, cut off, missing the jurat, something looks funky.
You have daughter's name and location, and you have the name of the attorney on the power of attorney form? Call the attorney see if he has a better copy and send a human to pick it up and get into hands of Fidelity employee at your transaction to re-record. Have the person look at it and tell you it's good and not blurry or cut off. Fidelity is probably now going to require the wet signed copy to be certain.
Often recordings are digital and no human eyes inspecting the written words. Is it the jurat or just the recording seal?
0 Reply
Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
3y
Quote from @Chris Seveney:

Quote from @Harris Harris:

Quote from @Caroline Gerardo:

Title Co A didn't clear or issue clear title. Title Co A has to fix the missing pieces and there is no way around this, when you go to sell the new lender will not accept a bond around it. You maybe didn't get ownership. This is why wholesaling is not easy. Hopefully if there is a mortgage it's current. Have you ordered the payoff?

I bought the property with cash. No lender involved. Do I have a valid claim under title insurance to recover the funds?

They will not give you the money back, they will clear the title issues and probably have to do quiet title action. Quiet title action can take several months to a year. You will not have to pay for any of this but you also are not able to sue them to collect any lost monies etc.
File a claim with your title insurance company now.

I think you're assuming the Principal (mom) is still alive and competent and able to execute a new POA or execute whatever documents are needed to cure the defect.
As I've frequently written, a quiet title action is neither a panacea nor a cause of action. You have to have grounds for why the court should quiet the title in your name against the interests of the defendant.
Let's say mom was dead when the sale to the wholesaler closed. That means, even if the defect was curable, the authority for the attorney in fact (daughter) to convey the property was null and void. That also means the defect cannot be cured. Now let's further assume mom's will leaves the property to her son and disinherits her daughter who mom considered a ne'er-do-well and unworthy of inheriting her estate (knowing she would not inherit anything might have prompted her to commit the fraud). Her son, loving his mother and cherishing his memories of growing up in the house at issue, has no desire to sell and no amount of money in the world can change his mind. In that case, what we have is in my opinion a total failure of title. In which case Harris would probably be paid the amount of insurance as his loss recoverable under his title policy.
Assuming Harris received a warranty deed the insurer very well might sue his grantor to recover its loss (assuming the insurer did not also insure the grantor when (s)he received their deed.
1 Reply
Caroline Gerardo
Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
3y
Fidelity's other company names and sub old companies here:

https://fnf.com/underwriters

Come to learn seller on A is not competent. A better copy of POA that attorney has an original may resolve the problem.

Heirs can now pop up. Getting this cleared in weeks by filing quiet title in court doesn't solve @Harris Harris need to close in three weeks.
0 Reply
Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
3y
Quote from @Tom Gimer:

@Wayne Brooks Here's my take on this... there is no "nightmare". Stop losing sleep. Nobody is collecting any $ from either title insurer or anybody else for that matter (unless there is some fraud involved). This POA problem -- a document affecting title not properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered -- or some similar definition in the policy form at issue, is a covered risk. Everything is gonna work itself out.

The A-->B deed recordation (albeit late) fixes the chain issue due to the doctrine of after-acquired title.

So here's what happens next. Since the insured buyer is trying to resell, the title insurer on the B-->C transfer will step up and insure the next transfer while the POA recording issue gets resolved. @Peter Walther I think would be a good resource for more info as to how things like this work out.

** Question Answered Above while posting **
0 Reply
Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
3y
To me it sounds like the recording was submitted electronically:

County rejected the POA for seal not being clear

Title company A should not have closed the A-->B deal without a valid, original POA in hand. That's the standard where we do business anyway. While a scan or fax of the POA may be reviewed for substance in preparing for closing, the original gets brought to title before or at the closing. The lack of an original POA -- not sure if that is the case here -- should have prevented the A-->B deal from closing at all. And then of course that should have derailed the B-->C.

It's things like this that make me think a double closing cannot be 100% perfected between 2 different title companies. Ask a transactional lender whether they are comfortable with that setup!

