Chain Of Title Issue...
Hello,
I was curious about what others have experienced in regard to title searches.
Specifically, here are my questions:
1. If I am assigning the deal to a rehabber, does the rehabber (assuming they like the property after inspection) then pay for a title search themselves?
2. If it has cloudy or defective title, are titles impossible to cure and make clear?
3. Should I be putting issues about title in my contigencies when I am working with owners of abandoned homes?
Also, should I be asking my rehabber/buyers what contigencies they need to see in the contracts to do the deals? I am about ready to start making offers and just want to do things as best I can.
Thanks in advance! - Dave
In PA, the buyer who is taking title paying for the title insurance. Very important for you to have someone check out the title of any property you're thinking of buying or flipping and put a contingency in the purchase contract. Standard provision in PA contracts is one where the seller must provide good quality title free and clear of all liens and encumbrances. About curing defects in title, it depends. Suggest you connect with a title insurance company in your area.
I assume you are doing your own homework in terms of title prior to acquiring them. Generally speaking, you should be doing your own title research or having a title company handle it for you. Assigning the contract does not relieve you of the obligation of purchasing the property in the event that your rehabber fails to close; you are still contractually bound so it makes sense to know what you are buying. Also, I don't know anyone who would buy a property without knowing what liens or other encumbrances are on it. I would make it a practice of doing this and providing your findings to your buyers for piece of mind.
In terms of your second question, the answer is it depends on the cloud. Some clouds can be easily remedied while others may require a quiet title action to cure. Again, it depends on the cloud.
Your obligation to purchase should always be predicated on the ability of the seller to deliver good and marketable title. So the answer here is yes.
You may want to use one of the RE forms used by your local realtors as it contains the standard boilerplate language which will contain these contingences that you speak of.
J
There's nothing wrong with asking the seller if there are any title issues that they are aware of. If they misrepresent the situation, they have given you a reason to walk. Put it in the contract if you wish! Your contractual obligation to purchase is however limited to forfeiture of the earnest money deposit. If your in the practice of giving large earnest money deposits on wholesale deals, then you may want to rethink this strategy.
If there's enough money in the deal, then most title issues can be cleared up. If there's something that can't , then the property owner knew it was there, and misrepresented the properrty when you asked them the question above.
A title search isn't expensive, and you should never take title yourself without a title insurance policy in place. You can order the title search, and let your buyer pay for the title insurance policy.
Good luck,
Jeff[ Edited by jeff12002 on Date 10/27/2003 ]
There are times when it is perfectly acceptable to buy without the seller providing you with a title policy. I do it quite often on vacant land. I just bought a parcel last month from a party that was the purchaser when the land was original subdivided. That was back in 1976. He was an out of state owner. In this case, I paid $63,500 and already have it under contract to sell to a builder for $105,000. Under these circumstances it is pretty easy to research the property yourself. Many times these owners just want the simplest way out and are willing to discount deeply because of it. About the only clowds that might be present would be a mortgage or a code enforcement lien. Both are easily found and dealt with.