Quiet Title Action found at escrow

[Ian Wagner]

Looking for some insight on a Quiet Title Action. I'm in escrow as a buyer on a pre-foreclosure SFR and title has stated that there is a pending Quiet Title Action claim on the property. I'm waiting to hear back from them, but it sounds like the deal is dead until this is resolved. Does anyone have any experience encountering a situation like this? Also, do you know if this would prevent the upcoming trustees sale from happening?

Thanks!

Ian

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Originally posted by @Ian Wagner:

Looking for some insight on a Quiet Title Action. I'm in escrow as a buyer on a pre-foreclosure SFR and title has stated that there is a pending Quiet Title Action claim on the property. I'm waiting to hear back from them, but it sounds like the deal is dead until this is resolved. Does anyone have any experience encountering a situation like this? Also, do you know if this would prevent the upcoming trustees sale from happening?

Thanks! Ian

It depends. Your seller may not even have the right to sell if someone else is determined to have ownership of the property. As you probably know by now, a Quiet Title Action is to remove known or unknown claims of ownership. It could be a probate, an ex spouse, a friend or relative that has an inheritance right or a contract to buy that never completed. If someone pops up and contests the Quiet Title, it's a long battle.

That is actually an interesting question. For a trustee's sale to proceed, all parties on title and all parties on the mortgage have to be "properly" notified. A Quiet Title action indicates that someone thinks that may not have happened.

However, depending on a lot of factors, (which lender, how much is owed, how far along in the foreclosure process, the attorney doing the foreclosure) It probably won't affect the trustee's sale. The trustee's sale is about not getting paid. Quit Title is about proper ownership. Two very different issues. A successful foreclosure removes ownership from the property and transfers ownership to the winning bidder at auction. (The lender bids the amount they are owed, so if no one else bids, the lender's bid wins and the property becomes REO - real estate owned - by the bank - That is NOT what the bank wants.) So, if no one responds to the Quiet Title before the auction, the auction will probably proceed and the Quiet Title will be dropped or proceed, again determined by the attorney's and plaintiffs involved. It is a Grand Dance. Each play and counter play.

However, if the attorney files a Lis Pendens, that will "probably" stop the sale. (at least briefly.)

Or, the lender can see that their path to foreclosure may become a lawsuit and they will simply postpone the foreclosure sale until the Quiet Title is dropped or resolved then they will file foreclosure proceedings again. They will still want to get paid regardless of who actually owns the property.

All the while the unpaid mortgage payments, late fees, legal fees, property taxes accumulate and become part of the arrears which has to be paid at escrow if you still want to buy and if you can actually buy the property when the dust settles.

And to make things more exciting, the borrower can file bankruptcy 10 minute before the sale and then watch heads explode. That stops everything, at least for a few months.

Meanwhile, normally if there wasn't a Quiet Title nor a Lis Pendens you can negotiate with the seller to bring the loan current, so that you have time to close. It's a risky approach and you have to trust the seller since you have no way to collect if they take the money to get out of foreclosure and then refuse to sell to you. It would take a lawsuit to force them to comply.

Are you ready for the drama? 

Is this the best way to spend your time and money?

Could be, if there is a ton of money to be made,

But normally it's best to "pass " and move onto a better deal.