When you’ve got ever bought a house via a realtor and with a mortgage, then you have seen a title commitment. This is a “invoice of health” from a title insurance firm, alerting you to who owns the property you are purchasing and to any liens, mortgages, or encumbrances on the property. It’s essential that you just get a title commitment and title insurance.
A typical sales agreement requires the seller to provide the customer a “warranty” deed. The word “warranty” implies that the seller is guaranteeing to the customer 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 could have been discharged at the time of closing in order that the property is switchred without any baggage. As an aside, if the sales agreement was signed by one individual but the title commitment indicates that there are owners of the property, both 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 must get a court order to acquire the creatority to sign a deed on behalf of the estate. If the property is owned by an organization, then a seriousity of the shareholders must consent to the sale by way of a corporate resolution for the sale to be effective.
When there isn’t a title insurance guaranteeing the authorized description, the legal owner, and the absence of encumbrances at the time of closing, the customer often gets a mere “quit claim” deed. This means “purchaser beware”-in spades. The client may later have a claim for fraud in opposition to the seller, but meaning a lawsuit and potential problems with accumulating on a judgment. If, on the other hand, you may have title insurance and discover that the authorized description was wrong, the seller didn’t have the suitable to sell the property, and/or liens or other encumbrances weren’t disclosed or not discharged, you’ll be able to file an insurance claim and hopefully be paid virtually immediately.
Once you buy property, especially if it has been foreclosed or you might be shopping for it as a “brief sale,” you should definitely 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, nonetheless, can “expire.” There’s a date, usually at the prime, that signifies the last date that title to the property was checked. You possibly can request that the title commitment be “updated” to the date of the sale. If it is just not and also you settle for a commitment with a stale date, then you definately might not be able to complain if the IRS filed a lien against the property the day before the sale, and the title company didn’t discover it. Because title insurance firms are connected lately to the Register of Deeds office, it shouldn’t be burdensome for them to do a last minute check.
As a last concern, when property has been foreclosed, there’s a “redemption period” (generally 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 on the sheriff’s sale plus the curiosity that has accrued because the sale. If the owner manages to sell the property throughout this redemption interval, that will produce sufficient cash to redeem the property. The problem is that if the property is redeemed, then all the mortgages or liens that had been recorded after the foreclosed mortgage was recorded are reinstated and remain hooked up to the property.
For example, assume the following:
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 at the sheriff’s sale (after which offered to cancel the mortgage in change for the property); and (c) the owner didn’t redeem the property-then the next Quicken Loans’ loan and the IRS lien might be extinguished. Bank of America will own the property outright.
If, however, a) Bank of America foreclosed on the $a hundredK mortgage loan; (b) Bank of America “bid” $a hundredK on the sheriff’s sale (and then offered to cancel the mortgage in trade for the property); and (c) the owner did redeem the property -then the subsequent Quicken Loans’ loan and the IRS lien stay an encumbrance against the property. If somebody bought the property in the course of the redemption period, even in a brief sale, that particular person would have paid something to the owner to buy the property however would have really purchased property still topic to the $50K secured equity line and the $100K IRS lien. Only the whole running of the redemption period extinguishes subsequent liens, mortgages, and encumbrances unless those subsequent lenders or lien holders agree to release their interest within the property. In case you are still dealing with the owner of foreclosed property, the property is undoubtedly nonetheless in the redemption interval-and due to this fact you MUST BEWARE!!
It’s crucial that purchasers of real estate acquire title insurance and the knowledge of an excellent title insurance company. As they are saying, “If it’s too good to be true, then it probably is not true.” While in most real estate deals the seller pays for the title insurance, there is nothing to stop a buyer from obtaining title insurance himself. At the minimum, a buyer should acquire a title search of the property (present to the date of sale) before any purchase.
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