How Do You Experienced Investors Handle Missed Liens By Your Title Co.?

[Ibrahim Hughes]

We're working with a title co. we've used for years on a deal we have that's in foreclosure. We always do our own unofficial 'title searches' before submitting an offer and/or putting a property under contract.

So I know for a fact that the property is in foreclosure, a lis pendens has been filed and that there may have been a couple of judgments missed by my title company (not sure because my state seems to have two different databases - one for civil cases opened or closed and the other for closed cases that turned into docketed judgments. Not to mention that the owner's last name is sometimes spelled with just one 'n' instead of two). So it looks like my title company missed the LP, mortgage and (again) maybe a couple of judgments.

Do you guys notify the title co. of their error? Or allow the property to be insured as is? I thought this would sort of come under 'moral dilemmas' however on a recent deal my attorney suggested we keep quiet when the buyer's title company missed an irs tax lien on a seller whose property we assigned to an investor (we'll be doing the same on this deal). And I was a little surprised as my attorney is pretty 'by the book' in his practice. But I also know that he was under no legal obligation to alert the title company to the IRS lien.

My thinking is that unless our end buyer uses his own title co. (happens sometimes), then they may likely catch the LP and mortgage.

Your thoughts?