“I asked my realtor if she had ever encountered this before, and she said ‘honestly, in 30 years in the business, not once.'”

lien
Photo by PoPville flickr user MidnightMadman

“Dear PoPville,

I’m in the process of selling a property I’ve owned for nearly a decade and refinanced twice in that time. So, the title has been researched 3 times in less than 10 years, without complication. Now the settlement company says they’ve found some old “small” liens against “previous owners” against the property they need to settle before closing. It’s threatening to delay my closing, which threatens to disrupt the buyer’s financing (though that’s probably not a bad thing in the current rate environment, where an update would probably net them better terms).

I have owner’s title insurance, so everything will ultimately be fine, but I asked my realtor if she had ever encountered this before, and she said “honestly, in 30 years in the business, not once.”

So, can I get any advice from the PoP community at all? What to expect, what to do, anything!”

27 Comment

  • Hire a lawyer

  • One giant leap for title insurance salespeople or anyone else who’s ever had to defend its existence.

    • Actually. To me it reinforces that Title Insurance is sort of a scam being forced upon us. The OP notes that he’s gone through financing three times ***on this same property before***. Once to initially buy it and twice to refinance it. If Title Insurance were more than a legalized racket then the old liens should have been caught in one of those previous 3 times the OP payed Title Insurance.

      • Um, no. Why does the title examiner missing liens have anything to do with the value of title insurance as a product?
        .
        Also, you’re not required to buy title insurance. But good luck convincing your lender they don’t need a policy..

        • I think people are mixing up the types of title insurance here. Lender’s title insurance is almost always required by the lender (though the buyer (or owner for refis) pays for it). Owner’s title insurance is generally optional, and covers issues like this. It’s usually only issued once, at the time of purchase. While I’ve never been through this, I’m at least educated about what the products are, and hopefully this explanation will help others. I won’t comment much of the value of the owner’s insurance, except to say I’m glad I have it right now. My policy was about $600 for anyone curious about costs.
          .
          As of end of day yesterday, settlement company said they were working under the assumption that closing would not be delayed, so it sounds like they’re truly small issues. Thanks for the advice from all. I feel a little better. This could very easily be an issue where some old lien that hadn’t been put into the databases was entered in the last couple of years. Almost everything in DC is old enough that there could be paper records buried somewhere that get uploaded at some random point.

      • Everyone likes to criticize title insurance until they need it. Mistakes happen during a title search, closing, recording, etc… But the policy indemnifies you against loss.

      • I’m guessing this is a result of the internet. All kinds of old judgments that happened before the internet was used (other than by some researchers and academics) are now being found and posted in online databases, which makes them easier to find. Good thing the OP bought title insurance.

  • Usually what happens is the lien has been paid but the title company either forgets or neglects to record a Release in the land records. So the title company is probably in the process of confirming that prior liens were paid off so that they can then record an actual release.

    If there are legitimate liens still in the chain of title that were not paid off, then the title company will take care of it. You have your policy, so you are covered. The only frustrating thing if the delay as you mentioned. There is no need to hire a lawyer as the above posted suggested.

  • How small are the liens? Would the title company be willing to hold funds in escrow pending the release, which would allow you to go to closing but still permit them to insure over the liens?

  • If the property is historic it can be “fairly common” on small unplayable liens.

  • A good settlement attorney should be your first stop. Unfortunately, settlements have become a sideline for people with small practices who aren’t real specialists.

    Given the relative shadiness and ineptitude of people and businesses in the mortgage trade over the last 10-15 years, you shouldn’t be surprised about stuff like this and my guess is that your realtor is lying.

    • The first settlement company, which is also the company that issued the title insurance, is a large, long-established, and generally well-regarded company. The buyer’s settlement company also has a good reputation. I don’t doubt your assertion for the refis (it was pretty obvious they were scraping the bottom of the barrel to save $$). As the seller, I really don’t have much say in settlement. Since my title insurance covers an attorney if necessary, I would assume the insurance company gets to pick them, no?

  • Get a new realtor then. Cause if she hasn’t seen this before, she clearly hasn’t been paying attention.

  • This just happened to me this week as well. I purchased the property three years ago and re-financed it once, so two title searches. I got notice yesterday that the buyer’s title company found two small tax liens from 1990 and 1993. My realtor thinks the previous title company probably paid them and forgot to record the release. (Previous title company also large and well established.) It shouldn’t take much to clear up, but man title issues are annoying.

  • Use to do title searching in VA. We would only go back to the last title policy if we had a copy of it. So when the OP refinanced the company probably only went back searching to the date they purchased the home etc. So if the Op’s original company missed the liens the next companies were probably relying on their word the title was clean.

  • Agree with Melbot87

    I have seen this happen several times and it is almost always due to liens that were not released properly – they were paid off but not recorded. DC’s record keeping is abysmal – worse than you can conceive of. Documents are stored all over the city with little rhyme or reason as to where or why and things get lost in the mix.

    Further, the title company who handled your original closing likely closed, meaning your current title company has to track down who is holding its archives.

    If there truly were 10+ year old liens, someone would have showed up before now! The liens may even be your old, pre-refi deeds of trust that weren’t replaced when you refi’d

    • Original title company is alive and kicking. Sometimes it pays to go with the big guy. Companies are talking to each other. They have not told me what the issues are, but I guess that’s my next question. Hopefully escrow is an option as others have mentioned. I checked the records myself and the refi’s are all documented properly, as is the release for the previous owner.

  • 1. make sure you know exactly what the title issues are, see the documents if possible

    2. make sure your settlement company and the new settlement company are talking and exchanging info

    3. run it by another settlement company to get an impartial opinion, and maybe even an obvious solution nobody thought of

    4. push for holding funds in escrow and proceeding with closing, most buyers should go for this

    there are lots of different scenarios so it’s hard to say what you will have to do without knowing what the issues are. There are instances where a previous owner or lender may need sign off on a release, or their estate. There are instances when a court judgement is needed to document something unclear in a chain of custody, which can be lengthy and pricey. Some title insurance policies have exceptions that do not cover liens that aren’t able to be found in public records, so that’s something to be aware of as well

    hope that’s helpful, good luck with your situation

  • Hate to say it but this is not uncommon at all. Record keeping in a lot of areas is still done on paper, so there is a large margin of error.

  • Don’t hire a lawyer. The title company will obtain a Release and everything will be fine. That’s what they are paid to do.

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