04/26/2008Buying a house without title insurance? What are the risks?
- I want to buy a house. But there's a big problem.
The yard looks horrible, and the county has a lien on the property. The current owner has to pay $50 fine until she cleans up the mess. She is lazy, hasn't done anything. She wanted mercy, and they gave her 30 days. She didn't do anything! So, again, they began to fine her $50 per day. Now she already owes thousands to the county! They are going to demolish the house unless she cleans up very soon.
I want to buy her house, but I cannot get a title insurance on it, because they won't give it to me as long as the county has a lien against the property. The owner is NOT willing to clean up the mess, and I don't want to clean it up for her, because if I do, the house will be worth twice as much, and she won't sell it to me for the amount we agreed. So, I don't want to clean up because it's not my house. And she doesn't care. The county will not take partial payment and will have no more mercy.
May I buy this? What are the risks???
- Best Answer:First of all -- if you can't get title insurance, NO ONE will lend you the money for it.
Secondly -- if there is a lien against the home, it must be paid out of seller's proceeds or the seller has to come to the table with money to pay the lien.
NEVER EVER buy a home without title insurance. Title insurance assures you have a clean title.
You may want to consider seeking attorney help or realtor help to write a good contract that she will accept. In other words, she has agreed to sell the property to you for a certain price. You might be able to put something in the contract that says you will clean up the property so the county will stop assessing the lien, but she cannot raise the price of the home and must sell it to you by a certain date (give yourself plenty of time to clean up the property and plenty of time for your loan to go through underwriting -- generally 30 days or less) ...
Additional comment -- I understand that you are paying cash for the property ... but if you don't buy title insurance, you take a big risk on whether that title is clean when you buy it. For example -- let's say this woman was divorced previously and has judgments, etc., on title that for some reason don't surface until after you buy the home. (It has happened, trust me) ... if you don't have that title insurance, then you become responsible for everything and anything on that title. If you have title insurance, it protects your interest, and the title company has to indemnify the title (they have to remove the wrong items that should have been removed when you purchased it).
I can understand it is a difficult decision. If you want to take the risk, then take it ... you may want to talk to the title company and ask them if they will write the policy for you after you purchase it and after you clean it up, so you have peace of mind.
pstang@1omni.com
- Answer:you could probably buy it if you pay all the liens and an y taxes due, but there is still a risk of unknown issues that could come back to haunt you after the sale without having a title company approving everything - I would walk away
- Answer:I wouldn't touch it with a 10 foot pole. You are asking for problems.
Are you proposing to pay cash? If you will need a mortgage loan, you won't get one without a clean title report and title insurance.
- Answer:Hi Breeze -
You question is intriguing, but let me first say that you should not buy this property without title insurance, especially with the way that you have portrayed the story.
The reason title insurance is a good idea is to protect you if there is an issue with the title ('cloud on the title'). If it turned out that there were other liens on the property, such as a mechanics lien from a contractor whom she never paid, then you would have to rectify it yourself, probably incurring great legal and other costs. So, don't buy a house without title insurance (unless you are a risk taker and gambler!)
But with all that being said, I thought of something else regarding your situation.
You may be able to pay off the municipal lien (that's the one that she has because of not paying) with the county yourself. There is a relatively little known area of real estate investing called Tax Lien Certificate investing, whereby you pay the back taxes on a property and you get a certificate. This certificate tells you how much interest you will get, in addition to the principal (the amount you paid the county), when the lien is paid off. Now it is BACKED BY THE PROPERTY, so if she does not pay back the lien in a certain amount of time, you may be able to take possession of the property for the amount you paid for the certificate.
If you google tax lien investing, you should be able to find enough information about it.
Hope this helps!
- Answer:I don;t know if it's doable, but my imagination is working here. Contact the city and give them some bond or other assurance that you will have the property up to code and more within six months if they will attend the closing and accept their full payment then.
Structure the offer to the owner in such a way that you reduce your offer by the amount of the lien and clean-up costs.
On the day of close hand the check to the city, take the release from them, hand that to the title company, which issues its paperwork and then proceed as normal.
No, I don't know if anyone will buy into it, but you never know.
- Answer:I had my own property that was given to me by my father and built a house on it and we did not bother with title insurance because the land belonged to my father and his father left it to him so we knew about it. But my dad gave my older brother some property that buts up against my property and the people that split my land from my dad's left something out of the physical description of the property and without title insurance there was little I could do. So the moral to this story is that even if you don't think you need it, you do, so get it anyway. It is well worth the money
- Answer:This is not a hard decision. Don't buy without title insurance. Where there is one lien there may be another. Won't the title insurance company issue the policy with an "exception" for the specific lien to the County? An even better possibility would be for the lien to be paid at closing from the sale proceeds. Either of these solutions are fairly common for liens.
If you buy without title insurance you don't really know that the seller owns the property. At the last minute before closing the seller could deed or mortgage the property to an "innocent" third party. A third party could file a lien or judgment or a tax lien could be filed. All these would take priority over you if recorded before your closing.
Is someone trying to talk you into doing this without title insurance? If so, you may be the target of a scam. Have you seen a preliminary title report?
If you are still thinking about doing this, talk with a lawyer first.