Title Company Error Causing Us Grief. Arrrgghhh!!!
About a month ago, my brother and I bought a property at the trustee's sale. We had our title search done prior to the sale, and the rep at the title company gave me the O & E, stating that the property was encumbered by just the foreclosing lien. Amazing deal - we paid $25K for a FMV $270K home. We haven't gotten any phone calls about it.
So just today, I decided to look back at the county website at this foreclosure, and I see this listed: "Date Lien Intent to Redeem," with a date, and a payment to the county. Well, how could there be a lienholder redeeming? We paid them off, didn't we?
I called the trustee, and he did some quick looking, and said, "Well, you didn't notice the additional mortgage and federal tax lien when you did your checking?" I couldn't believe it. Isn't that what we have title companies do a search for us for? (This also brings me to a topic I can't seem to find the info on - should title insurance have been purchased on the day of the sale, or should we wait until we actually own the property after the redemption period?)
Doing my due diligence on federal tax liens, I'm not too worried about that one. But this other lien is for $76,000 (still making the property a good deal, but not an amazing one any more), and it's in front of the one we bought.
Where do we go from here? Do we try to pay off the first? Is this something that could have possibly been alleviated by our having purchased title insurance right after the sale?
Thanks in advance for any help with our dilemma.
Did you purchase title insurance?
Having a copy of their O&E doesn't cover anything. That just proves they are covered. You should have purchased title insurance
Lori
Nope. We just couldn't seem to find a straight answer as to whether you should buy it the day of the sale, or when the property is officially yours after the redemption period.
Thanks Lori. That's the answer I was looking for. Bummer, though.
Obviously you want to pay off the first so that they don't foreclose on you...
I am a paranoid person (a little) I never trust anyone to mind the store, I check it out myself at the courthouse and for the few hundred it would cost for title insurance.....
Good Luck, it still seems like an incredible deal!
[addsig]
A little update: I got a copy of the original O & E that the title company ran on this property for me prior to purchasing it at auction. The $76,000 lien is in fact junior to the $25,000 lien that was the foreclosing one that we bought. But, the 2nd is trying to redeem the property themselves. Can they do this? Aren't juniors to the foreclosing liens wiped out at the sale? Since we bought the first, aren't they, in fact, now junior to us and powerless to actually get the property? (To throw an interesting twist in this, the first and the second were both owned by the same bank, but the $25K note was the one they foreclosed on!) Again, thanks always in advance for everyone's valuable advice. You guys are the best.[ Edited by adambeal1 on Date 05/19/2004 ]
I don't understand this. If you bought the property at sheriff sale, and have obtained a sheriff's deed these prioir liens/interests are a dead issue. They were wiped out at sheriff sale. You have a deed don't you?
The only way they could still be proceeding is if you in fact purchased a lien thats not 1st, and then it that case you only purchased an interest subject to the 1st.
If the second mortgage was more than the first, I would want to investigate whether the 1st mortgage subordinated to the 2nd.
research subordination agreements
I would say the place is yours and the 2nd holder loses.
Unless there is some odd subordiation between loan.
plus, for 75K, I'd talk to a lawyer.
This my 2 cents and is not first hand information and I am in Colorado. I have not purchased a foreclosure although I am trying to get one that we want to live in.
As I understand from my lawyer, any other mortgage or lien holders as well as the owner can redeem the property within the 75-85 day period. But unless you are getting a fantastic deal it is usually unrealistic for any of those to pursue the redemption.
Good Luck!
Yes, second lienholders can also redeem the property during the redemption period, and yes, it was a fantastic deal for us, so it would be silly for the second to not try to redeem the property. Overall, we were just disappointed with the title company that they failed to tell us about the federal tax liens, and the fact that the owner is in bankruptcy (why did the property even go to auction if they're in Chapter 7?). Goes to show that we should be doing our own title searches. Also goes to show that we should have bought title insurance then and there. And we don't get the deed until the end of the redemption period.
So, the federal tax liens amount to about $80,000, making this one property that I think it may be likely that they may come after. And, there's a bankruptcy going on. We had thought about buying the second, but then we thought that we'd be into this property for $100K in cash really with no guarantee, considering the feds and BK. So we decided to sit and wait it out. We're not going to lose money on this (and are getting interest on our money), but we don't want to invest more into something that is less than a sure thing.[ Edited by adambeal1 on Date 05/23/2004 ]
In TN almost all loans have a clause that gives up the right to redeem. check this out for your state
TNTrash:
I guess I'm not understanding what you're saying. You mean there's a clause that says the lender gives up the right to redeem? Thanks for your response.
adambeal1,
I used to be Colorado working foreclosures. After the 75 day homeowner redemption period, up to three juniors have the right to redemption if they filed intent to redeem with the trustee prior to the sale. If they haven't filed intent then they are wiped. The worst case senario is that the junior filed intent and redeems and you collect interest for the next several months on your 25K. The tax lein will have to be taken care of once you receive the trustees deed but intil then you wait to see if the junior lein holder redeems on the date given to them by the trustee. The trustee will give you the redemption deadline for your juniors.
"After the 75 day homeowner redemption period, up to three juniors have the right to redemption if they filed intent to redeem with the trustee prior to the sale."
This is intriguing. You say that they have to file to redeem before the date of the sale? They don't have to file simply before the date to redeem deadline, which is sixty days after the date of the sale?
Every state is different as to redemption.
Speak with the title company you first contacted and a few others. See when they will issue title insurance. Some title companies will not issue a normal policy until the redemption period is over as they do not want the hassle of a title that might not be really clean.
They can help explain what the redemption period is. I say this as you will be telling them you want to spend money with them to insure the title and they should be able to give you a quote and a timeline for when they will issue it.
I do suggest more investigation next time. Sounds like you will be OK this time around but not as rich as you might have been.
The foreclosure to proceed needed to have the property released from the BK process.
John
[addsig]
Thanks for your valuable comments, John. You're a big help to those of us just starting out, as I've read many of your postings and appreciate them all.
We've decided that with other auction properties in the future, that any title searches done will be done by us, rather than relying on a title company. When there's that much money at stake, if mistakes are to be made, I want to know that it was me who made them, and not rely on someone else only to find out that their error cost me money.
The redemption period ends on this one in 20 days. Should be interesting to see this play out and see what happens.