You found a house you love OR you are about to sell your home. Exciting times until your attorney sees the title report. A seller is generally obligated to provide marketable and insurable title. The title report is the document which shows the legal status of that property and the title insurer will issue the title insurance based on that report. And, it’s surprising what can come up. Here are a few of the common issues so you can take a proactive approach, as either a buyer or a seller, to resolve these prior to closing.
Judgments and Liens
You are about to buy or sell your home, and then all of a sudden one of these liens pops up against you. The simplest resolution is that you have a common name. (I once had a client named John Smith – you can imagine how many judgments and liens showed up on that search!) If you can prove that you did not live at the address that comes up on the report, no problem. You can usually sign an affidavit at closing. But if this is you, you will need to provide proof that you paid off your debts and the creditor will have to file a satisfaction of judgment. These liens are attached to a property as soon as you buy it and then your mortgage won’t be in the first lien position, so ensure this is taken care of before closing.
Sellers, you usually have a mortgage to pay off, which will be paid off at closing. The title closer will pick up the payment, make sure it gets to your lender, and the loan gets satisfied on record with the County Clerk. That is expected. But sometimes, the satisfaction of mortgage does not get properly recorded with the County Clerk. This could happen when you refinance with a new lender. This mortgage is going to show up in the Clerk’s official records, even if you paid it off. This is something that can delay the closing on your home until we can get a new satisfaction (a “duplicate sat.”) I do recommend you keep all of your documents pertaining to any refinance until you sell. So, when you are packing away all the stuff in your home and you find paperwork relating to your house and any loans, don’t throw it away. If you don’t have your documents, we utilize companies that can help you track them down, but it’s not easy and it takes time, and may cost you additional fees.
Buyers, this is why you get title insurance. If the prior owner’s mortgage shows up still on record with the Clerk’s Office, when you go to sell or refinance, most likely you will be protected. Title insurance insures your interest in the property as of the date you purchase your home. We would send a copy of the title policy that you got when you purchased it to the title company and generally the situation gets resolved.
Sellers, if you are going to be selling your home anytime soon, get your deed, survey and title policy ready. That way, we can get the contract out quickly as soon as you have a buyer.
Tax Lien or Tax Warrant
This lien means you owe taxes to the IRS or New York State and that can go against your house. It has to be resolved before we can close.
If you have fallen into arrears on your taxes, this will show up in the title report. In Suffolk County, they are paid twice a year and in Nassau County and New York City, it’s four times a year. If you haven’t paid, you are getting interest on those and will need to pay in full at closing.
Red Light Camera Tickets
Pay them! Or it can become a judgment. You can go online and pay them off quickly. You will need that proof if anything would ever come up. This varies by state.
Town Violation Lien
At some point, you may have built something without a permit. A pool, a shed, a deck, etc. If the Town issued a violation, which resulted in a judgment, the title search may show a judgment, or an open violation, which will need to be cleared prior to closing. When you get ready to sell, check with the township and make sure there are no open violations against you. If so, get it resolved before listing your home.
As a fixture on your property, if you are leasing or financing, the company has put a UCC-1 on your property. It’s a notification to the world that there is a lien on personal property. While this is a complicated matter to get into here, it’s simply a reminder that this will need to be transferred and a UCC-3 termination statement issued. So if you have panels, get this process moving.
For a closing to go smooth, just be prepared. Many people are worried about staging the house or good curb appeal, but none of that matters if title issues are going to delay or derail your closing.