Home-selling tips: Real estate documentation and title risk
June 8, 2016
Everything in real estate must be written with few exceptions. As such, it would make sense that the written documents would be cherished and kept in a safe place for reference in case they are needed.
We have experienced several occasions lately where old documents were needed to clear title. One was 25 years old, but was needed to complete the chain of title in order to get title insurance. Luckily, the Sellers could find the needed death certificate and we were able to close.
Unfortunately, that isn't always the case. When Sellers don't have the documents available, we need to look elsewhere. Sometimes they are recorded and simply overlooked by the title research officer. Other times parties need to be contacted to confirm the status of something.
This can be an old re-conveyance that wasn't recorded when the note secured by a Deed of Trust on the property was paid off. In another recent experience, we had a Seller with impeccable records including statements from the Seller regarding the balance on the Seller-carried note. They were 30 years old, but so detailed that the title company issued insurance without an actual re-conveyance deed.
If the property was the subject of litigation be sure to keep records. Sometimes the details of the record are important for understanding the results and status of the property and the litigation.
A lawsuit that was initiated for specific performance, but later changed to a damages suit, with the specific performance component eliminated, could result in an unsubstantiated claim for a commission by the original Agents. Having the documentation can save legal bills, unnecessary aggravation, and the cost of multiple sales commissions.
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There are many ways that saving documents can help you in the future. If you pay off a VA loan, save the re-conveyance deed in case the record if it being paid off is lost. If you can't prove you paid off one VA loan, you won't be able to obtain another, or the amount you can borrow will be limited.
If you agree with a neighbor to place a fence in a location, memorialize it in writing for future reference. Agreements like that can be recorded if you get the signatures notarized and have the assessor's parcel numbers in the document. It helps to have a public record of your agreements, but too many may hinder you.
Something casual between you and a friendly neighbor can become a nightmare with the wrong neighbor. You don't want something that works in a good relationship situation recorded so you are compelled to do it into perpetuity.
Remember, too, that what works for you may not work for a new Buyer. Be very careful with what you record against your title.
Our Advice: It is important to look the Preliminary Title Report/Commitment over immediately when it is issued in case there is an unexpected lien that will require work to clear.
Just like unexpected physical deficiencies that show up in an inspection, title liens from long ago that show up in a title inspection can cause delay and potential expense.
Read your report carefully and obtain copies of any documents referenced in it that you don't know what they contain. If you or your Agent don't know what they are, the Buyer will surely have questions about them.
Sometimes titles are clouded, and they have liens or claims against them by third parties that preclude their being insured or, perhaps, even transferred. They will remain a problem until they are cleared. That can entail waiting for litigation to be over, initiating litigation, finding people or their heirs, etc.
A clear paper trail is needed when working with title so the title officer making the risk evaluation for issuing the policy is comfortable.
Lisa Wetzel & Jim Valentine, CDPE, SFR, work for RE/MAX Realty Affiliates in the Carson Valley. Visit carsonvalleyland.com or call 775-781-5472 for information.
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