no title search, NEED HELP!

15 Replies

Hello bp community. I've Been reading the forums and listening to the podcasts for awhile now. But I could really use some advice.

So I purchased my second rental two years ago, it was a Fannie Mae(homepath) property. The real estate agent I used told me that there was no reason to get a title search unless I wanted to waste my money. His reasoning was that Fannie Mae does a title search and can't transfer the deed unless the property is clear of leins. Against my own better judgment I listened to him.(he is a seasoned investor with 22 rentals)

Now two years after closing I received a letter from the sewer authority saying that there are $300 in past due sewer bills. Since I've owned the property I've always psy my sewer bill on time. The sewer lein is from the previous owner, plus a little from Fannie Mae when they owned the property.

I'm waiting to get the results of a title search that I ordered the day I got the Lein notice.

So I guess my question is have any of you guys decided not to get a title search on an REO property? Has any real estate agents on here given that same advice to a client? ( I think I listened to some bad advice from my real estate agent, and won't be using him again)

I'm hoping that there isn't any other LARGE leins against the house. If its just the $300 its just a good lesson learned, and it could have been allot worse.

Thank You for any responds! Im sorry that I'm asking questions before answering any questions.

Unless the lien was filed in the public records, it wouldn't have been found in a title search anyway. With that said, your "agent" clearly breached their fiduciary role by making such a statement and he and his broker have liability if you can prove he made the statement.  If you don't have it in writing and didn't record it, it didn't happen. Every pertinent communication in every deal should be in writing (email is great!) and retained in the file for that property. This has been a  lifesaver for me.  

Let this be a lesson learned. I know people who have been investing for 25 years and have never looked at a survey, title commitment or closing documents, so don't equate time in an industry with knowledge or skill....it's often been more luck than skill that kept them from having the pants sued off them.  

thanks for your response.

Over the past few days I was wishing that I had the "don't get a title search in writing", but no such luck. For now on any advice I receive from a agent or an attorney I'm going to confirm it in a follow up email, if its said in person.

I'm just keeping my toes and fingers crossed that nothing else comes up on the title search. I'm only 23 years old and a significant lein could crush me. 

So i just looked at my closing papers and Fannie Mae charged me for the sewer bill during the 8 months that they held the property, but they never paid the sewer company. So it looks like they just pocketed that money. So I do have documentation that Fannie mae " backed charged" me for the sewer bill but never actually paid it. I feel like I have a legal standing to sue them for that, but it wouldn't be worth it from a financial standpoint with the cost of a lawyer for a lousy $100. Or the time or aggravation for that matter.

so I'm assuming that everyone on here always gets a title search no matter the circumstances of the deal?

@Andrew Kubiczki  

Trust, but verify.   Live by this mantra and you will be much better off. 

My last closing was with a fee attorney for a title company here in Austin and I could not believe the closing documents I received. They must have contained 15 different indemnities. I marked up every document and sent them back for corrections which were promptly done. But I couldn't help but think about how many investors / buyers sign these documents not realizing the liability they're assuming. 

@Andrew Kubiczki  

I am not familiar with closings in Pennsylvania as to whether you close with a title company or an attorney ?

Whomever closed the transaction was responsible for paying the past due sewer bill if it was collected on the settlement statement not FNMA.  Even though the closing was a couple of years ago, they should be able to pull the file and provide proof of payment or issue payment

512-293-3885

To add to what Guy mentioned you should learn to do your own title searches before buying NOT as a substitute for title insurance, yet it lets you know whether or not liens exist and what they are. That knowledge can give you leverage in negotiations.

What if the property you bought was listed in a divorce settlement, in a pending BK, IRS lien or some other type of lien. 

Make sure whoever sells you title insurance has E&O coverage. Title insurance compies don't publish how many claims they have in a year but for some it is significant. If you have to make a claim they will do everything to deny a claim. If the seller of the insurance has E&O you can also make a claim with their insurance company. Now you have two companies battling it out with one an other.

Look here    http://www.klehr.com/C7756B/assets/files/lawarticles/_0519144018_001.pdf

@Andrew Kubiczki  

Here's why you want to carefully review the HUD! You have already asserted that it's true and accurate!

"I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief, it is a true and accurate statement of all receipts and disbursements made on my account or by me in this transaction. I further certify that I have received a completed copy of pages 1, 2 and 3 of this HUD-1 Settlement Statement." 

Yea, the title co. was responsible for paying the sewer bill, that they withheld funds for. Contact them. As for these showing up on a title search.....if it's not recorded, it won't show up on the public records search, which is all most title co.s do that represent REO's, and you will see exclusions for those in your title policy, exemptions section B. with a Real title search, searches are requested from all the city, county and utility depts., about $35 each, specifically inquiring about unrecorded debts, and usually take about 2-3 weeks.

I have seen items like this in the closing statement before. The proceeds to the seller are generally reduced by the amount of outstanding liens. My attorney has me bring separate checks to the lien holder during the closing and we mail them to ensure payment. Some attorneys will escrow the entire amount of the purchase price and write the checks for you. I would call your attorney and inquire what happened to these funds.

Andrew

i had a similar issue on a recent closing.  Call the title company.   If it was on the hud1 they should be able to give you proof of payment.  I had to enlist the help of the code enforcement officer to get the collection agency to remove my lein.  Fyi-they wont give occupancy permit with the sewer lein.

I always use my own title company, do title search, and buy the insurance.   Its worth the couple hundred bucks. 

As a Broker, I would recommend going to the Broker that represented you and raise cane.  

If they have some integrity they will make this right due to their agency haphazard guidance. 

@Guy Gimenez  

  on those 4 properties I bought yesterday in TExas  there were surveys on each one.. why do you do survey's on what looks like lot and block descriptions..

I understand survey requirements for the properties I buy in Charleston for example because the plats are from the 1700 to mid 1800's small little lots with lots of encroachments. Just not used to survey's on what appears to be mid century or later plats. 

what say you on this ? 

@Jay Hinrichs  

Several reasons Jay. 

For me, the cost of a survey is a small price to pay: 

1.  to get Sch. B items removed from the commitment thereby giving me a cleaner title policy. I require my surveyor to specifically state if a Sch. B item affects or does not affect the property;

2.  to have a survey that will protect me should the surveyor make a mistake (prior survey offers me no protection since it isn't certified to me or my company) on placement of improvements, encroachments/protrustions, setbacks, etc. If prior surveyor made a mistake, it becomes the new owner's problem, not the surveyor's. 

@Guy Gimenez  

  we do foundation survey's on our new construction here in Oregon but NO one orders a survey on lot and block inner city or suburbs properties.. of course on small or larger acreages surveys are common and or just marking the corners.

I would think if your surveying each property you buy then there is a lot of survey mistakes or encroachments that are common in your area..

Now if you buy a home in our market and its obvious when looking at a 50/100 rectangular lot that someone may be encroaching you may order a survey to establish an encroachment.

Or we do hub and tac when we have very dicey and restrictive property set backs which is common here.  Lenders require it and some cities do.. but again that's on new construction.

But good points and will be my SOP for my Texas purchases...

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