Missed Lien by title leads to missed profits

Missed Lien by title leads to missed profits

Member since 2019 · 8 posts · 1 vote

Purchased a property through a probate sell with title insurance a few days after closing I had a buyer set up to by my property for 165K profit, (Another investor ready to go) they had money in escrow and we were about to close pending clear title ( i had a binder was thinking easy money). Title comes back and says it looks like they missed a lien from back in 2018 and they need to resolve it before we can move forward with the sale. They don't have a time frame. Buyer of course walks and all monies are refunded.  


If the property ends up selling for less because of this now lien issue that was not suppose to happen, do I have a vlaid claim  to the missed profits + Holding cost? I made a claim but it was denided stating : 8. LIMITATIONS OF OUR LIABILITY
. . .
(a) If the Company establishes the title, or removes the alleged defect, lien or
encumbrance, or cures the lack of a right of access to or from the land, or cures
the claim of unmarketability of title, or otherwise establishes the lien of the insured
mortgage, all as insured, in a reasonably diligent manner by any method, including
litigation and the completion of any appeals therefrom, it shall have fully performed
its obligations with respect to that matter and shall not be liable for any loss or
damage caused thereby.
. . .
To the extent that you are requesting compensation for the Alleged Damages, please see Condition
8(a) of the Policy which provides the Company with the right to establish title as insured in a
reasonably diligent manner without being responsible for any loss or damage to the insured. You
submitted a claim on August 27, 2024. As the Company is working to cure title in a reasonably
diligent manner, the Company would not be liable for any loss to the Claimant.

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Lender · CA · Member since 2018 · 637 posts · 393 votes
2y

Definitely want to consult a title attorney on that, but this is why I tell people to go with large well funded title companies rather than the cheaper local ones.  Insurance is an expensive pain in the *** but man are people grateful they have good insurance when they need it.  Title insurance is no different.

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  • Lender · CA · Member since 2018 · 637 posts · 393 votes
    2y

    Definitely want to consult a title attorney on that, but this is why I tell people to go with large well funded title companies rather than the cheaper local ones.  Insurance is an expensive pain in the *** but man are people grateful they have good insurance when they need it.  Title insurance is no different.

  • Member since 2019 · 8 posts · 1 vote
    2y

    lawyers title lol trust me its not the size of the company that was the issue. 

  • Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    2y

    I'm not an expert, but I'd say no you aren't due your potential profit. Just like auto insurance, it isn't to buy you a brand new car, it is to fix yours or give you the value of the car as of the date of loss. Your value loss is limited to the value of the lien, or what you paid for the property. So if they determine the lien is $1M, then they could choose to reimburse you the purchase price and you have been made whole. 

    Insurance is to prevent loss, not provide profit.  

  • Lender · CA · Member since 2018 · 637 posts · 393 votes
    2y
    Quote from @Eric Chan:

    lawyers title lol trust me its not the size of the company that was the issue. 


     size + quality then, because that level of due diligence is fairly unacceptable

  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Eric Chan

    You are not due any lost profit

    They will resolve the lien so you have clear title

    If it’s a title claim and they have to do quiet title it can take over a year

    They will cover the costs to resolve the lien or pay it off that’s it. You get nothing

    Sorry but that’s how it works

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  • Member since 2019 · 8 posts · 1 vote
    2y

    Thanks needed a straight answer, we were looking at a quick sale, so we purchased a binder in lieu of a full policy does that effect it at all? I was told to change it to a full policy but  now im talking to the people that issue the policy and they are trying to dance around the issue. 

  • Member since 2019 · 8 posts · 1 vote
    2y

    @Chris Seveney 

    Thanks needed a straight answer, we were looking at a quick sale, so we purchased a binder in lieu of a full policy does that effect it at all? I was told to change it to a full policy but now im talking to the people that issue the policy and they are trying to dance around the issue.

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

    Following to hear how skimping on the expenses involved in a true double close works out.

    I doubt a hold-open or a binder provides the coverage that will be needed here. And lost “profits”??? lol stop 

    I have actually fired clients for trying to close on the A—>B of a double close without title insurance. No, not just for being cheap… for being stupid. 

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  • Member since 2019 · 8 posts · 1 vote
    2y

    How was I skimming? I bought the property with title insurance with our own money… closed on it and when I tried to sell it that same company said they messed up and missed a lien. Issue is they don’t know who the lien holder is so they have to investigate. 

  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    2y
    Quote from @Eric Chan:

    How was I skimming? I bought the property with title insurance with our own money… closed on it and when I tried to sell it that same company said they messed up and missed a lien. Issue is they don’t know who the lien holder is so they have to investigate. 

    All I said was that I was following this thread to hear how trying to save a few $ works out. 

    @Peter Walther may chime in

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  • Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    2y

    @Eric Chan I believe @Tom Gimer said skimping not skimming.  Those are two very different things.  But I think he meant you may have been being "penny wise and pound foolish".  

  • Flipper/Rehabber · CA · Member since 2023 · 1k+ posts · 1k+ votes
    2y

    I've had title companies miss a lien, insurance took care of it, but as Eric mentioned opportunity lost.

    Chris, Tom, Peter; Advice for future? Pay for a 2nd title search? Any other strategies to better my DD?

  • Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    2y

    @Eric Chan, the only way I would see you being entitled to a loss of profit would be if the seller was obligated to disclose known title issues, knew about this issue, and chose not to disclosure it. Then I could see you potentially having a claim against the seller.

    The title insurance would never cover your lost profit. Think of it this way. If your house caught on fire 1 day before selling it, your homeowners insurance would pay to remediate the fire damage, but they wouldn't compensate you for the loss of the sale/profit.

    That said, unless the amount you end up losing is substantial it likely won't be worth going after with the cost of litigation and also the effort to collect. 

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

    @Alan F. Had 1) an assignment or 2) an entity acquisition been possible rather than a (fat) double-close, this would now be the end buyer's problem. And there would be no unanticipated holding costs... the insured could just let the insurer cure the defect once discovered, if ever.

    I'm amazed the title company actually did more title exam work and discovered their recent error in the small gap between the two closings. That's just bad luck... not really something DD would catch.

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  • Specialist · Winter Springs, FL · Member since 2009 · 1k+ posts · 747 votes
    2y

    I agree with what several others have posted and as the quote from a policy states, if the title is cured in a reasonable period of time, there is no loss recoverable.

    I'm assuming this is a judgment lien and not a mortgage lien.  If so, if your buyer agrees, ask the insurer to authorize a new policy be issued to the buyer with an exception and affirmative coverage over the lien, to be removed when the lien is extinguished.  Or, you or the insurer could have the lien transferred to a bond removing it from the property.  While you don't mention what state the property is in or the amount of the missed lien you or the title insurer might be able to either put up the cash or buy a surety bond and post it with the court.

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