closing with a cloud on the title

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closing with a cloud on the title

Rich Hupper
Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes

I often see many wholesale websites and investors in general say they will make an owner an offer within 48 hours of seeing the property and can close in 7 days. I know people out there are very good at estimating rehab costs. But what about title issues and the costs to fix those. Do these quick close cash investors take clouds on title into consideration with their 48 hour offers? 

I know title issues can be fixed in land court but at a great cost depending on what it is. Do any investors on this forum buy property with clouds on the title just to beat out their competitors? Thanks for your input.

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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
7y

@Steve McGovern Different issue...  a power of attorney missing from the chain is not even close to the same problem as a missing assignment.

Of course all the facts haven't been shared here (and this is not a state-specific response) but it sounds like the problematic deed can be re-recorded after being executed by a person with the appropriate authority, or by the recording of the missing POA. I would start that process immediately so owners coverage is available on the acquisition.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    The assumption, and language, in a contract is that the seller delivers free and clear title.  If a cloud is present, and the seller can’t cure it, then the buyer has to reevaluate.

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  • Rich Hupper
    OP
    Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes
    7y

    @Wayne Brooks yes I am aware that contracts state its the sellers obligation to deliver clear title. I am just trying to get a sense from the investor community if it is common place to buy property with a cloud on the title and fix later to make your offer more competitive, and give a seller a fast close as advertised.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Rich Hupper It depends on What the cloud is and how much time/money is anticipated to cure. 

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  • Rich Hupper
    OP
    Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes
    7y

    @Wayne Brooks in your experience are there any issues with title that cannot be solved even in court?

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Rich Hupper Just say what the issue is. There’s a ton of things court won’t fix......other owners on title, liens, judgments, etc, etc.  Sometimes court Verifies some other claim....making the “cloud” more concrete. 

    There’s no way to generalize. 

    1Reply
  • Steve McGovern
    Professional · Lowell, MA · Member since 2014 · 232 posts · 223 votes
    7y

    @Rich Hupper 

    Former Title Guy here-- not just residential conveyancing but also commercial, industrial, Agriculture, telecom, RR, O&G, and Transportation RoW assets. I've seen some stuff.   


    It's not advisable, but YES, people sometimes buy with known title defects.    Furthermore, if you're working well with your Counselor, and if said Counselor has a clue, you can often negotiate affirmative coverage over things that others believe are unable to be overcome.  You'll definitely want to get Title Insurance (an Owner's policy, obviously).  You should have it anyway, but the only way to get the Insurance Co to overlook the issue is to Insure the property with an Owner's Policy.  

    I'll repeat-- IT IS NOT ADVISABLE, usually... and Wayne Brooks' point is true:   it's impossible to say anything, really, without knowing WHAT the defect is.  

    We appear to be neighbors. Want to PM me?  I can walk you through.   

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  • Rich Hupper
    OP
    Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes
    7y

    @Wayne Brooks @Steve McGovern Hi Steve thanks for replying. My attorney who pulled the title report found a discrepancy in a foreclosure deed where Us Bank as Trustee for Ramp2005EFC4, c/o GMAC mortgage LLC Appointed Orlans Moran PLLC attorney in fact to complete foreclosure proceedings. However there is no recorded document found in the title where US bank appoints Gmac attorney in fact. This is holding up the closing. And no one from US bank, GMAC or Orlans is talking.

    I would just assume close on the property because the owner has a mortgage on the property but his bank didn't seem to care about this title defect,  however my attorney does and I am suppose to be the cash buyer with the ability to close quickly. 

    its great to see someone in these forums nearby

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  • Steve McGovern
    Professional · Lowell, MA · Member since 2014 · 232 posts · 223 votes
    7y

    @Rich Hupper that's kinda what I was afraid of. You need to wait on this one. The owner may have recourse.

    In a separate email I'm going to send you a link for an introduction to this matter. If that doesn't come through (I'm on mobile) search

    mass Ibanez foreclosure

    On your choice of engine. I'll give you a starting point.

