House Sold Without Paying Off My Lien

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House Sold Without Paying Off My Lien

Jackie Lange
Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes

About 10 years ago, I sold a house with seller financing. I closed at a title company.  They recorded my deed of trust (mortgage). 

The buyer stopped paying me.  I discovered that she sold the house a few months ago but the title company in Dallas Texas completely overlooked my lien. They never called for a payoff.  The funds were given to the seller (my buyer).  

The title company says call the seller but she's not returning my calls or emails.   

The title company's error and omission insurance should kick in, but it will require a lawsuit to get them to pay.

Or, I could foreclosure on the house since no payments have been made for several months.  


Looks like I will have to file a lawsuit against the title company, lawsuit against the person I sold the house to, and file for foreclosure if I ever want to see my money.

Has anyone else ever had this happen?  

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Dion DePaoliPro Member
Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
8y

@Greg H. the OP can issue a Notice of Default right now.  The time to cure is 20 days.  No need to wait until December at all.  

Don't wait @Jackie Lange, just start moving on the FC. Forget making contact with title companies, agents and other 3rd parties. None of them will help you. (except your own counsel) The idea is simple, you were alienated - title to the real property was conveyed in whole and you were not paid off. Your instrument should carry a due on sale clause that gives you a right to call the whole loan due. The NOD is the first step. You will send the NOD to the subject property which should get the attention of the new homeowners. They will panic and start making calls to the title company, agents and alike. All you want is to be paid off in full. Avoid conversations with 3rd parties. For a brief moment you will be treated as the devil squashing the dream of these homeowners. It just is, what it is.

As the chips fall, you will get paid off.  The owner and lender policy will kick in and pay you off.  The insurance company will then pursue the borrower/seller civilly and investigate the title companies search to see why the lien was missed.  None of that matters to you.  Don't get wrapped up in the drama outside your door.  There will be much.  

It's not your fault.  It's not the new owner's fault.  And that is why we have title insurance.

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    8y

    @Dion DePaoli

    Agreed. My "friends " comment was meant more as the note holder and the current owner are the parties with a mutual interest for resolution 

    As I am sure you know,  the OP's earliest attempt to foreclosure would be the first Tuesday in December so backing out the required 41 days she has sometime to get the ball rolling

    0Reply
  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    I've sold hundreds of houses with seller financing and never had this happen before.  So, just because this happened to me do not be afraid to sell houses with seller financing.  It will eventually get fixed - it just takes time and money to resolve the problem.  


    2Reply
  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    8y

    @Greg H. the OP can issue a Notice of Default right now.  The time to cure is 20 days.  No need to wait until December at all.  

    Don't wait @Jackie Lange, just start moving on the FC. Forget making contact with title companies, agents and other 3rd parties. None of them will help you. (except your own counsel) The idea is simple, you were alienated - title to the real property was conveyed in whole and you were not paid off. Your instrument should carry a due on sale clause that gives you a right to call the whole loan due. The NOD is the first step. You will send the NOD to the subject property which should get the attention of the new homeowners. They will panic and start making calls to the title company, agents and alike. All you want is to be paid off in full. Avoid conversations with 3rd parties. For a brief moment you will be treated as the devil squashing the dream of these homeowners. It just is, what it is.

    As the chips fall, you will get paid off.  The owner and lender policy will kick in and pay you off.  The insurance company will then pursue the borrower/seller civilly and investigate the title companies search to see why the lien was missed.  None of that matters to you.  Don't get wrapped up in the drama outside your door.  There will be much.  

    It's not your fault.  It's not the new owner's fault.  And that is why we have title insurance.

    10Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y

    @Dion DePaoli I knew you could cut thru the clutter. A side question that was raised in this thread, assuming the OP had a lender's title policy......I can't see Her lender's policy having any liability here, as my understanding is title policies simply guarantee clear title At The Time Of The Initial Transaction, not protection against future events such as this......but I'm open to being reeducated.

    1Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    8y

    @Dion DePaoli

    My reference was to the earliest to actually foreclose which requires 41 days.  20 days for the Notice of Default and Intent to Accelerate and then filing at least 21 prior to the auction.   So December would be the earliest possible attempt to foreclose. Obviously, the filing would be the first public notice 

    0Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    8y

    That happens. That is another reason not to get a mortgage from a bank only. Good luck.

