Traditional Lender Who Can Get Us Over a Hurdle (Quickly) in KY?

Question

We've been under contract for close to 75 days and still don't have a closing date. Ready to jump ship on our lender if there's someone else out there that can get us to close by March 16th.

Details:Powell County KY 35% down Excellent credit (although we've had two hard pulls recently - by the same lender)Property appraised for 3% over purchase priceAll paperwork (tax info, pay stubs, bank statements, etc.) in a folder on my computer and ready to submitHurdles we've been dealing with:- Unresolved mortgage on previous owner (we've been told it's been resolved)- Small judgement lien against previous owner (<$1000) can not be resolved. Entity declared bankruptcy and didn't list the lien in their filings. We had already requested owner's title insurance before this was even discovered.- Property is on a private road currently owned by an LLC/Landowner's association. This last one is really holding things up. We're the first build in the development and the builder is going to turn it over to an HOA when the development is finished.We know there's an easement but the lender wants reassurance that we have permanent and unrestricted access. I'm trying to get something from the developer but honestly don't know what I could give them at this point.I'm also okay with advice that we should walk away if in looking at this think it's too risky. We might be naive, but we don't see huge risks.  DM if you're a traditional lender who can make this happen (without outrageous fees of course!).

Patrick Roberts · Answer

These sound like issues that prevent the delivery of clear title. Changing lenders is unlikely to help. For the unrestricted access/road issue, this is usually spelled out in the easement that is attached to the deed and references the CCRs. If none of that and the HOA stuff is in place yet, very few lenders are going to touch this. It affects the marketability/value of the property.

Title issues are not my specialty, but these have been deal-killers for me in the past. I had a knock-down, drag-out fight with an HOA on a VA condo purchase loan late last year over an HOA bylaw issue. It was a very minor issue regarding the pre-sale process that had expired 20 years ago. Finally got a waiver from the VA, but it nearly killed the deal and took almost 7 weeks to close.

Maybe someone with title knowledge can provide better insight.

James Wilcox · Answer

@Dina Schmid I agree with what others have said. I wouldn’t put too much blame on the lender, as this is a seller issue related to the title. Unfortunately, this is common in the area because people often cut corners legally to save money, leading to more clouded titles than there should be. If you’re looking for more insight on RRG or your particular STR deal, I’d say most people on BP would agree that I’m the go-to person here for that. Happy to help and just a DM away.

Dina Schmid · Answer

@Patrick Roberts Really appreciate you taking the time to respond. It prompted me to do more digging including reaching out to the seller/developer directly. I asked for the paperwork regarding the road and easement and all I got was the plat - which I already had. He claims that state law guarantees us access, but neither I nor my AI assistants could find anything guaranteeing us access without a permanent easement. There was no paperwork of an easement provided.

Early on, seller had requested we use his title agency and is still pushing us to use his title agency, which raises even more questions. I guess if we want to close we go with his agency (which I'm guessing will look the other way) or we do this right.

Patrick Roberts · Answer

Lawyer time. Have an attorney who is knowledgeable in this stuff and who represents your interests look over the documents you have and the deed, supposed easement, and records. Im not an expert on title stuff, but I would not feel comfortable moving forward with the purchase if I was in your shoes based on what youve described. If the property becomes landlocked due to a lack of access, it's worth significantly less. A good attorney will be able to review this and advise you on whether it can be fixed or if you should walk away. This isnt a lender issue - without clear title (and all of the access stuff that goes with that), no lender (other than maybe a private lender) is going to close on this loan.

Chris Seveney · Answer

This seems more like a title issue than lender issue. You cannot get clear title and the bank will not give a loan on a property without clear title.

Did the subdivision rules and regulations and convenants that got approved by the planning board have this? There should be a document outlining this that was created by the developer.

Dina Schmid · Answer

Thanks @James Wilcox. Seller has indicated he'll sign something regarding the easement, but he's not willing to proactively do that himself. (He keeps indicating that he'd rather we just use his title agent.) I've got a call into the lender to see if their title agent can write it up. I really don't think we should have to pay to get an attorney involved in this.

Peter Walther · Answer

I suspect the lien of the judgment could be transfer to a bond posted with the clerk of the court.  If there is a recorded plat that creates a road or ROW I think that would be sufficient for the title insurer to issue a policy w/o exception for a lack of access.  If the insurer is saying they can't issue a policy insuring access, ask them what they require to do so and save the expense of asking an attorney.  The attorney isn't insuring your interest and will probably just call the insurer anyway.

Dina Schmid · Answer

Appreciate you both (@Patrick Roberts and @Chris Seveney ) chiming in. I went back through the development covenants that were written in Phase I of the development. That one does mention non-exclusive easement for access to homes. Unfortunately it calls out the street names specifically, so our street isn't mentioned. I forwarded those to the lender and asked if getting the developer to amend the covenants to include our street would suffice. Hopefully that will fix things. If not, then it looks like we'll have to make the decision of whether to get an attorney to write something up - or back out as the phrase "throwing good money after bad" keeps popping into my mind. (We already had to spend $$$ on a PE to get the builder to make a foundation fix.)

Traditional Lender Who Can Get Us Over a Hurdle (Quickly) in KY?

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