My father left in his living trust a house and land on which he had a private land sale contract. However, recently we learned from a title company that the original transfer of the property from my parents to the trust was not done properly, even though the county government has never complained about it. I have consulted a lawyer in that jurisdiction, who says he has a plan that he believes the underwriter will sign off on, so that we will have a clean deed if the buyer refinances and wants to pay us off.
Things I don’t understand: who decides whether the deed is clean or not? If one underwriter is willing to sign off on the plan to do whatever to make a clean deed, will the result be accepted by everyone?
I understand that title insurance insures against defects in title to real property, but this takes me back to my first question, who decides whether the current title has defects or not? It seems like it would be a court, but no-one is talking about putting this in front of a judge. Instead, the underwriter seems to have say-so.
Any enlightenment greatly appreciated. My lawyer charges me every time he sends an email, so it helps me a lot if I don’t have to ask him to explain every detail.
Ever heard the expression “beauty is in the eye of the beholder”? That’s the way it is with underwriting.
Title Company A may be satisfied with a title search going back 30 years. All the i’s dotted and the t’s crossed? Good to go!!
Title Company B, having had to take it on the chin for a few losses in the past, goes back 50 years, looks at the i’s and the t’s and then looks again. And decides for whatever reason, they’re not comfortable with the risk!
The underwriter is the one is will be extending credit based on being able to insure the risk of a bad title. Is Company B more thorough or just more anal? Until the underwriter can insure the risk, they won’t approve a loan.
This seems to be the essence of your question. If title were ever actually disputed (someone else claimed ownership) then it probably would go to court. But the point is that the title insurance company is indemnifying the buyer against any risk of losing the property if such a hypothetical court judgment went against him. So for your sale, the objective is not to prove anything in court, it is to get an insurance company comfortable that any risk of some hypothetical adverse future court judgment is acceptable to them. That decision is down to the underwriter, and different underwriters may have different views on that risk.
I can’t follow your description completely so I have one caution that may not apply. The most common title insurance is lender title insurance connected with a mortgage. In the event that a fault is determined, the title insurance covers the mortgage only. It does not protect either the buyer or seller beyond that.
OK, I think I understand this, thank you. However, if my lawyer can get a particular underwriter to agree on a process to get a clean deed, what if that isn’t the underwriter that ends up being asked (by the lending bank, I presume) to underwrite the mortgage?
I don’t know if I should give any details about what the actual problem was with the deed transfer from my parents to the living trust. It seems a very technical point, and really obvious what the intent was, and the worst thing that would happen is that, instead of the trust, the property would now belong equally to me and my sister (under the terms of the will). That would introduce a lot of complications and delay, however, and so I want to avoid that.
If I 'm following you properly, I think your’re asking what if you take whatever steps your lawyer recommends and the bank’s title insurer isn’t satisfied. The first thing you should do is find out who chooses the title insurance company. When we bought our house, we of course paid for the policy that covered the bank, and also for the one that covered us - but I’m pretty sure our lawyer arranged the policy, not the bank.