    0Reply
  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    8y

    In for updates, would like to see this resolved fairly for everyone

    0Reply
  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    8y
    Originally posted by @Wayne Brooks:

    @Dion DePaoli I knew you could cut thru the clutter. A side question that was raised in this thread, assuming the OP had a lender's title policy......I can't see Her lender's policy having any liability here, as my understanding is title policies simply guarantee clear title At The Time Of The Initial Transaction, not protection against future events such as this......but I'm open to being reeducated.

     You are correct.  There is no claim on the OP's lender policy.  That lien is not in jeopardy.   Collecting what is due at the time it is due is the duty of the mortgagee not the title insurer.  Title insurance doesn't insure against future alienation only past.  This is why the claim here is on the NEW owner's policy HO or Lender or both.   

    1Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Dion DePaoli I disagree. That lien may be in jeopardy. One thing that remains to be seen here is whether Jackie Lange's lien was properly recorded and secured an interest in the subject property. She said the title company initially told her to go and deal with the seller about this. That tells me they may not have found her lien in their search... and that isn't always due to a title company error.

    So, had Jackie been issued a lender's policy concerning her DoT/mortgage, and for whatever reason (error in legal description, failure to record, etc.) the DoT/mortgage was not a valid lien, her policy might protect her in this situation.

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    1Reply
  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    Update:  The title company acknowledged that they saw my lien prior to closing.  They said the seller (my buyer) signed a statement that she would pay off the lien outside of closing. (of course, she had no intention of paying anything and thinks she got away with my money). 

    What??  I can't believe that they would even allow this.  

    The title company never contacted me to ask it that was ok with me ( the lien holder). They never asked me for a payoff statement.  

    This is just insane!

    Meanwhile, the new buyers likely got a Title Policy that says there are no other liens which is not accurate.  

    1Reply
  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    8y

    @Tom Gimer - there is a little too much speculation in that idea than what we have presented in the thread.

    The OP stated she has verified the DOT was recorded. So from the post the issue isn't whether OP has a valid lien but rather the search was conducted in error. Further, the Seller (OP's borrower) agreed to defend title against such claims and was knowledgeable about the existing lien and still took the proceeds from sale.

    The new policies - HO and Lender - would insure against search errors.  The title company searched and didn't find the lien.  Happens from time to time.  The OP can prove her lien with her paperwork for the transaction which would show us intent of the parties - Buyer/Seller - Lender/Borrower.  After all, she was both the Grantor of the deed and Lender of record.  

    As a side note, remembering the OP was also the Grantor to the Seller/Borrower who sold to the new owner, we didn't see any errors (that we know of) in that conveyance through the search.  As such, I am inclined to think that both that Warranty Deed and the Deed of Trust were made in tandem without error and perhaps recorder's office errored or searcher missed the document.  Point is, I am more inclined, based on the thread, to believe the DOT is proper and valid and the issue is on the search.  Ergo, search error falls on a claim onto the current insurance policy not the prior.  

    So the most probable outcome/course of action here is the OP files for FC.  The new owners and new lender trigger their policy to verify OP's claim and payout accordingly.  The error would be at the hand of the title company and the searcher who didn't uncover the DOT to the OP.  

    2Reply
  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    8y

    ....and there you have it.

    File foreclosure.  Serve the new owners.  This title company just got themselves into a heap of trouble.  

    @Jackie Lange - you are correct, the title company arranged title insurance and a warranty deed from your borrower to the new owner under false idea.  Title was not free and clear at the time of settlement.  They violated their fiduciary duty.  This gives claim to the new owners and new lender to satisfy your lien.  

    The title insurer will deal with the title company's negligence and will pursue the borrower for unjust enrichment.  

    Get out of the way of all the drama. Just enact the remedies that you have per the DOT which is to foreclosure in the event the contract is breached. It was, you were alienated on title. As crazy at it may sound, this is good confirmation and would stop reading this and file your Notice of Default today.

    Good luck.

    3Reply
  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Dion DePaoli Jackie responded and clarified.

    The fact that the DoT was recorded is not the end of it. You can record a DoT and still not have a valid lien due to problems with the legal description or the instrument itself. 

    But something else is up here... the title company discovered Jackie's lien in their search but took an affidavit from the seller that she would pay it outside of closing? That's unheard of. And if it turns out to be true, the ultimate liability will fall on the title company's E&O -- unless the seller bucks up.

