Title company closes deal when property is foreclosed.

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Title company closes deal when property is foreclosed.

Eugene Mar
Investor · Vancouver, BC · Member since 2013 · 27 posts · 4 votes

Hey everyone, 

I've got a really good one here.

My property was sold for 42k and net proceeds came out to 35k.  The Title company did all the work with a warranty deed and Title insurance.  Funds were wired to my account.  The next day the Title company emails me and wants the money back.  Apparently they messed up and the property was foreclosed by the county and was then forwarded over to the Land Bank.  I called the Land Bank to see if I could redeem the property but it has already been sold to a developer.  I've bought and sold many properties in the past and this case is very bizarre.  My attorney tells me that Title screwed up and it's their responsibility to clean up this mess.  The property is in Detroit.  I'm Canadian.  Legally speaking, do I keep the money and tell Title to fix the problem on their own?

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
8y

Well, You can not sell something that You do Not own.  Yeah, the title co. missed the tax foreclosure, but in the end You sold something you didn’t own......of course you owe the money back.  You could have plead ignorance, but now that you know, it would be fraud and you absolutely will lose this battle....you got the money, the buyer got nothing.  Remember, You gave the Warranty Deed.

And for those who will say “the buyer can collect from the title co.”, that may be true but if so, guess Who is going to lose the suit to pay the title co. back.....the one who collected the money for a property they didn’t own.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y

    Well, You can not sell something that You do Not own.  Yeah, the title co. missed the tax foreclosure, but in the end You sold something you didn’t own......of course you owe the money back.  You could have plead ignorance, but now that you know, it would be fraud and you absolutely will lose this battle....you got the money, the buyer got nothing.  Remember, You gave the Warranty Deed.

    And for those who will say “the buyer can collect from the title co.”, that may be true but if so, guess Who is going to lose the suit to pay the title co. back.....the one who collected the money for a property they didn’t own.

    3Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Eugene Mar Your attorney is setting you up for a big fall.  Perhaps he's interested in defending you in the civil action.

    One of the prerequisites to having title insurance is a valid, recorded deed. Accordingly, there is no title insurance for the buyer to look to here... so they'll be looking directly at you.

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  • Bob Prisco
    Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
    8y

    @Eugene Mar it was the title error however you will not win. I do not know about the land bank in Detroit ,but in Cleveland it is EXTREMELY corrupt , you will not win. How about this. I purchased a tax lien, ( I have done more then 100 so experienced ) for 125k for a 24 unit building worth more then 500k. Well the county sold MY lien to the Land bank ( error in my paperwork, BS ! ) who then sold it ( really gave it away ) to another buyer. Turns out this same buyer gets A LOT of deals from the LB HMM, Well turns out the buyer opened his LLC about a month BEFORE the sale/ transfer ( how did they know they were getting MY property ) I have spent 35k on attorneys . County said , yes we messed up it should never have been sold, but like the saying , you cant fight city hall. End result it seems we are getting the upset price of 236k, so not a total disaster , but still a far cry away from the 100k per year NET I would be getting or sales price of 600k or more.

    Unless you want to spend 10s of thousands  move on . 

    1Reply
  • Brian Stamm
    Dallas, TX · Member since 2018 · 3 posts · 1 vote
    8y
    @Eugene Mar Hi Eugene, having worked in the title industry, this one is messy, but without looking at the title, it’s hard to determine what exactly happened. If the mortgage foreclosure Just happened, there may be a redemption period (which you could be in a position to have the title company negotiate for you); since the bank sold to a developer, the title company would need to contact them. Another piece of the puzzle is the deed; who signed the deed to you, when, and what kind of deed? I wish I had a more simple answer for you, but feel free to reach out if you have more questions. You may want to ask your attorneys opinion regarding the money.
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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    8y

    @Eugene Mar   as usual @Tom Gimer, is right, the attorney is full of crap or simply incredibly unethical. You have collected money for a property you did not own.  The title company did screw up and is responsible to the Buyer.  You on the other hand are responsible to the title company and the buyer. Since you signed a warranty deed you are on the hook. 

    Now you may be able to fight with the county. If you didn't get notice of this foreclosure you might be able to unwind it. That is likely to be hard and expensive battle.   

    Since you said the county took it I presume it was for taxes. Did you get notice of any pending action?

    2Reply
  • Oren K.
    Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
    8y

    @Bob Prisco @Brian Stamm @Ned Carey @Tom Gimer .... Well maybe not so fast.

    While it does not make sense to me, I provide for your reading enjoyment the following links /  Court Case;

    https://www.gpo.gov/fdsys/pkg/USCOURTS-ohnd-1_08-c...

    and

    https://www.casemine.com/judgement/us/5914fbf2add7...

    This property was recently listed and so I was doing some research, ran across the case and learned a thing or three.

    The synopsis is (not a lawyer so maybe I haven't read it correctly) and leaving a side the fraud of one party (which he eventually was found guilty of), the eventual purchaser, purchased in good faith and was declared the 'owner' with good title. So despite the fact that various(?) parties s***ed up, I find a parallel here though the amounts are orders of magnitude different (i.e. not worth the legal costs).

    I think the Land Bank buyer ends up with the property, the seller ends up with his funds and not sure where the title company (assuming they acted in good faith) ends up and the buyer from the seller may be left holding the bag of poop or it may be the buyer from the Land Bank that has the bag.

    Can't say I agree with the outcome but if I apply this case.. that is what I get.

    Oren

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Oren K. That's a case involving Ohio law, on a summary judgment motion, focusing on an entirely different issue in the context of a mortgagee, not a purchaser. Why would we apply that case?

    How about we find some Michigan law involving this issue... OP "sold" a property he didn't own and thinks he can keep the money.

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    8y

    You gotta give the money back. It's kind of like going to the superstore and the cashier forgets to ring out your big screen TV with all of your other items. Just because the cashier made the mistake doesn't mean you can walk out the door with the TV you didn't pay for.

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