    --EVEN BANKS wouldn't sell these assets REO. Talk to your atty in earnest. I'd recommend Ed &Shelly Rainen in North Andover if you don't have one yet. They are regional title experts. And I mean experts. They are Certified as title Attorneys for the Mass Land Court.

    Link to follow immediately. If you dont see it, s see it , it's BP

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  • Steve McGovern
    Professional · Lowell, MA · Member since 2014 · 232 posts · 223 votes
    7y

    @Rich Hupper

    massrealestatelawblog.com/tag/ibanez

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  • Steve McGovern
    Professional · Lowell, MA · Member since 2014 · 232 posts · 223 votes
    7y

    @Rich Hupper looks like that went through. As you will see, these assets CAN'T POSSIBLY pass via the marketable title doctrine. This isn't a "cloud," it's an F3 tornado.

    ...and even if it did (once) then each subsequent passing can't. The current owner probably snagged it prior to the ruling. That's my guess. You wont be the last to walk away.

    my advice if you demand to buy this-- you need to buy out the aggrieved party. Acquire a quitclaim deed from the foreclosed party and you're good. That'll cost you some money but it's the safest way. Maybe someone will be happy to have $20K for something they lost 10 years ago.

    Other thoughts:

    1) No licensed atty in her right mind is going to help you with this. They can be disbarred.

    (Bad idea already, right?)

    2) if this somehow goes through (without the quitclaim, that is) be prepared for the same issue on the way out (!) If every asset is purchased to ultimately be sold, and this is unsellable, then what's the point?

    3) ANY TENANT who you tick off and who does the research can actually challenge your authority as owner and absolve themselves of the need to pay you. And this is Massachusetts, not Texas.

    4) if you do all these things and are ready to take the risk .. pay yourself for it. Negotiate a 50% discount on the purchase price on the lack of marketable title. Or at least the 20K discount for the deed you'll need to acquire from the aggrieved party.

    A) expect same from your future buyers. If You ever have a buyer.

    5) better than any of those, WALK AWAY. Live to fight another day.

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    7y

    @Steve McGovern Different issue...  a power of attorney missing from the chain is not even close to the same problem as a missing assignment.

    Of course all the facts haven't been shared here (and this is not a state-specific response) but it sounds like the problematic deed can be re-recorded after being executed by a person with the appropriate authority, or by the recording of the missing POA. I would start that process immediately so owners coverage is available on the acquisition.

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  • Steve McGovern
    Professional · Lowell, MA · Member since 2014 · 232 posts · 223 votes
    7y

    @Tom Gimer you've absolutely got a point... hopefully it's that easy.

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    7y

    @Steve McGovern Yes, I think this one is an easy fix. Hopefully we'll see the follow-up.

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  • Rich Hupper
    OP
    Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes
    7y

    @Steve McGovern oh lord. This is not good thank you for bringing it to my attention. 

    According to what I am seeing at the ROD is the original mortgagor bought the property in 2005. The mortgagee was MERS. In 2009 MERS assigned the note to US bank Trustee for Ramp2005EFC4. On the foreclosure deed executed April 2010 the grantor was named : US bank Trustee for Ramp2005EFC4 c/o GMAC mortgage LLC. ( not sure how GMAC came into the mix )

    Orlans Moran PLLC executed the foreclosure deed as the attorney in fact for US bank. 

    The grantee of the auction " a local investor" bought the property cheap then flipped it to the current owner in May of 2010 for a  hefty profit. 

    Do you think this effectuates the ibanez ruling?

    Also you lost me when you said I need to buyout the aggrieved party do you mean the current owner?

    Then get a quitclaim deed from the 2005 mortgagor who was foreclosed on?

