Seller is not transferring keys at closing.

35 Replies

BPers,

I am closing on the house on 4/10 but the situation has gotten little more complicated. The seller's (Owner's) relative who managed this property is not surrendering the keys to the seller. Seller wants to close on the house without transferring the keys to me during the close and suggested that I change the locks as soon as I close.

Background:

Owner's relative is mad because he wanted to buy the house but cannot afford right now. This relative actually bought the house in the owner's name just to get around the number of the mortgages. But, the owners have the legal right to the house.

I would not go through all these headaches but I am buying this for 50% ARV with a decent condition.

Question:

Does this relative have any right to put a lien on the house or come after me after I buy the property? 

If he has no Legal right to the property, no sweat. The keys are a non issue.

I would demand the house be delivered vacant of all possessions and occupants at closing AND with keys delivered to you at settlement.

It's no big deal to change the locks. I bought a lot of reos and i hardly ever got the keys.

With that said, i would dig a little deeper in that previous purchase. Did the relative put down payment to purchase? If so and if he has proof, I'd be careful. He might not walj away all that easily. That's why the owner of record is likely willing to sell that low. Sort of like the cheated on wife who sells the husband's belonging for $ 1 just to spite him. You get a great deal, but you might be getting a lot of bad energy with it.

Why are you on here at this point asking legal questions regarding this sale. These questions need to be  resolved by your lawyer. 

If you shared these facts with your title company they can be prepared for a lis pendens or other filing to be made and/or the sales proceeds frozen.

If you have not shared these facts with your title company and are relying on the internet to save you from this mess, good luck!

Originally posted by @Max Tanenbaum :

I would demand the house be delivered vacant of all possessions and occupants at closing AND with keys delivered to you at settlement.

 House rented and I have already talked to tenant. They know about the change of ownership that is going to happed. 

Originally posted by @Michaela G. :

It's no big deal to change the locks. I bought a lot of reos and i hardly ever got the keys.

With that said, i would dig a little deeper in that previous purchase. Did the relative put down payment to purchase? If so and if he has proof, I'd be careful. He might not walj away all that easily. That's why the owner of record is likely willing to sell that low. Sort of like the cheated on wife who sells the husband's belonging for $ 1 just to spite him. You get a great deal, but you might be getting a lot of bad energy with it.

 thanks. I talked to the lawyer and said my transaction with a seller is not affected by if there is a litigation in a family. thanks :) 

Originally posted by @Thomas S. :

Why are you on here at this point asking legal questions regarding this sale. These questions need to be  resolved by your lawyer. 

Because I just found out and also reached out to a lawyer. the whole concept of the BP community is to help each other. Chill out, brother. Just wanted to see others opinion. 

I would request that your title insurance be for the ARV, not just the purchase price. May cost just $100 extra for peace of mind; if this other person actually has a legit claim to title, you won't be out the reno costs. Or negotiate this extra cost to be paid by the seller.

Also, when you say "the attorney" is this your attorney who's job it is to look out for you? Because a claim on title should not matter if it's family or not.

Originally posted by @Ashish Acharya :
Originally posted by @Michaela G.:

It's no big deal to change the locks. I bought a lot of reos and i hardly ever got the keys.

With that said, i would dig a little deeper in that previous purchase. Did the relative put down payment to purchase? If so and if he has proof, I'd be careful. He might not walj away all that easily. That's why the owner of record is likely willing to sell that low. Sort of like the cheated on wife who sells the husband's belonging for $ 1 just to spite him. You get a great deal, but you might be getting a lot of bad energy with it.

 thanks. I talked to the lawyer and said my transaction with a seller is not affected by if there is a litigation in a family. thanks :) 

Did you happen to mention to the lawyer you're paying 50 cents on the dollar? 

Originally posted by @Ashish Acharya :
Originally posted by @Michaela G.:

It's no big deal to change the locks. I bought a lot of reos and i hardly ever got the keys.

With that said, i would dig a little deeper in that previous purchase. Did the relative put down payment to purchase? If so and if he has proof, I'd be careful. He might not walj away all that easily. That's why the owner of record is likely willing to sell that low. Sort of like the cheated on wife who sells the husband's belonging for $ 1 just to spite him. You get a great deal, but you might be getting a lot of bad energy with it.

 thanks. I talked to the lawyer and said my transaction with a seller is not affected by if there is a litigation in a family. thanks :) 

Did you happen to mention to the lawyer you're paying 50 cents on the dollar? 

