Can you get a loan on a property with a CLTA policy?

Question

Hi.

I have an investor client interested in purchasing a metes and bounds property with a duplex built in 1952. Chicago Title is telling me they can only issue a CLTA. My client is purchasing the property with cash. My client is concerned if he goes to sell years down the line he will face an issue where the new buyer would not be able to obtain a loan on a property with a CLTA policy and his buyer pool will shrink to cash buyers only which could delay the sale.

Can lenders lend on properties with CLTA policies?

Any additional thoughts are greatly appreciated.

Guy Gimenez · Answer

If you get a survey completed, title company should remove the exception at your request. Of course they won't do it on their own...you have to object to it if objections are allowed by your contract.

John Giggy · Answer

Thank you :)

John Clark · Answer

Is there an existing lot and block description plat recorded with the recorder of deeds and accepted by the county? If there is, then an ALTA survey is imperative, and you need to know why the lot and block description is not being used. Is someone sell only a portion of a lot and not trying to get a new property index number? That has property tax consequences.

The more improvements on the land (which includes fences) the more important a survey is. At this point, I would demand a recent ALTA survey.

John Giggy · Answer

John Clark thank you. More great tips. A staked survey even if the property is fenced? There is a duplex. Can you convert a metes and bounds to a lot and block? See pic. Thank you kindly for your support.

John Giggy · Answer

Hi Ty. Thank you so much for the info. I greatly appreciate it. I just heard from the title company that they can issue an ALTA policy. Yay. My question now is would a lender lend with this exception. See Pic.

Ty Coutts · Answer

Hello, John Giggy. Here's some clarification and advice regarding your client's concerns about purchasing a property with a CLTA (California Land Title Association) policy:

Understanding CLTA PolicyCLTA Policy: A CLTA policy is a type of title insurance policy commonly used in California. It insures against defects in title up to the date the policy is issued. It generally covers issues like forgery, undisclosed heirs, and errors in public records.Lender Acceptance: Many lenders typically accept CLTA policies because they provide coverage for common title issues. However, lender policies can vary, and some may prefer an ALTA (American Land Title Association) policy, which offers broader coverage.Impact on Future Sale:Cash Buyer vs. Mortgage Buyer: It's true that some buyers who need mortgage financing may prefer properties with ALTA policies, which provide more comprehensive coverage.Potential Buyer Pool: While a CLTA policy might not deter all mortgage lenders, it could potentially limit the pool of buyers who are eligible for certain types of loans or who may prefer the broader protection of an ALTA policy.

Recommendations:Discuss with Title Company: Engage further with Chicago Title or another title company to understand the specific reasons why they are offering a CLTA policy instead of an ALTA policy. They can clarify any concerns about lender acceptance and provide insights into local market practices.Consult with Lenders: If your client anticipates selling the property in the future and is concerned about buyer financing, consider reaching out to local lenders. They can provide guidance on their policies regarding title insurance and preferences for ALTA vs. CLTA policies.Negotiate Terms: If feasible, negotiate with the seller or title company to potentially upgrade to an ALTA policy if it provides greater peace of mind for your client and enhances future marketability.Educate Buyer: Ensure your client fully understands the implications of the CLTA policy versus an ALTA policy, including potential impacts on resale and buyer financing preferences.

While lenders can generally lend on properties with CLTA policies, buyer preferences and market dynamics may vary. It's crucial to gather specific information from local title companies and lenders to address your client's concerns effectively. I am here to answer your questions, so don't hesitate and set up a time to chat with the link below if you're interested in more insights as I am a loan officer. https://calendly.com/tycoutts