Title insurance lawsuits... can be retroactive?

Question

Hello Everyone,

I'm struggling to find a title agency to insure my seller carry back on a property I secured out of HOA foreclosure, but I know its just a matter of finding the right investor friendly company.

Through this process and talking with several different companies, I've been told more than once that the reason they don't insure HOA or Tax lien properties is because the owner could sue them over being foreclosed on due to this; as its 'not fair they lost their property due to such a small amount'.

Has anyone ever heard of anything like this before?? I don't understand how a title company can be held responsible for anything that happens after the policy, as it insures from the time it is purchased and any defects prior. I was told by one of the escrow officers that this was a big problem back in 2008, but am skeptical, as to me it makes no sense,.. any experience with this anyone?

Russell Brazil · Answer

Just have them issue a policy with an exception to this one situation, and you will have to take on the liability for that exception yourself.

Clint Votruba · Answer

Chicagoland attorney here.

It has been my experience in my State that the Buyer (you) at an HOA foreclosure is at risk of the previous owner redeeming/ challenging the foreclosure.

However, if the Buyer at an HOA foreclosure (you) sells to a third party thereafter, that is when the title company(s) will give clear title to the new owner (your Buyer) on the grounds that the sale of the house, after the sheriff's sale/HOA foreclosure, would end the previous owner's right of redemption.

Discuss this with the title company(s) you talked to.

You stated: "I don't understand how a title company can be held responsible for anything that happens after the policy,..."

The title company is not responsible to anyone but you IF they gave YOU title insurance against the risk that the previous owner would challenge/redeem AND THE IF previous owner did redeem or challenge in court, the title company would have to pay or defend you in court.

Why would they take that risk?

I believe in my State, that risk to the title company would end after you sell it to a third party purchaser.

Good luck.

Brooke T. · Answer

Arizona, Im sure I will find someone who will do this, even if I have to pay extra. Just a matter of finding an investor friendly title agency. There was a mortgage but only for 16k and since the bid was ran up enough to cover the HOA and that, the prior mortgage is now extinguished.

Wayne Brooks · Answer

@Brooke Templeton There was no mortgage, right?

Brooke T. · Answer

Arizona, Im sure I will find someone who will do this, even if I have to pay extra. Just a matter of finding an investor friendly title.

Wayne Brooks · Answer

What state? Here, it would be no problem, assuming no other liens/title issues.

Title insurance lawsuits... can be retroactive?

Title insurance lawsuits... can be retroactive?

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