What Buyers Need to Know About Title*
With terms like "Torrens," "warranty deed," "ALTA," "registered property abstract," etc., title is no one's idea of scintillating.
However, problems with a home's title -- the document that shows you are the legal owner -- can be every bit as expensive as a defective roof or cracked foundation.
In a nutshell, here are the 4 things home Buyers need to know about title:
One. Exactly what does the Seller own? (Call this "the Brooklyn Bridge" test.)
Lawyers colloquially refer to the various property rights as a "bundle of sticks" (right to use, right to exclude, right to convey, etc.)
Two. How many of those "sticks" are they conveying to you? (You want all of them)
Three. Is anyone else contesting the Owner's claim?
Like, ex-spouses, rival heirs, encroaching neighbors, etc.
Four. Are there any unpaid creditors who are entitled to get paid from the Seller's proceeds?
This last question is especially critical for foreclosures, where unpaid liens, property taxes, city fines, etc. can be piling up, and the Bank that owns the property has zero motivation to discover -- let alone disclose -- their existence.
You'll pay $500 or so to a good title company to carefully address these questions. Then, depending on your home's value, another $1,000 - $2,000 to buy a home owner's policy protecting you from any defects in title.
Good investment.
*From a former attorney not giving legal advice.
Showing posts with label liens. Show all posts
Showing posts with label liens. Show all posts
Thursday, August 6, 2009
Wednesday, January 28, 2009
Title Insurance Traps
Title Traps Can Bite
Foreclosure Buyers
The potential traps that lurk for Buyers procuring title work, especially for foreclosures, reminds me of a favorite attorney joke (I'm allowed to tell them because I am one, albeit non-practicing).
When a neighbor charges that the attorney's dog bit him, the attorney first denies it. When he's shown photos of the bite and the emergency room bill for the neighbor's stitches, the attorney then argues that the dog attacked in self-defense. When numerous witnesses come forward to testify that the attack was unprovoked, the attorney says . . . it's not his dog.
Similarly, Buyers paying good money for title exam and insurance need to be mindful of numerous pitfalls, especially when foreclosures are involved. Herewith is a partial list:
--Who is the title company working for? If they're hired by the bank that owns and is selling the property -- as some banks require -- their motivation to uncover all potential liens and claims against the property may be compromised.
--What's in the fine print of the owner's title insurance policy? Specifically, what's included -- and more importantly, what's excluded? Many municipalities are now imposing hefty abandoned building fees (Minneapolis' is $6,000). Is the title examiner checking to see if such a fee has been imposed? How recently did they look? Ditto for property taxes, unpaid utility bills, contractor liens, etc.
--Even if the owner's title policy covers a potential claim, it may be subject to a significant deductible. Or, to collect, the owner may have to incur significant legal fees that the title policy won't reimburse.
--Is the company issuing the owner's title policy financially sound? Even an airtight claim is worthless if the company standing behind the policy is bankrupt or otherwise out of business.
When it comes to title work, inattentiveness or unwise penny-pinching can cost Buyers A LOT down the road.
Foreclosure Buyers
The potential traps that lurk for Buyers procuring title work, especially for foreclosures, reminds me of a favorite attorney joke (I'm allowed to tell them because I am one, albeit non-practicing).
When a neighbor charges that the attorney's dog bit him, the attorney first denies it. When he's shown photos of the bite and the emergency room bill for the neighbor's stitches, the attorney then argues that the dog attacked in self-defense. When numerous witnesses come forward to testify that the attack was unprovoked, the attorney says . . . it's not his dog.
Similarly, Buyers paying good money for title exam and insurance need to be mindful of numerous pitfalls, especially when foreclosures are involved. Herewith is a partial list:
--Who is the title company working for? If they're hired by the bank that owns and is selling the property -- as some banks require -- their motivation to uncover all potential liens and claims against the property may be compromised.
--What's in the fine print of the owner's title insurance policy? Specifically, what's included -- and more importantly, what's excluded? Many municipalities are now imposing hefty abandoned building fees (Minneapolis' is $6,000). Is the title examiner checking to see if such a fee has been imposed? How recently did they look? Ditto for property taxes, unpaid utility bills, contractor liens, etc.
--Even if the owner's title policy covers a potential claim, it may be subject to a significant deductible. Or, to collect, the owner may have to incur significant legal fees that the title policy won't reimburse.
--Is the company issuing the owner's title policy financially sound? Even an airtight claim is worthless if the company standing behind the policy is bankrupt or otherwise out of business.
When it comes to title work, inattentiveness or unwise penny-pinching can cost Buyers A LOT down the road.
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