Keys shouldn't be a big deal....especially if there is a Tenant in place.  You simply notice that tenant that you plan on replacing locks for their own protection (from anyone who may have a copy of the old one), and will furnish them a new key.  Disclose the day and time so the Tenant can be there to receive their new key. Rekeying a property is a minimal expense, and if you have a home warranty at closing, many of them cover this service.

Make sure your title company is "in the know" on this issue so that any clouds on title will be covered by your policy.  Maybe their lawyer can dig a little deeper on the previous sale to see if there are any issues that may be a problem for you in the future.  However, from what you mentioned, it sounds like the relative's issue would be with the Seller, not with you.  Any litigation would most likely be between them.

Originally posted by @Kimberly H. :

I would request that your title insurance be for the ARV, not just the purchase price. May cost just $100 extra for peace of mind; if this other person actually has a legit claim to title, you won't be out the reno costs. Or negotiate this extra cost to be paid by the seller.

If this turned into a title claim it would be excluded 100%. Buyer for less then FMV trying bump coverage up ... red flag.

3. Defects, liens, encumbrances, adverse claims, or other matters

***

(b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy; 

Tell him that you will trade him the keys in exchange for an introduction to the world of portfolio (and commercial) lenders.

A 4.5" angle grinder with a cut off wheel will remove a door knob.  You need a flat blade screwdriver to take care of the rest.

If there is a deadbolt, you'll need a 7" angle grinder with a cut off wheel.  There isn't enough clearance between the door frame and the bull nose of the dead bolt to fit a 4.5" grinder.

You'll need a source of 110 volt alternating current.  I keep a power invertor in my truck, along with an angle grinder and a host of other property management tools. 

It'll take you 30 minutes the first time. 10 minutes thereafter.  Wear leather gloves and hearing protection.

22 STRs with 82 beds is what I have.  Bank foreclosures with 25 cents on the dollar is what you can buy in my market. Google "Worst place to live in Kansas." It is Coffeyville, my market.

@Ashish Acharya Sounds like there's going to be some issues with this house with the relative involved. I'd make sure it's vacant before you take possession. If you could get the locks changed before you close, that would be better. You can always get it re-keyed which is what I do and less of a hassle. Good luck! 

When you state it was already disclosed to you that the relative bought the house in the legal owner's name to avoid the mortgage in relative's name, that would be an alarm bell to me.  I'm not a lawyer, no legal advice, but if it were me, I'd make sure the relative does not have any equitable interest or other form of agreement with the relative that could come back to bite you, especially if you know if the relative has made any improvements, funded any part of it, or is involved in management.  Getting stuck in the middle of someone else's family battle is likely not in your best interest, and title insurance may feel like a security blanket, but a title insurance claim is a huge hassle, and problems already disclosed to you are likely not covered, as others have said.      

@Paul Sandhu :

22 STRs with 82 beds is what I have.  Bank foreclosures with 25 cents on the dollar is what you can buy in my market. Google "Worst place to live in Kansas." It is Coffeyville, my market.

 I literally just googled "worst place to live in Kansas" and Coffeyville is number 1.  LOL.  But if you're making money there, that's what matters.   

@Ashish Acharya   I am not sure what makes you think the person you are dealing with has any right to transfer the title to you.  I do understand that the person you are dealing with has their name recorded at the court house.  But you are admitting in your original post that you know they are not the owner.

Is there an unrecorded deed between the owner and the person you are dealing with?

If I was going to get one of my relatives to do this, I would "have subject" to documents drawn up, signed and notarized.

I completely agree with @Tom Gimer .   You know about the unrecorded defect.  This would be like calling to get property insurance after the roof blew off.  You are even admitting there has been a discount because the person you are dealing with might not own the house.

So... to answer the question from the original post.  Keys have nothing to do with it.  Your post shows you have been put on some kind of notice that someone else is the owner.  You are assuming they cannot prove it.  They may or may not have proof that they own it.  I would guess anyone that is using this method to get around the restriction on the number of mortgages might know how to make this legally binding and not record it.

PS...   Before everyone claims the deed has to be recorded or it is void...  I have read the Georgia statute.  It is only void if the new buyer is not noticed.  A good lawyer would use this thread as evidence of notice.

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