House Sold Without Paying Off My Lien

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House Sold Without Paying Off My Lien

Jackie Lange
Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes

About 10 years ago, I sold a house with seller financing. I closed at a title company.  They recorded my deed of trust (mortgage). 

The buyer stopped paying me.  I discovered that she sold the house a few months ago but the title company in Dallas Texas completely overlooked my lien. They never called for a payoff.  The funds were given to the seller (my buyer).  

The title company says call the seller but she's not returning my calls or emails.   

The title company's error and omission insurance should kick in, but it will require a lawsuit to get them to pay.

Or, I could foreclosure on the house since no payments have been made for several months.  


Looks like I will have to file a lawsuit against the title company, lawsuit against the person I sold the house to, and file for foreclosure if I ever want to see my money.

Has anyone else ever had this happen?  

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Dion DePaoliPro Member
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
8y

@Greg H. the OP can issue a Notice of Default right now.  The time to cure is 20 days.  No need to wait until December at all.  

Don't wait @Jackie Lange, just start moving on the FC. Forget making contact with title companies, agents and other 3rd parties. None of them will help you. (except your own counsel) The idea is simple, you were alienated - title to the real property was conveyed in whole and you were not paid off. Your instrument should carry a due on sale clause that gives you a right to call the whole loan due. The NOD is the first step. You will send the NOD to the subject property which should get the attention of the new homeowners. They will panic and start making calls to the title company, agents and alike. All you want is to be paid off in full. Avoid conversations with 3rd parties. For a brief moment you will be treated as the devil squashing the dream of these homeowners. It just is, what it is.

As the chips fall, you will get paid off.  The owner and lender policy will kick in and pay you off.  The insurance company will then pursue the borrower/seller civilly and investigate the title companies search to see why the lien was missed.  None of that matters to you.  Don't get wrapped up in the drama outside your door.  There will be much.  

It's not your fault.  It's not the new owner's fault.  And that is why we have title insurance.

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

    Sounds like time for a local RE attorney.  Do you know if they did a quit claim deed, or warranty deed With title insurance?  Was your lien fraudulently released earlier?

    0Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y
    Do you have a lenders title insurance policy? Make a claim.
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  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    Yes I verified that my lien was recorded and that the legal description was correct.  

    The house was sold to the new buyers with a Warranty Deed and they got Title Insurance (which is no good because my lien is still out there and superior to the mortgage they got to buy the house)

    I'm already contacting several real estate lawyers in Dallas.  

    Unfortunately, Designated Title (who closed the deal) is not just doing the right thing to pay off my lien.  In 20+ years of doing real estate investing I have never heard of a title company not paying off a recorded lien and not even calling for a pay off. 

    1Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y
    Was a lenders policy issued in connection with your seller financing, or just owners coverage? That’s the crucial issue. If you have a lenders policy, file your claim and you’ll have counsel. No lawsuits needed (yet). If you don’t have a lenders policy, that’s another matter to address with your title company in your lawsuit.
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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y

    @Tom Gimer I never thought about it, and don't know much about lender's title insurance, but......I assume lender title insurance works the same as that for an owner....it insures clear title At The Time Of The Transaction.  I wouldn't think it would cover anything like this, occurring later.  The New title policy for the buyers though, yeah, they're on the hook if the lien was recorded properly.

    @Jackie Lange If I didn't get any response from the new title co., I think I'd file foreclosure on the old and new owners.....that should get the wheels turning.

    2Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Wayne Brooks Lender was supposedly in first lien position. What's the point of title insurance if you don't get paid first? 

    The coverage decreases as the loan is paid. Sounds like ZERO was paid.  

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  • Brian Ploszay
    Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
    8y

    I am surprised that a title company would make such a mistake.   Make sure your lien is still recorded.

    The title company will try to fight this.  Get an attorney and you are in a good position to collect the full amount.

    1Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Wayne Brooks One more thing... the existence of an owner's policy is irrelevant in this scenario. There is nobody "on the hook" for this other (1) than the owner who absconded with the BP poster's funds and/or (2) the title company who botched this deal ... unless a lender's policy was issued. And a lenders policy should have been issued as it would have been pennies on the dollar to do so.

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  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    Filing foreclosure is about $1500 and takes a few months.

    A lawsuit starts at $5,000 and goes up by the hour.    But the time if finally got settled, the attorney would likely get more money than I would.

    If I file foreclosure on the old owner, she will probably ignore it... she has nothing to lose.

    But filing foreclosure on the new owners will get them to take action contacting the title company and their Title Insurance company.  If they fail to take action, I get the house back.  Either way I win going this route.

    10Reply
  • Michael Lewis
    Investor · Independence, MO · Member since 2016 · 89 posts · 70 votes
    8y
    Interesting please keep us updated.
    0Reply
  • Dave Homyak
    Investor · Ann Arbor, MI · Member since 2016 · 71 posts · 56 votes
    8y

    Any chance you can contact a government agency in Texas that can prod the title insurance company?  IDK, like Texas attorney general?

    1Reply
  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    The title company has been reported to the Attorney General and other agencies but like anything in government, it is s-l-o-w.  I want to get this resolved faster.

    2Reply
  • Account Closed
    Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
    8y

    @Jackie Lange   I live in the area and I have done owner finance.  Which county was this in?  If you want you can private message me the address.  I would love to look up what happened.

    I think the appropriate response is to start sending the notices to the people that have stopped paying you to foreclose the home.  If the mailing address is the home you sold to them all the better.  I would send two copies of each notice.  One via certified mail and the other first class.  That should get the people that bought the house interested.  They can file a claim at the title insurance company.

    You are not the customer of the Title Insurance Company.  You cannot file a claim with them.

