If you have ever purchased a house by a realtor and with a mortgage, then you’ve got seen a title commitment. This is a “bill of health” from a title insurance company, alerting you to who owns the property you might be buying and to any liens, mortgages, or encumbrances on the property. It’s essential that you simply get a title commitment and title insurance.
A typical sales agreement requires the seller to give the client a “warranty” deed. The word “warranty” implies that the seller is guaranteeing to the buyer that he/she owns the property, that it consists of the authorized description set forth in the title commitment, and that the liens, encumbrances, and mortgages can have been discharged at the time of closing so that the property is transferred without any baggage. As an aside, if the sales agreement was signed by one particular person however the title commitment indicates that there are owners of the property, each of the owners must sign the closing documents for the sale to be consummated. If the property is owned by an estate (because the owner died), the personal consultant might have to get a court order to acquire the authority to sign a deed on behalf of the estate. If the property is owned by a corporation, then a significantity of the shareholders must consent to the sale by a corporate decision for the sale to be effective.
When there isn’t a title insurance guaranteeing the legal description, the authorized owner, and the absence of encumbrances at the time of closing, the customer normally gets a mere “quit claim” deed. This means “purchaser beware”-in spades. The customer may later have a claim for fraud against the seller, but meaning a lawsuit and potential problems with amassing on a judgment. If, then again, you’ve gotten title insurance and discover that the authorized description was incorrect, the seller did not have the right to sell the property, and/or liens or different encumbrances weren’t disclosed or not discharged, you can file an insurance claim and hopefully be paid nearly immediately.
Whenever you purchase property, especially if it has been foreclosed or you are shopping for it as a “brief sale,” you’ll want to get a title insurance commitment. The commitment provides direction for what needs to be performed to remove liens, encumbrances, and mortgages from the general public record. The commitment, nevertheless, can “expire.” There is a date, usually on the high, that signifies the final date that title to the property was checked. You can request that the title commitment be “up to date” to the date of the sale. If it is not and you accept a commitment with a stale date, then you is probably not able to complain if the IRS filed a lien towards the property the day earlier than the sale, and the title firm didn’t discover it. Because title insurance corporations are linked today to the Register of Deeds office, it isn’t burdensome for them to do a last minute check.
As a last situation, when property has been foreclosed, there is a “redemption interval” (generally six months) after the sheriff’s sale throughout which the owner can “redeem” the property. To redeem, the owner must go to the Register of Deeds office with a cashier’s check for the amount paid at the sheriff’s sale plus the curiosity that has accrued for the reason that sale. If the owner manages to sell the property during this redemption period, which will produce sufficient cash to redeem the property. The problem is that if the property is redeemed, then the entire mortgages or liens that had been recorded after the foreclosed mortgage was recorded are reinstated and stay connected to the property.
For example, assume the next:
On January 5, 2008, Bank of America recorded a $a hundredK mortgage loan to the owner.
On September 9, 2009, Quicken Loans recorded a $50K secured equity line.
On March 2, 2010, the IRS filed a lien for $one hundredK.
If (a) Bank of America foreclosed on the $100K mortgage loan; (b) Bank of America “bid” $a hundredK on the sheriff’s sale (and then offered to cancel the mortgage in alternate for the property); and (c) the owner didn’t redeem the property-then the subsequent Quicken Loans’ loan and the IRS lien shall be extinguished. Bank of America will own the property outright.
If, then again, a) Bank of America foreclosed on the $one hundredK mortgage loan; (b) Bank of America “bid” $one hundredK on the sheriff’s sale (after which offered to cancel the mortgage in alternate for the property); and (c) the owner did redeem the property -then the following Quicken Loans’ loan and the IRS lien remain an encumbrance towards the property. If somebody bought the property during the redemption period, even in a short sale, that particular person would have paid something to the owner to purchase the property but would have really purchased property nonetheless subject to the $50K secured equity line and the $100K IRS lien. Only the whole running of the redemption interval extinguishes subsequent liens, mortgages, and encumbrances unless those subsequent lenders or lien holders comply with release their curiosity within the property. If you’re still dealing with the owner of foreclosed property, the property is undoubtedly nonetheless in the redemption interval-and therefore you MUST BEWARE!!
It’s crucial that purchasers of real estate acquire title insurance and the wisdom of a very good title insurance company. As they are saying, “If it’s too good to be true, then it probably is just not true.” While in most real estate offers the seller pays for the title insurance, there may be nothing to stop a purchaser from acquiring title insurance himself. On the minimum, a purchaser ought to receive a title search of the property (present to the date of sale) earlier than any purchase.