If there is or was no valid POA and the principal is now dead, the PR of his/her estate can confirm the prior transaction via confirmatory deed and all will be resolved... in a perfect world of course.
Gimer Law516 Reviews
Website View Page
0 Reply
Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
3y
Quote from @Account Closed:

Quote from @Tom Gimer:

@Wayne Brooks Here's my take on this... there is no "nightmare". Stop losing sleep. Nobody is collecting any $ from either title insurer or anybody else for that matter (unless there is some fraud involved). This POA problem -- a document affecting title not properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered -- or some similar definition in the policy form at issue, is a covered risk. Everything is gonna work itself out.

The A-->B deed recordation (albeit late) fixes the chain issue due to the doctrine of after-acquired title.

So here's what happens next. Since the insured buyer is trying to resell, the title insurer on the B-->C transfer will step up and insure the next transfer while the POA recording issue gets resolved. @Peter Walther I think would be a good resource for more info as to how things like this work out.

@Tom Gimer: @Peter Walther @Wayne Brooks @Caroline Gerardo:

The following question was asked and I had not heard of doing this (but there is a "guru" pushing this.)

********************************

"Hi all,

I made an offer on a house "subject to" and it got rejected because the seller is nervous that if i dont pay then they will get foreclosed on.

Is there something called a performance deed that would deed the property back to the seller if I dont make the payments, or it that just made up? Thanks"

*********************

My question are:

Has anyone heard of doing this?

Would Title accept that and close, revert Title back to Seller, even if the buyer couldn't be found?

Is he confusing it with a Deed in Lieu?

0 Reply
Patricia Steiner
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
3y

First things first: In the state of Texas, once you file a claim, the insurer has 15 days to respond - and then has 30 days to deny or pay the claim. You also need to know what exclusions apply specifically to your policy. Do the homework; start here:
https://www.tdi.texas.gov/title/titlefaqs.html
https://lonestarlandlaw.com/title-insurance-in-texas/#:~:tex...
But know this: if the issue is the notary seal not being clear, that's not a hard thing to fix...that's about the notary who are registered. It's a rather common mistake/issue (see #6) in article here: ttps://www.nationalnotary.org/notary-bulletin/blog/2015/08/avoid-co...
You may not have a big problem here - and you might be able to meet that upcoming closing. Clarify what the issue is and the steps being taken to correct it. Fingers crossed this will be a non-issue very shortly. Best.
0 Reply
Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
3y
Quote from @Account Closed:

Quote from @Account Closed:

Quote from @Tom Gimer:

@Wayne Brooks Here's my take on this... there is no "nightmare". Stop losing sleep. Nobody is collecting any $ from either title insurer or anybody else for that matter (unless there is some fraud involved). This POA problem -- a document affecting title not properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered -- or some similar definition in the policy form at issue, is a covered risk. Everything is gonna work itself out.

The A-->B deed recordation (albeit late) fixes the chain issue due to the doctrine of after-acquired title.

So here's what happens next. Since the insured buyer is trying to resell, the title insurer on the B-->C transfer will step up and insure the next transfer while the POA recording issue gets resolved. @Peter Walther I think would be a good resource for more info as to how things like this work out.

@Tom Gimer: @Peter Walther @Wayne Brooks @Caroline Gerardo:

The following question was asked and I had not heard of doing this (but there is a "guru" pushing this.)

********************************

"Hi all,

I made an offer on a house "subject to" and it got rejected because the seller is nervous that if i dont pay then they will get foreclosed on.

Is there something called a performance deed that would deed the property back to the seller if I dont make the payments, or it that just made up? Thanks"

*********************

My question are:

Has anyone heard of doing this?

Would Title accept that and close, revert Title back to Seller, even if the buyer couldn't be found?

Is he confusing it with a Deed in Lieu?