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    3Reply
  • Brian Halstead
    Investor · Miami, FL · Member since 2017 · 30 posts · 6 votes
    8y
    Some title companies are simply irresponsible telling you to call the Seller when it's their mistake is ridulculous. If you file your lien correctly you should easily be paid by the title company they warrant the deed that's what a warranty deed means they will have to pay up eventually. Don't be afaid to sue them, you might even get your court cost covered in the end. I once have a title company told me why I don't sign the release and give the Buyers his money back. When this guy decided not to close on the closing day and I being a nice Broker offered him 50/50 split, when all the escrow was clearly mine, as closing date superseded all other date on the contract. I had to educate them that money in escrow belong to no one, that's why it's escrowed and they can go ahead and give the money to the Buyer if they wish. Of course they didn't and the Buyer accepted my offer. And as a side note, I actually sold the property for more money before the Buyer eventually up his mind, I made on extra 10% on the deal.
    1Reply
  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    The seller is MIA.  The attorney I hired is getting a private investigator involved to track her down.  

    Official certified (and regular mail) foreclosure notices have been sent to everyone involved in this mess.  It's a 3 step process in Texas.  

    And a demand letter was sent to the title company.

    3Reply
  • Michael Anspach
    Real Estate Investor · Smithtown, NY · Member since 2013 · 65 posts · 26 votes
    8y

    This is very interesting.  Hoping all works out quick and easy foe you Jackie!

    0Reply
  • Albert Ng
    Rental Property Investor · San Jose, CA · Member since 2015 · 401 posts · 221 votes
    8y
    Why do you even bother tracking the seller? Just foreclose on the house. They either pay, or you get the house. Recovering the money from the seller is not your problem.
    3Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    8y

    @Albert Ng You have to make a good faith effort to find the delinquent borrower, to serve them with the foreclosure action.

    2Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    8y

    Did you touch base with the title company?

    0Reply
  • Jennifer A.
    Sun Prairie, WI · Member since 2013 · 150 posts · 69 votes
    8y

    Wow.  I'm astounded that a title company would simply accept her assertion that she would pay you outside of closing.  That's asinine on their part.  I hope you are able to recover all your legal and court fees as well. 

    0Reply
  • Jerry N.
    Chicago, IL · Member since 2016 · 172 posts · 38 votes
    8y

    Following - very interested to learn more and about the outcome.  Lots of great info here about the various aspects of title insurance.

    0Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    8y

    Have you talked with the title company and demanded them to pay you the money that you are owed? I am not sure the amount, but if they know that they are ultimately liable for it, then they may pay to avoid a lawsuit. Get attorneys involved only after the title company refuses to work with you. My philosophy is negotiate first and sue last

    0Reply
  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    Of course I have talked to the title company.  They said I need to call the seller (my buyer) because signed a statement that she would pay me...(without my permission of knowledge).  Their stance is that it is not their responsibility to pay me because the seller said she would.  But the seller (my buyer) is MIA and does not reply to phone calls or emails.  

    The only way to get this resolved was to get lawyers involved unfortunately.

    1Reply
  • Sam L.Pro Member
    Rental Property Investor · Joliet, IL · Member since 2014 · 163 posts · 85 votes
    8y

    @Jackie Lange, any progress? 

    0Reply
  • Jackie Lange
    OP
    Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes
    8y

    Mr OR Ms??

    Remember that house I sold with seller financing then the buyers asked me to switch to a Warranty Deed in just the “daughter” name so she could refinance. But instead of refinancing her plan all along was to sell the house. Some how, she convinced the Title company that my recorded Lien with the property as collateral was really a personal loan and she would just pay it outside of closing. But she took off with my money and never had any intentions of paying me.

    To make a long story shorter, I filed a law suit to get my money or get the house back. Both the person I sold to, the title company, and the new buyers are named in the lawsuit.

    The process server has been trying to serve the lady i sold to but there is only a guy at the property and he says she is not there. The process server has been back many times and even waited overnight.

    Yesterday I got a report from my attorney that they would have to file some other kind of document since the lady I sold to cannot be found. In the report from the process server, they listed the phone number for the lady and said they have called her several times but she just hangs up on them.

    I did a google search for the number to see what else I could find out. ( do lawyers do this?) What I discovered is that the lady is really a GUY and offers SHEMALE escort services. I won’t go in to details about what other stuff and photos I saw and explicit descriptions…

    So, when you are involved in a lawsuit, perhaps it is a good idea to say mr. and/or ms – just to cover all the bases.

    As real estate investors we run across some STRANGE stuff – but this is just about the weirdest thing that has ever happened.

    For a long time I have had the domain name Every House Tells a Story with the intentions of writing a book about the stories and strange things I have discovered doing real estate investing.

    Eventually I will get my money and/or the house.

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