Issues with the Title

Issues with the Title

Real Estate Investor · Columbus, OH · Member since 2011 · 74 posts · 25 votes

So I am in need of some opinions. I had a wholesale deal I was working and I am at a dead end. I dont like to give up easy, I have been trying to think of some other creative strategies to make this deal work. I hate walking away.

So basically I had a house under contract for 8,000 dollars. I had a cash buyer lined up for 12, 000. Everything is great right! Except that once the title company starts doing research on the title, it appears that the last 3 people who owned the house have never used a title company, done a title search or gotten title insurance. Basically back in the 70's theres a hole in the title. So we dont know for a certain period of time who owned the house. If anyone had purchased title insurance, it would fix this, but since none of the previous owners did, the only thing the title company is saying to do is have a attorney file a Quiet Title Action to fix it. What an attorney basically would have to do is send certified mail to the 4 owners of the house and they have 30 days from when they were served to say if they have any legal interest in the house. After the 30 days, the attorney goes to court, files the title action and the title is good. The issue is because some of the owners are going to be hard to find because they owned it 30 years ago, 5 attorneys have quoted us a price of 4-6k to get this fixed. I checked to see if there is any way I can do this without a attorney, unfortunately you have to have a attorney file this in Ohio. The seller and my end buyer are aware of the situation. I asked my seller if they would cover 2k of it, and I was going to split rest of it with my end buyer. However my seller wont fork out any money to get this fixed. They live out of town and are telling me they will give me money to just rent it out for them, instead of selling it.

The only other thing I can think of is to do a quick claim deed and disclose to a seller that the title isnt clear. But I'm not sure anyone will even go for that...Any ideas or thoughts?

0Reply
17 views

Most Popular Reply

Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y

There is no such thing as a title hole. Someone always owns the property. Valid ownership goes back to when the title was perfect, even if it's now owned by a deceased person/people or their estates. Somebody died and/or improperly deeded it away and/or failed to reconvey a loan on it or executed some other DIY transfer. (I haven't seen it all, but I've seen a lot.) The sellers don't have marketable title and have something that is difficult or impossible to sell. My experience is that they often know something is wrong and have tried to sell before.

If you are sure that the title flaw can be fixed by a quiet title action, tell the seller you'll give them 1K for their faulty, imperfect, partial interest in the property. Don't do any of the transfers without the help of the attorney or title company who will be helping with the qta. NO DIY deeds!

And walk away if they won't play. Life is too short to work on low valued props with title flaws. Ask me how I know.

See this reply in the discussion

5 Replies

Jump to latestLatest
  • Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    13y

    Not buying title insurance creates a hole in the chain of title? That can't be true. Not recording deeds could create holes in the chain, but title insurance just give coverage to the new owner.

    The previous owners probably didn't buy title insurance for the same reason you're going to have to do this deal without it. That is that the title companies did the search and discovered this issue. Nobody was willing to pay to fix it, so the deal was done without insurance. Is your buyer willing to buy without insurance? Are you doing this with an assignment? I sure wouldn't want to give the buyer a warranty deed. A quit claim (not quick) would work, if those have any validity in your state and if they buyer will accept it.

  • Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    There is no such thing as a title hole. Someone always owns the property. Valid ownership goes back to when the title was perfect, even if it's now owned by a deceased person/people or their estates. Somebody died and/or improperly deeded it away and/or failed to reconvey a loan on it or executed some other DIY transfer. (I haven't seen it all, but I've seen a lot.) The sellers don't have marketable title and have something that is difficult or impossible to sell. My experience is that they often know something is wrong and have tried to sell before.

    If you are sure that the title flaw can be fixed by a quiet title action, tell the seller you'll give them 1K for their faulty, imperfect, partial interest in the property. Don't do any of the transfers without the help of the attorney or title company who will be helping with the qta. NO DIY deeds!

    And walk away if they won't play. Life is too short to work on low valued props with title flaws. Ask me how I know.

  • Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    13y

    By "holes" I meant situations where deeds weren't properly recorded. Or there was some situation, such as probate, where ownership was fuzzy. A proper chain of title would show all the transfers working back from the current owner. I'd guess there some point where a deed shows a grantor who's name doesn't appear as grantee on any previous deed. So, ownership after that point would be in question. Title insurance wouldn't have fixed it, but the search would have revealed the problem. The seller may in fact not actually own the property.

  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    13y

    Ember,

    Sometimes defective titles can lead to very good deals for the person willing to clean it up. Also what some title companies look at a routine work others consider a scrambled pain in the *** title.

    1) I would want to know exactly what is the title issue?
    2) Next I would want to know what are my options to clear it.
    a) Getting quit claim deeds from anyone who might have reason to challenge the title is an option in addition to a quiet title action.
    b) Tax or mortgage foreclosure may clear the title
    c) Negotiate a better price because of the defective title.
    d) You may be able to tie up the property if you have a contract promising you marketable title. If the seller is still stuck 6 months from now he might be much more flexible.
    d) Find a buyer who will accept the bad title. I wouldn't for a flip because I couldn't resell it. However I would for a rental if I felt the deal was good enough and the risk of the title issue coming up was very low.
    3) Evaluate whether its worth your time. Don't be afraid to walk. Sometimes the best deal is the one you don't do.

    Good luck - Ned

  • Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    Ember Dye The trouble with a QTA for a title flaw from 40 years ago is that it's possible/likely that one or more of the parties that needs to be served for the court case is deceased. You can't serve deceased persons. There's different ways that this can be dealt with, but it's all expensive at attorney hourly rates....for a $12K property. Make sure you and the attorney and title company are on the same page about what can be accomplished. Get info from the attoreny all the variables for how much it could cost and how long it will take.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.