It's like the real estate Ripley's Believe it Or Not!
The closing should have already happened. The buyers agent was going to be out of town the day before the closing, so he asked an associate to do the walk through with the clients. No problem. And being the responsible agent he is, he did a walk through himself before going out of town.
Things looked good, the house was all cleaned out and ready to sell! Walking around the back of the house he noticed something.... boxes with new locksets and a combo lock box, plus a notice from a management company that the house appeared to be abandoned. All in a neat pile under the back deck. Uh oh... this smells of foreclosure!
How could that be? Nothing was noted during the process, the title search had been done, all was well.
The management company would say nothing on the phone. A quick call to the listing agent produced nothing but more head scratching by both agents. What could be going on? The man was current in his payments, had not missed any, was not a short sale, all was confirmed.
More calls to attorneys, nothing came up... untill it was noticed that the seller had purchased the home 2 years prior at a tax sale. There had been more than one bidder and the home had gone for about $100,000 over the actual amount owed to the town.
Land records exist to give constructive issue of title.
Observation on the property is actual notice of issue of title. (You know, like a path to another house, a driveway to the neighbor that extends on to the property, or notification from a management company that says they have secured the property.)
According to the town, all interested parties had been served notification both before and after the tax sale. The redemption period had come and long gone.
The land records showed nothing unusual. But the observation on the property by the agent said different thing. There was an issue of title no matter what any town records said.
Fast forward, there is a court case pending. Took a while to figure it out though. The next step will be a trip to the court to see what the case is about. The previous lender from the people who lost the house to the tax sale is involved in the case and is the one trying to foreclose on the property.
What about the title company? Good question, the buyers title insurance company is refusing to write a policy unless the sellers title insurance company will indemnify them from any issue arising out of this mess.
The sellers title insurance policy does not want to do that, but has offered to write a policy for the buyer.
As one attorney said to me, that isn't a real estate closing, but it is a great question for a bar exam!
What will happen, who knows. I am sure there will be some way to resolve it, but not without a few sleepless nights and stressful days.
- Perhaps the lender is trying to recoup any monies from the town over and above what the tax lien was for.
- Perhaps the lender didn't bother to record the notice from the town about the tax sale.
- Perhaps the law firm handling the impending foreclosure didn't do their home work?
It's anyone's guess what will happen. What I do know is that this is proof positive that even if you pay cash for a property you need to get title insurance. With the wild west days of real estate we have been having there could be all types of issues cropping up.
I knew of one case where the lender who foreclosed on the property was not the primary lender, and one month after they foreclosed they rescinded the foreclosure. My question, how could the law firm handling the foreclosure not know they were in second position? How could the lender not have known? The land records were accurate, they showed a first mortgage. Sloppy work, sloppy, sloppy work.
I am sure this particular property will close. The title company may have to pay money, the town may have to fork over $100,000 profit they made, or the whole thing might just go away, but I am sure it will close.
Andrea Swiedler, Realtor, Southern Litchfield County Real Estate
2017 President, Greater New Milford Board of Realtors
2017 Connecticut Magazine 5 Star Realtor
Coldwell Banker Residential Brokerage
Litchfield County Regional Office,375 Danbury Rd, New Milford, CT 06776
© Andrea Swiedler 2009 - 2017
Always do right. This will gratify some people and astonish the rest. - Mark Twain