lot purchase agreement - Posted by Keith (TX)

Posted by Tony Colella on June 14, 2005 at 08:43:51:

Foreclosures almost by definition have title issues. The defaulting owners often have hidden financial skeletons in the closet, many of which occurred after they bought the property.

At the time of purchase the VA, FHA or other type loan would likely require the title search and insurance but that would only include and insure up to the date of that purchase.

If there were errors made during that search, then the title company may be on the hook (but you would have to read the policy for exclusions). Additionally, anyone on the chain of title that provided a warrantee type deed when they sold, would also be on the hook (but may have no money or assets to go after if a problem is found).

The foreclosing lenders often require the buyer to sign lengthy addendums (I had to sign one that was 22 pages long) in order to buy. These addendums essentially relieve the lender of as much liability as possible and usually states that they will provide no warrantee meaning they seek to provide title by some form of deed other than a warrantee deed. In some cases I have seen them provide a special warrantee deed which essentially states that during the banks brief ownership, they did nothing to cloud the title but they are not guaranteeing the title other than that.

Many investors will look for an FHA loan in the history of the title knowing that a title search would have been required at that time but as stated in other posts, a mistake may still have been made but at least from that loan back there may be a title insurance to go after.

Where we find consistent problems is with the title of the mobile homes. Banks typically now require the retirement of a doublewide mobile home title so as to make the foreclosure a one step process. But in many cases, the title had not been attached and the bank forgets to repossess the title and only forecloses on the land. This routinely delays closings. Usually during that time my attorney also finds other title issues on the land as well that need clearing.


lot purchase agreement - Posted by Keith (TX)

Posted by Keith (TX) on June 13, 2005 at 11:18:36:

Anybody have a simple contract form for the purchase of a M/H lot

Re: lot purchase agreement - Posted by Tony Colella

Posted by Tony Colella on June 13, 2005 at 15:28:28:

I finally gave in and just started using the standard, bar approved real estate agent forms because even when the other party is not represented by a real estate agent, it always seems that at some point a relative, friend, neighbor, attorney etc. looks at a privately written form and tells the other party some odd ball opinion.

Why swim up river I asked myself.

If you do look for your own form, I recommend Bill Bronchick?s forms (why not use his since they are written by an attorney who invests in real estate himself?).

One word of advice. Do NOT forgo the title search or formal closing process. There is little money saved in doing so and the risks can outweigh the costs of a closing by far. Title insurance on a $4k lot will be next to nothing and you now have a good title search (or someone else to fall back on).

I tell this story at our workshops and believe I have written about it here before but the reader?s digest version is this.

I bought an improved lot for $9,500. The seller who claimed to be a seasoned investor had purchased the lot and an old home (he since removed) from ?get this? two folks who were in prison. He had an attorney draft the deed but did not request a title search.

When I bought the lot, my attorney found several thousand dollars worth of judgments against not only the prisoners but also the seller himself (despite his assurances that the title was clear).

Out of $9,500 in cash that I gave him at closing, he walked away with about half because of the rest went to satisfy those judgments so as to provide me with clear title. Had the investor done a title search, he would not have had to pay for prisoners debts too.

Protect your deal. The cost is very minimal. In my area the whole closing, including title search, title insurance, deeds and filing run about $450 to $600 bucks (depending on attorney). Money well spent in my opinion if anything should later be determined to be a problem.


Thanks and 1 more question - Posted by Keith (TX)

Posted by Keith (TX) on June 13, 2005 at 19:44:09:

Would you still recommend a formal closing and title commitment even if the lot purchase was only $2700, I did my own title search (I must admit I am no expert), and I really had no plans to ever sell the lot (I plan to sell the home and rent the dirt). Just trying to pinch pennies. Thanks.

Re: Thanks and 1 more question - Posted by Tony Colella

Posted by Tony Colella on June 13, 2005 at 21:20:31:

Doing one’s own title search is a risk in itself. Just looking at the chain of title and the deeds is not enough. Time and time again my attorney has found title issues that had been overlooked by the previous (and well respected) closing attorney.

Searching various judgment files (not all are recorded) on each and every person on title or that may have a claim is (for me) too important to overlook. Get a quote from an attorney or title company and weigh your risks.

The argument could be made that if you never sell the property that the title will clear itself but Never is a long time.

Just my thoughts.


Re: Thanks and 1 more question - Posted by Gary

Posted by Gary on June 13, 2005 at 22:55:39:

Just have a search done. Keep in mind the attorney doing the search could also screw up and miss something. An attorney I used at one time was known to do this,but this was a guy who would bring both his wife and his girlfriend to parties,etc. Maybe he was distracted or just plain tired!!!
I understand when you purchase a repo that had a guarenteed VA loan that the government guarentees clear title. Any authorities on this?