    1Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Jackie Lange You can't foreclose a prior owner -- they are out of title.

    But yes, a foreclosure against current owner should get the ball rolling.  

    Buyer should have paid for lenders and you would have limited work and zero out-of-pocket here. 

    Let us know how it all works out.

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  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    The property is in Dallas County, Texas.  The title company was Designated Title.  
    But I live in Panama.  (Central America)

    The only way to get this ball rolling without it costing me a lot of $ is to file a foreclosure.  Since the note is in the name of the person I sold to, I would think she will have to be named in the foreclosure even though she is not in title anymore.  The current owners have no responsibility to pay my lien.  But their house was the collateral for the loan.  Their mortgage company, who has a junior lien at this point, will need to be notified too.

    What a mess!

    I'm talking to 3 lawyers on Monday and will pick one. 

    2Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y

    @Tom Gimer I realize the prior owners title policy is irrelevant.  But, title insurance, lender or otherwise, does not protect you from Future events unrelated to the validity of title at the time of the transaction, and has nothing to do with getting paid later ......it is strictly for guaranteeing title is good at the time of the transaction, period.  There is no guarantee for a lender to get paid later.

    And yes, the prior owner would have to be named in a foreclosure as That is who has not paid, and placed the house up as security, and the new owners would be named since they "have an interest" in the property just like the additional mtg holder will have to be named along with anyone else with an interest/lien in the property.

    3Reply
  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    This is the biggest, strangest mess that I have even encountered in 20+ years of doing real estate investing.

    I don't understand how a title company could let this happen. 

    And I really don't understand why a title company would not instantly make things right when it is brought to their attention (which has already happened).  

    5Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @wayne brooks 

    @Wayne Brooks Title insurance guarantees lien position... whenever it is questioned. That's really all that matters. Most of these messes involve the same handful of insurers figuring out who holds the short straw.

    I said you can't foreclose the prior owners' interest. 

    Sounds like a lot of legal work will be done here when what should have happened did not. 

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

    @Tom Gimer Perhaps you're right about the lien position, seems odd to me but I don't know the commitments with lenders policies.  I know here, and it is judicial here and I think not in TX, the lender always names the original owner also when title has already been transferred.

    @Dion DePaoli may know, if he still cruises around here.

    0Reply
  • Sam C.
    Lehigh Valley, PA · Member since 2016 · 144 posts · 91 votes
    8y

    I hope you get paid. Makes me want to stay away from deeded sales where I am the lien holder.  Did you have legal representation when you "sold" the property? If not who represented you at the settlement? 

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    8y

    Title companies DO screw up. Re: the thread posted by the unlicensed broker that middle manned a deal..it closed...now states the person he contracted with did not own the property. I did note he states he is not going to return his unlicensed brokering fee. Had a licensee been caught up in this no doubt E&O would give some coverage.

    0Reply
  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    8y

    @Wayne Brooks rang...

    The borrower (to OP) had a responsibility to ensure all liens and encumbrances that he/she knew of were satisfied from title. He/she warranted title to the new buyer. So she/he agreed to defend the title for the new buyers from claims arising prior to sale - like our subject DOT.

    Filing foreclosure here is best bet for now.  This should trigger the current lender and owner's policies to satisfy the OP's lien.  Get an attorney involved to help protect your interest OP but pursue FC first.  Obviously the new owners will be shocked to learn of this action.  They will place some calls to the title company and perhaps their own counsel as well.  The room will likely fill up quickly with legal personal with the title claim present.  They should have to redeem within state statute timelines.  So in Texas this will go quickly.  

    More than likely the insurance company will pursue the old borrower civilly for fraud or unjust enrichment once they have redeemed the property from the OP lien.

    It does seem like the title company could handle this a little better.  At the least they should go back and check their searches and see if the lien came up.  OP - just re-check your recorded instrument - ensure that you are attached to the property and the legal description matches.  A whole bunch of people are going to go look at this real soon and you want to ensure you are in the position you believe.  Your legal counsel will also check.

    The attorney fees you pay for should be recoverable through your foreclosure here.  They are advances you are making in order to collect on the debt the borrower owes you and secured by the subject property.  

    OP if you want out of this and would consider selling the lien I would be happy to show you a bid.  Alas, it will be at a discount.  

    Good luck.

    8Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    8y

    @Jackie Lange

    As you know, eventually you will prevail either with a payoff or the property. Have you contacted the new owner?  They should be willing to be your best friend at this point as they are truly the exposed party in all of this ? I would ask them to initiate a claim through the title insurance underwriter for the title company that close the sale to the current owner. This is a way to possibly mitigate your legal fees

    7Reply
  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    8y

    @Greg H. - it wouldn't be advisable to reach out to the current owners and try and be friends.  The OP and new owners won't be friends.  The OP is showing up essentially saying - "the house you just purchased, yea, not so much yours..."  That is going to be a shock to the new owners and any finance company they used.  The new owners will likely panic, which would be understandable.  

    You want to follow standard procedure.  Obtain counsel.  File foreclosure.  Someone from the title insurer will reach out once the new owner or new lender process the claim.  There is no claim to process unless FC is started since title is not in jeopardy until that time.  

    This is not uncommon.  This sort of thing is why owners and lenders get title policies.  

    3Reply
  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    When the property was sold, the seller (my buyer), had a listing agent and the buyer had an agent involved.  They have both been made aware of the situation and neither wants to do a darn thing about it.  The buyer's agent does not even want to tell his clients about the mess. 

    When I sold the house, 10 years ago, I used an attorney at a title company to represent me.  

    The screw up in this whole mess is the title company.   

    0Reply
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