As I understand it, a performance deed is similar to a deed in lieu, except it is given to the grantor (grantee in the performance deed) by the grantee (grantor in the performance deed) at the time of closing and in advance of a default, to be held "in escrow" in case of a future default.
In general, it's my understanding in most jurisdictions, courts have held that a performance deed cannot be relied on to extinguish the grantor's interest in the property hence I also believe a title insurer will also not rely on one to insure title without exception for the grantee's interest.
1 Reply
Account Closed
Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
3y
Quote from @Peter Walther:

Quote from @Account Closed:

Quote from @Account Closed:

As I understand it, a performance deed is similar to a deed in lieu, except it is given to the grantor (grantee in the performance deed) by the grantee (grantor in the performance deed) at the time of closing and in advance of a default, to be held "in escrow" in case of a future default.
In general, it's my understanding in most jurisdictions, courts have held that a performance deed cannot be relied on to extinguish the grantor's interest in the property hence I also believe a title insurer will also not rely on one to insure title without exception for the grantee's interest.

Thanks, that's what I was thinking based on the following, but I have no experience using a Performance Deed. I think it's being sold as an easy way to get a property back in the event buyer doesn't perform, even if the buyer is nowhere to be found. It seems like a false promise (not complete, too many "if"s involved) from the buyer using Subject To, to convince the seller that Subject To is "safe". My strong opinion is that Subject To is not at all "safe" for the seller.

"The Performance Deed of Trust

https://www.calrealestatelawyersblog.com/the-performance-dee...

The obligation being secured must be capable of liquidation (i.e. determining a specific monetary value) before enforcement.
Reference: Dieckmeyer v. Redevelopment Agency of the City of Huntington Beach

"A performance deed of trust may be difficult to foreclose non-judicially – that is, by trustee’s sale through the power of sale.

A hesitant title company would refuse to perform the sale, especially if the borrower disputes the performance breach.

The lender/holder of the deed of trust (the beneficiary) could substitute themselves in as trustee, and conduct the sale. However, If the beneficiary buys the property at the sale (in the event that there are no sufficient bidders),

the borrower – mortgagor would have the right to redeem the property, getting it back by full performance of his obligation. (Copsey v. Sacramento Bank (1901) 133 Cal. 659).

1 Reply
Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
3y
@Account Closed I responded in the original thread about your performance deed questions:

https://www.biggerpockets.com/forums/311/topics/1143288-is-t...

@Peter Walther I agree that performance deeds create major title, insurability, liability, etc. problems but when a subject-to buyer does default, having that option would make me as a seller MUCH more comfortable when deciding to resume making payments on the mortgage.

While in the process of being screwed having a bad option is better than no options at all.
Gimer Law516 Reviews
Website View Page
2 Reply
Ryan KellyBusiness Member
Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
3y
@Harris Harris this is exactly WHY you purchase title insurance, for legal situations like this that have to be resolved. File your claim and let the title companies resolve the issue. It could take several months, so be patient, but likely will work out in the end.
[email protected]512-674-5478
Ryan Kelly Group - Keller Williams5112 Reviews
Website View Page
1 Reply
Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
3y
Quote from @Tom Gimer:

@Account Closed I responded in the original thread about your performance deed questions:

https://www.biggerpockets.com/forums/311/topics/1143288-is-t...

@Peter Walther I agree that performance deeds create major title, insurability, liability, etc. problems but when a subject-to buyer does default, having that option would make me as a seller MUCH more comfortable when deciding to resume making payments on the mortgage.

While in the process of being screwed having a bad option is better than no options at all.

I think it's better not to sell subject to and with a wrap around mortgage.
0 Reply
Jack Deer
Member since 2020 · 84 posts · 27 votes
3y
Title Insurance companies are willing to, and always do insure 30%+ properties that don't pass the 'Who Really Owned This' before yesterday. Read the fine print of the title insurance. It ain't worth nothing for anything that you can't afford to sue someone for.
What happens if your attorney is a loser?

Do your own research before you buy.
0 Reply
Peter Walther
Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
3y
Quote from @Jack Deer:

Title Insurance companies are willing to, and always do insure 30%+ properties that don't pass the 'Who Really Owned This' before yesterday. Read the fine print of the title insurance. It ain't worth nothing for anything that you can't afford to sue someone for.
What happens if your attorney is a loser?

Do your own research before you buy.

"Title Insurance companies are willing to, and always do insure 30%+ properties that don't pass the 'Who Really Owned This' before yesterday."
What are you basing this statement on?

0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.