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In a recent transaction I represented a buyer purchasing a Long Beach CA condo.
One of the many components involved in a purchase is Title Insurance. Early on during the escrow process the Title Company will deliver a Preliminary Title Report to the REALTOR® for review and to disburse to the buyer.
The title report will disclose any obstruction to the transfer of clear title from the seller to the buyer. It will show balance of mortgage due, any unpaid taxes, liens, judgements, all which must be cleared prior to the close of escrow in order to transfer clear title. It will also show any easements and anything else that might cloud clear title.
This particular Preliminary Title Report had a paragraph, buried deep in the back of the report in the boilerplate of the contract. I noticed this while I was reviewing the document and was initially so confused by the statement that I had to re-read it 4 or 5 times, run it by a couple of people in my office and call the title officer that I normally use. I could not believe what I was reading, and was convinced that I must be having a half-heimers moment because this just could not be possible!
The basic crux of the paragraph was that the title company would not deliver title insurance on the 2 parking spaces that are deeded to the unit. I can not even begin to describe the potential problems this could cause. The title company was instructed to remove the paragraph or another title company would be used. They did so, and very quickly when challenged.
Understand that the Title Company is “INSURING” clear title to your new home and these 2 parking spaces are deeded to and a part of your new home.
My title officer went on to explain to me that this is a new ploy being used by a few less than reputable title companies in an effort to reduce their liability. Well it seems to me that if they did their job properly and did proper searches to do just that, they would not have to worry about reducing their liability.
He went on to explain that this has already caused a problem for one Long Beach Buyer and REALTOR®. They were fortunate enough to have been able to work the problem out. Apparently the 2 spaces deeded and transferred had been with that particular unit through several owners and the fact that a prior owner had switched spots with another owner in the building had gone undetected (more poor work by other title companies). When searched the problem was resolved by switching the spaces back without harm. Under different circumstances this could have been a huge problem.
So now we are back on track in the transaction (you would think).
Another part of the paperwork process is disclosure. Part of the disclosure process when purchasing a condo are the Homeowners Association Documents, Minutes and Financials. These should be delivered in a timely manner based on the time line described in the purchase contract/joint escrow instructions.
In this particular transaction, with the same title company as above the HOA documents were not presented to the buyer until a few days before closing, despite attempts to acquire them sooner. My buyer had been instructed to sign nothing without reviewing it with myself, his REALTOR® and was savvy enough to understand the value in doing so. As it turns out the seller had a lien, undisclosed by the same title company (this is soooooo part of what they are responsible for) for unpaid HOA dues for about 6 months. There was also evidence of an undisclosed assessment, and as if that was not enough an undisclosed increase in HOA dues. This came to the tune of over a couple of thousand dollars. Not funny!
Now before I go any further here let me say that the 3 most important factors in any real estate transaction are:
“DISCLOSE” “DISCLOSE” “DISCLOSE”
Because, Disclosure will set you free!
An amendment to the purchase contract was presented to the buyers agent authorising escrow to withhold the funds from the sellers proceeds to satisfy all of the above, with instructions for the seller to sign immediately or forfeit the deal.
The seller signed and returned the document in less than an hour because:“NON-DISCLOSURE IS A VERY SERIOUS ISSUE”
and is the basis upon which most real estate litigation’s are founded.
It is critical in any real estate transaction to read all of your documents and question that which you do not understand, until you do.
In so many transactions I see peoples eyes rolling into the back of their heads when they look at the stacks of paperwork involved, and at all of the small print. Always remember that for most of you this is the biggest purchase of your life and should not be taken lightly. All of the components of any real estate transaction are in place for an excellent reason, to protect the parties involved.
More Title Insurance Issue’s
One of my 2007 Goals was to change brokerages. I moved into my new office about a month ago. The new office is an “open” office which means that Title and other sales reps are free to roam around and interfere in your business day at their whim (going to have to start closing my office door again). There are title reps roaming around here that did not roam around my other company (new faces), so they are all approaching me for business.
So this young cutie-pie title rep comes strutting into my office a little while ago to introduce himself. All full of compliments about my great office la la la….. During our conversation I brought up the Title Insurance Issues on my last transaction and asked him how the company he represents handles the indemnification of parking spaces on the sale of a condo. They don’t indemnify them either! Lo and behold, they too are sliding this into the back of the Preliminary Title Report in the boiler-plate.
While he and I were having this conversation 4 other Realtors joined us. They too had no knowledge of this, but were very concerned since he was the title rep that they used on a regular basis and this was the first they had heard of this. They are checking their preliminary title reports as I am writing this post. One is worried about her own parking spaces since she used this title company when she purchased her own condo.
So my advice to you is to read your boilerplate folks. The times they are a changing.
If we represent a buyer in a transaction and the parking spaces are part of that transaction, there had better not be an issue with them after the close of escrow.
Personally if the title company would not remove the clause releasing them from the indemnification, I would insist on changing title companies until one did. At the very least I would think a separate disclosure to the buyer pointing this out would be in order, but I am certainly not an attorney.
Your thoughts……………..?
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Title Insurance Issues
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