Title and lean liability to end buyer

[Mike Stahlman]

Hello,  We are purchasing a house through a Wholesaler for the first time. They are using a standard Missouri contract and are doing a double close.  They say the title company will not close if the house does not have a clear title.  Since they are doing a double close, if there is a lean or loan against the house or property, will they have to settle that with the first seller prior to them closing?  Could that pass to us as the end buyer?

Thanks for any information.  I wanted to add a contingency on clear title but they say it is built in to the contract.  Just being cautious.  

[Ed W.]

@Mike Stahlman

While you've received generally good advice above there are some - admittedly low probability - problems that could arise.  I'll point out a couple, there could be more.  I'm not an attorney but I'm a very experienced investor.  I may be dead wrong about the potential problems but my main point below is absolutely valid.

The fact that a title company will issue a policy does not mean the policy couldn't have exceptions that would give you less than complete coverage.  

I don't know Missouri law at all.  There is also a low possibility that when the deed TO the person you are buying from is recorded (it will be recorded prior in time to your deed) a problem could develop.  I'd want to know if Missouri law would allow an outstanding lien against the person you are buying from to be attached to the property prior to your deed being recorded.  I think most title companies know that and would check that but who knows.

You've demonstrated that you don't have the knowledge at this point in your career to deal with your contract or the title insurance.  I believe this situation screams for you to be represented by legal counsel knowledgeable with real estate contracts and law so you are sure of what your rights are and are not under the contract and sure that you will get good title or can walk.  The $300 or $400 (just a guesstimate) would be worth it to me. The possibility of an error that could cost tens of thousands is not worth gambling.  I know a young man who lost $50k on his first deal by trusting a seller and not using an attorney.