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  • Steve McGovern
    Professional · Lowell, MA · Member since 2014 · 232 posts · 223 votes
    7y

    @Rich Hupper I meant to buy out the original, foreclosed owner. HOWEVER @Tom Gimer had a great point: maybe it's not the assignment.... maybe its ONLY the Power of Attorney between the parties.

    Honestly, considering the track that Massive tends to take on matters like these, it may not matter. When it's wrong, it's wrong. Mass tends to revert ownership. This is a pro-consumer state in every capacity.

    So. Ask your atty If this is an Ibanez matter, or if they just need to record a confirmatory deed or power of atty. Then you'll know the likelihood of getting this done.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Steve McGovern @Rich Hupper

    Perhaps the missing POA is in the actual foreclosure case file, but not recorded?

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  • Steve McGovern
    Professional · Lowell, MA · Member since 2014 · 232 posts · 223 votes
    7y

    @Rich Hupper Orlans Moran is everywhere here. I would find it hard to believe that it was JUST their POA that was at issue. The connective tissue between GMAC and (someone) is what is usually at risk here. Operative word: usually.

    They say it all the time: the money follows the NOTE, which remains behind the scenes, and the Mortgage just goes along for the ride. The thing is that Mass disavowed that concept through this ruling.

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  • Steve McGovern
    Professional · Lowell, MA · Member since 2014 · 232 posts · 223 votes
    7y

    @Wayne Brooks yes. Theoretically that's plausible but it shouldn't hold up this transaction and cause radio silence.

    Also as I mentioned in the email after you asked, Orlans is one of the.... top 3-5 foreclosure firms in the area, so even if their POA wasn't recorded WITH this transaction set, it SHOULD be readily available in the county in the requisite time frame prior. These aren't usually sole- purpose PoAs. They're usually limited by time, if I recall. (6 or 12 months, give/take.) Someone else may be better-suited to call out the standard at this point.

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  • Rich Hupper
    OP
    Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes
    7y

    @Steve Bracero Okay Will do. I am hoping it is not because after reading the article you sent me It doesn't seem like anything can fix an Ibanez matter.

    @Wayne Brooks Which party listed above would I need to reach out to, in order to confirm your theory, Orlans Moran?

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    @Rich Hupper I think your foreclosures are judicial? I was referring the actual court file. 

    Here, our foreclosure plaintiff attorneys( mostly foreclosure mills)  are pretty much useless in these things. 

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    7y

    I had the exact same scenario recently... except the missing LPOA (3 transfers back) was that of an attorney-in-fact for HUD. Transaction occurred in the gap between effective dates of applicable authority. Simple confirmatory deed fixed the chain. They even overnighted the corrective instrument to help our settlement go without delay.

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  • Rich Hupper
    OP
    Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes
    7y

    @Wayne Brooks yes I believe mass is a judicial foreclosure state that considers title theory law when proceeding with foreclosure. I will go to land court and see if they have the old file.

    @Tom Gimer In your scenario who did you need to get the confirmatory deed from? In my chain of title the only discrepancy I am seeing is the introduction of " c/o GMAC mortgage LLC". I found a power of attorney document recorded for Orlans Moran but I am not sure how GMAC came into the picture when they were not on the original assignment of mortgage document from MERS to US bank Trustee for Ramp2005EFC4

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    7y

    @Rich Hupper First, we went directly to HUD because it was HUD's deed that was executed by its attorney-in-fact but without record of the requisite authority.

    Second, if there is truly a title issue (which has certainly not been established yet), your seller should immediately make a claim under their owners policy. The title insurer will either take the quick corrective action we are discussing OR perhaps issue a letter of indemnity to the title insurer you are using in connection with the acquisition, and then the issue is moot.

    Third, it sounds like GMAC Mortgage LLC is the servicer of the loan. I doubt that is the title issue your attorney is focusing on.

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  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    Very very rarely. 

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  • Rob Milliken
    Wholesaler · Union, ME · Member since 2016 · 148 posts · 27 votes
    7y

    @Rich I will not buy a property with a cloud on the title. It must be clean

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