closing with a cloud on the title

Buying & Selling Real Estate
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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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  • Rob Milliken
    Wholesaler · Union, ME · Member since 2016 · 148 posts · 27 votes
    7y

    @Rich Hupper

    We will close quickly IF CLEAR TITLE

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

    @Rich Hupper

    It all depends upon the issue. If there is someone that needed to sign off in the past and did not, that can become a Very Expensive problem to solve if they even will sign off. There are times that person would rather have the property...

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  • Account Closed
    Flipper/Rehabber · Quincy, MA · Member since 2016 · 53 posts · 35 votes
    7y

    As other have said, it depends.

    I did it once, closed on a foreclosure with a missing assignment. We paid a consultant $400 to fix it. It took a couple months, and by that time I was have way through the rehab, and was able to give my buyer a clean title.

    Recently, I passed up an opportunity to buy a property because I was affraid it had a title defect related to a recent state supreme court decision. The foreclosure auction occurred just a couple weeks before the court decision was handed down. The court decision sent all the foreclosing banks and their attoreys scrambling for a couple months to get their stuff in order. (For those of you in Massachusetts, it was the Thompson case). 

    After the bank called me to ask if I was interested in purchasing the property, I did a little homework, then asked if they could provide me with documentation that the property was free of Thompson defects. 

    The bank declined.

    I declined, too.

    It doesn't seem like the bank attorneys know how to fix this defect in cases like this, other than waiting the 3 year statute of limitations. 

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

    Just an update on this. After speaking with my attorney he said it is on an Ibanez issue. It is a missing POA document issue. @Tom Gimer apparently the seller does not have an owners policy. However the lender does.

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    7y
    Originally posted by @Rich Hupper:

    Just an update on this. After speaking with my attorney he said it is on an Ibanez issue. It is a missing POA document issue. @Tom Gimer apparently the seller does not have an owners policy. However the lender does.

    Perfect example of why you should always purchase owners title insurance. Unfortunately that lender's policy doesn't help here. 

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

    @Tom Gimer wouldn't it be in the lenders best interest to resolve something like this with their  policy?

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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    7y
    Originally posted by @Rich Hupper:

    @Tom Gimer wouldn't it be in the lenders best interest to resolve something like this with their  policy?

    Sure, but it's unlikely to happen on your timetable. If your seller were in default, the lender would conduct a title search in preparation for foreclosure proceedings and they would presumably discover the defect, make a claim, and the issue would be addressed. Right now they have no reason to do anything. 

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

    @Tom Gimer @Rich Hupper @absolutelyEveryone I second this. ALWAYS get N owner's policy. Always.

    ESPECIALLY if you're buying a lender's policy for the bank anyway-- but that's not the point. It's short money. Buy the Owner's policy.

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