Closing issues- "entity didn't exist"

11 Replies

What a mess. I have been trying to close on my 3rd deal for months now. The seller got rid of the deadbeat tenants. I thought all was well.

Then my title company informs me that when the seller bought the property, it was in an entity that didn't exist (even as a trade name). So they tracked down the previous owner. He had passed away, but they found his wife in Florida.

Now, they need the wife to open an estate in FL...then a foreign estate opened in Maryland...and some notoraized/signed document by the wife sent. But apparently the title company is treading lightly and she has not even yet asked for money. However, I think the title company is going to ask the seller if he will still offer this previous owner some money to move quickly with this paperwork.

I have gotten to know the seller. He said that when he bought, it must have just been a mistake and that he admits he didn't read everything...just signed, signed, signed. But, as the title company is wondering, how did he not know this was in the wrong name as he was paying taxes on the property in that name?

To make it even more complicated, I didn't know it was this complicated until recently. I had my contractors lined up to start work the day after closing was set. When it got pushed back, I thought it'd just be for a couple days as was suggested by title company originally. So my guys started work (with permission of the seller).

Now that we're at the mercy of this previous owner's wife, I don't know how fast she'll work. I can't say for sure the seller will offer her money to hurry...or that she will accept. If she doesn't in a timely fashion, then the seller will have to go to court to prove he was the intended buyer...that could take a while.

Now that I'm in this mess, what should I do? Just stop work? It's already started...demo work at least. I've bought supplies/materials.

Or could I draw up some agreement to continue on and treat the property as my own instead of stopping to get this all worked out?

Interesting situation. I would stop work ASAP.

If for any reason you don't end up closing you are throwing you rehab budget away.

Also could be liability doing demo on a property that doesn't belong to you.

Uh Oh, lessons from the school of hard knocks. Never start work before closing. Period. Stop work now and hope you don't get sued for the damage if the deal doesn't close.

Who would you draw up an agreement with? The person you think is the seller apparently is not legally the owner. Title issues do happen, as you're learning. Those are going to have to be resolved for you to buy the house. That might just take a day or two, or might be such an effort that the deal no longer works. At this point its impossible to say.

do not continue the work. If there is any break in the chain of title and the current title company cannot insure the deal, then you will have to find a title company that will insure around the matter, which is unlikely.

If the deal does bit close and a deed never gets recorded and transferred to you name then you will not own it.

Has the seller gone back to his original title policy when he purchased because he may have a valid claim on his title policy and they would have to pay and he can then offer the original sellers wife done money to clear this up , have her execute a deed to him and another deed from him to you.

Pauline Cox


I would stop work immediately. I also hope you have the sellers permission in writing. This could get ugly fast.

I always hear about people controlling a property they don't own. Lease option? Is there not something I could set up to continue on while this is all worked out and we go to closing? The seller is a friend of mine and open to my ideas. I just need to know what to structure.

Any creative suggestions are most welcomed. I want this to happen. Am I on the right track of some sort of lease option until the title problem is fixed?

The main issue here is not how can you legally start working on it, the issue is you should Not start working on it. You have no idea if title will be clear in 2 months, 2 years or 5 years. Find a local RE attorney, if the title co. isn't attorney owned. There should be some way, perhaps scrivener's error, or something similar. The deceased seller's Intent was to sell it, so hopefully opening probate can be avoided. Does your seller have a purchase contract that was executed for his purchase? That may help.

He found the paperwork from when he bought it, but it has the wrong name on it as well. How he didn't notice this at the time of sale is a whole other question.

The thing is, that work has already started on the property. I can't un-do that work that was already done, which is a lot of demo work so far. My thought was to work something out with the seller between us until the title work is complete.

Ask your seller if he/she got title insurance when they purchased the property & if so go back to them. They will most likely insur it again. If not I would file a quiet title action & have Florida gal & current seller stipulate to the lawsuit (much faster than probate)- that should be enough for the title company. BTW- whatever price u paid it's probably too much.

Good luck

Dennis Lanni - beautiful, elegant solution! File & Stip.

Hope the buyer has learned a valuable lesson.

Problems are merely opportunities to solve.

The title company says that title insurance is not the answer to this. I can not seem to get a clear answer as to why except that if it was just a typo of letters, it'd be easier, but this is an entire wrong word in the owner's LLC name.

We have asked the title company what if the seller just amends his LLC name to reflect what is on the title. They said they asked but because the underwriter already knows there's a problem, they probably won't let it slide but will ask again.

In the meantime, we have found another title company that said this is not an issue. The owner just needs to go amend his LLC name. Then we can close with this company.

We also found out that the original title company that made this mistake has closed down, but has ties to the title company we were working with. So it seems like possibly they want to fix it rather than make a claim to title insurance.

Problems are definitely just an opportunity to solve. That's why I came here hoping for some creative suggestions. The price I paid was not too much, but thank you for the positive note.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here