So, my friend bought a house this year (yes, it’s really a friend, not me).
The guy who owned the house was sick in a hospital in Florida. His estranged wife has power of attorney. The guy dies like 2 weeks after my friend moved in.
Yesterday, someone with the original lender (to the dying guy) shows up talking about foreclosing on the house.
Who’s at blame here? What’s my friend’s liabilities?
In general, isn’t paying off the existing mortgage part of the deal? Don’t you actually get the deed with THEIR name on it transferred to YOUR name?
I don’t know what else to tell you. He said the title company did a title search but didn’t turn anything up. But I’m thinking, “what the hell do you mean?” What did you purchase from the person if not the deed?
If I sold my house, can I just pocket the money, and let my mortgage company collect my debt by going after the house? That’s crazy world.
Basically, I’m asking, “what’s the deal with transferring a house?” Isn’t the seller obligated to pay off their mortgage and if not, can they dun me for it?
Does your friend have a mortgage? If so, he’s probably OK. Your friend might not know all the ins and outs about title transfer, but you bet your booty that the bank who gave you the mortgage does. Also, 'round here, we have title insurance that I’m pretty sure takes care of the situation you describe.
My understanding was that title insurance (which is usually purchased by the seller IIRC) covers if the title company didn’t find a lien on the house, which there would be if the mortgage wasn’t paid. Hopefully, your friend used a title company and a realtor and a mortgage officer to cover all the things that the avergae person doesn’t know about buying a house.
So pretty much, I second Athena. There was probably confusion at the bank if someone other than the original mortgagee transferred the property.
Assuming your friend bought the place using a mortgage, I imagine the mortgage company saw that the appropriate lien releases were handled. Usually, when you sell a house with a mortgage, you never get your hands on the proceeds, the settlement company takes care of paying off the existing mortgage.
If he took a mortgage, the mortgage company certainly insisted on a title insurance policy, so they’re covered whatever happens. Did your friend purchase an owner’s title insurance policy? That would compensate him for any loss of his portion of the property (e.g., the down payment) if there is indeed a loss.
Your friend needs to see a real estate lawyer immediately - as in, yesterday, if possible.
I don’t think my buddy, who isn’t always too bright understands much about what’s going on.
He did tell me this though, “We’ve got title insurance so we should be OK, but f***. I think I want to get a lawyer. The title company’s attorney is working on it, but he’s not going to keep me informed.”
So, for some reason, he wants to get himself a lawyer even though he’s insured. He’s a guy who likes to waste his time and his money when he doesn’t have to.
If crap like this would happen to anyone, it’s him.
He also said this, “[The previous owner’s] f***ing estranged wife didn’t pay off the mortgage. She lives in FL so she was just cut a check. It’s not like she got another mortgage and that new company paid off the old mortgage.”
I’m not sure what he means by this, but it might be possible that she sold a title she didn’t have? I don’t know. Sorry for not being able to follow up well.
See, I agree with xbuckeye. He should be taken care of and shouldn’t have to worry about getting a lawyer. Why should he have to jump through hoops because someone else messed up.
While I can’t speak to your friend’s behaviour in other situations, in this instance he’s spot-on. The title company’s attorney works for the title company and is the caretaker of that company’s interests, not your friend’s. If something goes down and the title company attorney has the choice between laying liability or repercussions at the feet of your friend or the title company, where do you think it’s going to land? Your friend is absolutely correct to consult his own attorney to protect his own interests.
Let’s start with your premise. Is it possible to sell a house without paying off the mortgage. Absolutely. If seller lied to you about encumbrances, you might have a fraud and/or contract claim, but sales subject to mortgages used to be fairly common. Nowadays, most mortgages are due-on-sale, for several reasons including that many lenders like their borrowers to be in possession (figuring they’ll have more incentive to make payments on time). But there is nothing in property law which prohibits, or even frowns upon, the practice.
As for the situation at hand, no one here can give your friend legal advice. IMU, not what this board is for; besides, not enough information presented. The immediate question is whether he should retain counsel. Otto has made the best case for why he should. On the other hand, if nothing is happening right now - especially, no foreclosure has been commenced - I would say your friend can wait a little bit to see whether either (a) seller’s lender goes away or (b) the title insurance company discovers it made an error and pays the claim (it happens). In other words, it would not be reckless to wait to see whether the problem resolves itself before investing in legal counsel. So long as friend remembers what Otto said. The title insurance company’s lawyer works for them, not him. If their and his interests diverge, the lawyer is not protecting your friend.
I probably live in happy happy la la land where if the title company screwed up in the first place, they they should say, “sorry, we’ll take care of everything” and leave it at that.
It sounds like they didn’t do the job that he hired them to do (the research on titles) and now he’s got to get a lawyer to avoid being screwed by them?
It just doesn’t make sense to me.
Anyway, not really looking for solid legal advice. He’s doing his own thing. I was just curious about some of this crap myself.
In that case, your friend may have a claim against the title company, which would also necessitate hiring a lawyer. In which case he may be able to recoup legal fees.
In the meantime, here’s a couple of things he might do to become better informed about the situation. First, go through the closing documents and find the “HUD-1,” maybe also called a “settlement statement.” This document itemizes the money flows: where all the money is coming from, and where it’s going. Look for a line item for the payoff of the existing mortgage on the property; normally there should be one, if the house was mortgaged. If there is such a line item, ask the title company to confirm whether the payment was actually made.
Another document to look at is your title insurance policy. This will normally list all the “exceptions” to the policy. These are the encumbrances on your title; the title company is essentially saying, “you have clear title, subject to these things that we’re listing.” See if the title policy lists a lien/mortgage held by the company that’s now threatening foreclosure.
None of this, of course, is a substitute for consulting an attorney, which your friend should do ASAP. (As always, this post is not legal advice, and I’m not your lawyer.)
Make sure that your friend gets a name and phone number, and then independently checks that the person that contacted him works for the mortgage lender. I would also suggest being very careful about giving out any information before this is done.
There have been a series of identity fraud cases recently in Minnesota. Someone calles up, claims there is now a warrent out for your arrest, because of a missed court date. When you deny getting a summons, they ask for name, address, birth date and social security number, in order to verify. Guess who they DON’T work for.
This almost sounds like it could be a variant on the same thing.