Flipper/Rehabber · Boston, MA · Member since 2016 · 6 posts · 3 votes
I am close to closing on my first flip. Closing has been held up for almost a month due to a title issue. A prior mortgage discharge was signed by a company acting under POA, but the POA was never recorded. The seller (a bank) has agreed to sign an indemnification stating that they will take responsibility for resolving the title issue. This will allow me to get title insurance and move forward with the closing.
However, my attorney has advised me that if I am going to resell within a couple months this title issue could still be pending resolution at the time of sale. The indemnification agreement will still be in place, so the buyer will still be able to get title insurance and move forward with the transaction and resolving the issue will remain the bank's responsibility.
Any thoughts on how I should proceed? Has anyone ever experienced this before?
If it were me, I would terminate this deal. Having run into title issues in the past that became show stoppers, I no longer deal with properties that aren't clear. Worst case scenario would be getting into this property and being unable to sell due to a pending lawsuit from someone claiming interest. You may win the lawsuit, or your title policy may pay them off, but these things take time and hassle that could make the difference between profitability and losing your backside. Unless this deal is a homerun, it may not be worth the risk.
Check to see what the indemnity agreement says. I have handled document execution with POAs before and often times we are able to use a POA recorded in a different county or state to satisfy the title company. We have also requested a new POA and record it in the needed county, this of course takes time, but if there is someone actively working on it should be done pretty fast.