I have found a SFR from one of my lists and in the discussion with the owner she said she has a lawsuit against her from a previous tenant. I asked if it was against her or the property and she said "The impediment is to title insurance ONLY" If she loses this suit does this mean a lien can be put on the property? The lawsuit is for over 30K so I just need to know if this needs to be a "subject to". I understand any advice is just the opinion of someone and cannot be taken as true legal advice.
I just need to know if this needs to be a "subject to".
Based on the question my guess is you do not understand the meaning of "subject to" as that would be unrelated. Perhaps you mean "contingent" on clear title? I wouldn't worry about it if i got title insurance but that may be the problem. You may not be able to get title ins.
Perhaps this is a reason to negotiate very hard as she may not have other buyers with a title problem.
Thanks Ned. She called me because she said she cannot get title insurance on it to sell it traditionally. As of right now there are several code violations already and I don't want this to come back on my investor.
Just because on title company will not insure it does not mean another one will not. I would try to really understand what the title issue is and then try to find a title company that would insure it.
I have bought properties with bad title, knowing I could never sell them, if the deal was good enough. I bought a property for $2,000 because she had a $16,000 inheritance tax judgment against her. Attorney's told me Highly unlikely they would ever come after the property but I wouldn't ever get title insurance unless this was paid. We have bee renting it for $1200 a month for three years.
Actually "subject to" the existing mortgage may work here. Perhaps this is what you were thinking. You transfer the deed into your name and then keep making her mortgage payments without actually changing the mortgage to your name. This could work but the devil is in the details.
She owns it free and clear and the lawsuit deals with renting the property out when the property was not up to code. Since the court date was in two weeks I was planning on putting in the contract that the price was "contingent" on what the outcome of the suit will be. When I first told her this she got mad and said she will not do any deal with contingencies which I got the feeling she was trying to pawn her possible judgement onto the next buyer. Thanks again for the advice.
Well, you certainly need to talk to a local RE attorney, and to the title co. You can't get clear title certainly due to the existing code violations. The cure for those, and any associated fines, will be important. An attorney can tell what would happen if you took title prior to any judgment being issued, and whether it might attach to the property. May be a bit of a gamble, and may or may not be worth it.
Welcome to BP.
Title insurance is extremely important to acquire as it could cost you thousands of dollars if something shows up on title work when selling.
generally speaking in our neck of the woods you cannot go shopping for title insurance like you describe there are only about 6 or 7 companies that issue title and something like this that is cut and dry .. almost certainly will not fly with any of them.
Out our way Attorneys are last resort.. this person would be best served to simply go to the title and escrow company and sit down with the escrow officer and title officer and walk through the transaction it will be free and they will know as much if not more than any attorney who would have to charge billable hours to get up to speed
In these little SFR transactions very few folks use attorneys for title issues ... they use them for contracts and other issues. but title companies here are the ones you deal with when it comes to these pedestrian liens and encumbrances.
It is interesting to hear different issues from around the country. Virtually nothing I sell meets code and have multiple violations and that has never been an issue. (Unless perhaps the title insurance policy, which I don't see, has exceptions for the violations)
@Jay Hinrichs , we had a major issue that no one seemed to want to insure our tax lien foreclosures. We checked around and found a few that would insure. Some needed to send each case file to the underwriter, some just chose to take the chance on ones they felt comfortable with. My understanding is the local title agent is ultimately responsible back to the title insurer for any claim.
In MD I believe it is a requirement that title companies have an attorney associated with them as only an attorney can create a deed
completely different here on the West coast.. All title companies have a corporate council but they are not in the trenchs and they certainly do not create ANY" documents they are at the corp level... unlike closing I do out your way were the Attorney is our version of an escrow officer.. here Senior escrow officer will know as much about transactions as a buyer or seller would need to know.. you go to the attorney when you have a claim or like your talking about if they are going to override a title issue... Those that get title issues overridden are usually top teir clients that bring in a lot of money with the volume of business they bring the title. co.. Like for me I might run 10 million in a year through one title co.. so yes I can get them to override things if its realistic...But the average investor who does a few deals at most is not going to have that kind of juice out here..
And the thing is our Title and Escrow companies in most cases are the same another words Fidelity title insurer is also the escrow company.. Along with FACTCO or the sister companies of Fidelity ( Chicago Ticor etc)... For plain jane SFR type transaction you could go a whole career and never speak to a RE attorney.. the only time is usually when your getting threatened to be sued LOL for some constructional issue or dispute.
Night and Day in how we transact compared to how you folks transact.. I am pretty engaged right now in SC and that of course is a attorney state and I am still trying to figure it out.. Heck the buyer has their own attorney and me as seller I have my own.. Its so disjointed and inefficient our closings are almost always a cluster with all sorts of last second things being worked on etc.. Where here ONE title company and escrow officer and their escrow assistant handles buyer and seller.. so they are totally on top of it and it runs frankly pretty smooth it also helps that we have state of the art title plants I get a title opinion or what we call a Pre lim in 24 to 36 hours and can get one same day if I want and I don't have to pay for them unless I close... Of course I can't abuse it.. But I got one this week on a Judicial foreclosure I wanted to buy redemention rights on and I ordered in 9am on Monday had it in my in box 4 pm next day.
point on Title is we have title plants that are all digital and in the title companies main office. So I can call customer service and in 3 minutes get a complete verbal date down on the phone.. it helps in real time when your working foreclosure stuff.
Also any agent can call customer service and get copy of last recorded deed the tax info zoning etc.. sent over in a matter of minutes...
out east when its kind of backwards form what I have experienced were you open an order and they don't order title to the end as you have to actually pay an abstractor to go to the courthouse I guess and physically pull data... so this leads to title issues at the end of the transaction were out here we have title within as I said 72 hours max of opening the order so you know up front if you have an issue and you have the whole contract period to work on it if need be.
@Adam Gratt We had a situation with a business intent that was different than your's but it may be useful to what you're trying to accomplish.
We had to fire a contractor, who then put a mechanics lien against the property. A lien we intended to fight & eventually won. But our investors were quite panicked because they believed we wouldn't be able to sell the property w/ this type of lien. Our title company offered us a special policy (I can't recall the name used) that allowed us to escrow the funds if we lost the suit w/ the contractor. Because of this policy we were able to sell the property even w/ the mechanics lien showing up on title. The eventual end buyer & their finance company were informed of the policy in place that allowed them to take ownership of the property without a cloud. It was brilliant.
We weren't trying to wholesale the property as it appears you're trying to do so this strategy may not be applicable.
Thank you @Jay Hinrichs
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