When you have ever bought a house by means of a realtor and with a mortgage, then you will have seen a title commitment. This is a “invoice of health” from a title insurance firm, alerting you to who owns the property you might be purchasing and to any liens, mortgages, or encumbrances on the property. It is essential that you just get a title commitment and title insurance.
A typical sales agreement requires the seller to offer 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 within the title commitment, and that the liens, encumbrances, and mortgages could have been discharged at the time of closing in order that the property is transferred without any baggage. As an aside, if the sales agreement was signed by one individual but the title commitment signifies 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 could need to get a court order to acquire the writerity 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 via a corporate resolution for the sale to be effective.
When there is no such thing as a title insurance guaranteeing the legal description, the legal owner, and the absence of encumbrances on the time of closing, the buyer usually gets a mere “quit claim” deed. This means “purchaser beware”-in spades. The buyer could later have a claim for fraud against the seller, however that means a lawsuit and potential problems with amassing on a judgment. If, then again, you’ve got title insurance and discover that the authorized description was mistaken, the seller didn’t have the suitable to sell the property, and/or liens or other encumbrances weren’t disclosed or not discharged, you may file an insurance claim and hopefully be paid almost immediately.
When you purchase property, especially if it has been foreclosed or you are shopping for it as a “brief sale,” remember to get a title insurance commitment. The commitment provides direction for what needs to be carried out to remove liens, encumbrances, and mortgages from the public record. The commitment, however, can “expire.” There is a date, normally on the top, that indicates the last date that title to the property was checked. You may request that the title commitment be “updated” to the date of the sale. If it will not be and also you accept a commitment with a stale date, then you definately may not be able to complain if the IRS filed a lien towards the property the day before the sale, and the title firm didn’t discover it. Because title insurance firms are connected nowadays to the Register of Deeds office, it just isn’t burdensome for them to do a last minute check.
As a final difficulty, when property has been foreclosed, there is a “redemption interval” (typically six months) after the sheriff’s sale during which the owner can “redeem” the property. To redeem, the owner should go to the Register of Deeds office with a cashier’s check for the amount paid at the sheriff’s sale plus the interest that has accrued for the reason that sale. If the owner manages to sell the property during this redemption interval, which will produce sufficient money to redeem the property. The problem is that if the property is redeemed, then the entire mortgages or liens that have been recorded after the foreclosed mortgage was recorded are reinstated and stay attached to the property.
For instance, assume the next:
On January 5, 2008, Bank of America recorded a $one 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 exchange for the property); and (c) the owner didn’t redeem the property-then the subsequent Quicken Loans’ loan and the IRS lien will 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” $a hundredK on the sheriff’s sale (and then offered to cancel the mortgage in exchange for the property); and (c) the owner did redeem the property -then the subsequent Quicken Loans’ loan and the IRS lien stay an encumbrance in opposition to the property. If somebody bought the property during the redemption period, even in a brief sale, that particular person would have paid something to the owner to purchase the property but would have really purchased property still subject to the $50K secured equity line and the $one hundredK IRS lien. Only the whole running of the redemption interval extinguishes subsequent liens, mortgages, and encumbrances unless these subsequent lenders or lien holders agree to release their interest in the property. If you’re still dealing with the owner of foreclosed property, the property is undoubtedly still within the redemption period-and therefore you MUST BEWARE!!
It is crucial that purchasers of real estate acquire title insurance and the wisdom of an excellent title insurance company. As they are saying, “If it’s too good to be true, then it probably shouldn’t be true.” While in most real estate offers the seller pays for the title insurance, there’s nothing to forestall a purchaser from acquiring title insurance himself. At the minimum, a purchaser should receive a title search of the property (present to the date of sale) earlier than any purchase.
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