I need some insight from the attorneys that meander through this forum.

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mods please remove this.

[justbroke]

This does not make any sense to me. If you passed title and paid for title insurance and had a title insurance policy issued, then the insurer, the Title Insurance Agency, is responsible for guaranteeing the Warranty Deed. If you are saying that you were told there was title insurance, actually paid title insurance at closing (on the HUD-1), and the title insurance was NEVER actually obtained and paid by your Escrow/Closing Attorney (or Title Company), then that is either an error, an omission, or fraud.

If the latter is the case, then you should go back to your closing attorney and inform him that you are going to file both a complaint to the State Bar and that you are going to seek damages from him for title fraud. He should have E&O insurance or other professional liability insurance.

What I don't understand, is how did you "close" the sale if a title issue came up? Did the title issue come up after the sale closed and the HUD-1 was issued? Why didn't the bank (your bank I'm assuming) not perform their own title search? It seems that there are errors all over the place.

Hopefully you have a bunch of this in writing.

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Doh, I decided to delete this based on new info but I'll try to explain.

It seems there was some lying going on by different parties. I saw the property in foreclosure. I approached the owner about doing a SS. He agreed and we submitted it to the bank through a realtor. They finally accepted our offer and gave us a closing date. I decided to use the realtors recommended attorney since he was local, reasonably priced, and the realtor had prior business dealings with him. The attorney, at closing stated that he used a professional service for title exams before the closing and that it came back clear. In reality, the attorney lied and did the title exam himself, as he admitted this today. When he went to the ROD's to record the Deed, he performed the second title search which is when the two liens were found. My understanding is that after the initial search is done, the title insurance company is called to get a price and info is given and then once the deed is recorded the policy goes into effect, hence, no title insurance yet. Had the attorney used a third party service for this like he said he did then it would have either been caught and re-negotiated by the bank OR missed and possibly been covered by THAT companies E&O insurance. The attorney refuses to pay for his mistake in missing the liens in the original search.

Now, this is where the new news comes in. I found out today that the seller did not make mention of these liens in his paperwork submission to the bank which holds him accountable to provide the property with clear title. Whether he knew, didn't know, simply forgot, or thought they had been taken care of apparently is of no consequence and leaves him in breach of contract.

Should the seller have listed the liens? Absolutely. Is HE responsible for settling them? I don't know, now. He was supposed to get $5000 out of the deal and I don't begrudge him for wanting every penny of it...been there, done that. But the property is offered "AS-IS". I just don't know if that implies the title and all which is what I've always understood title searched to be for... to uncover any liens, dues, taxes, judgements, etc...to the buyer. Apparently the attorney doesn't think so and is why he's refusing to pay it himself and wants the seller to take a haircut or let the bank eat it.

[justbroke]

Yes, certainly a bunch of people in the transaction haven't told the whole truth -- whether intentional or not. If you were in Florida, you would have a right of rescission, and you may still have some recourse under your State's laws. If it was "as-is" then your due diligence is there to make sure that clean title will pass. In some States, if you're issuing a Warranty Deed and are the seller, it is you, the seller, that is required to insure clean title. If they weren't granting you a Warranty Deed (WD), then it's probably is an "as-is" title and you are not guaranteed clean title. This is something you should have known and something your attorney (or closing agent) should have told you.

If you weren't being granted a WD (warranty deed) and were just getting a non-warranty deed, and it's your due diligence. if you wanted a WD that's what you would have asked of the seller (in the contract). Therefore, you end up with a non-warranty deed (or even a simple quit-claim (QC). Otherwise, you could be stuck with the encumbrances on the property (such as other liens).

I would say that your closing attorney, if he "warrantied" the deed by running a title search and telling you that there were no encumbrances as of a particular date, and you have that in writing, then your closing attorney made an "error". If you paid this attorney for a third party title search and they never sent it to a third party, then this is probably worse than a simple "error". You relied upon the information that he (the attorney) provided to you.

I think they are all going to play games until someone finally pays. It would be interesting if it's the bank's fault, since they can't guarantee the deed anyhow, since it actually could have other encumbrances that are not owned by the bank. The only thing that could have happened is that you either accepted it "as-is" with any defects in title (a non-warranty deed) or you were informed -- in writing -- that the bank would issue a "warranty deed" but did not.

Crazy situation, and probably a good example as to why you want a warranty-deed with title insurance paid for by the seller, and title searches performed by a third party.

The $5K carveout for the seller on a short sale is interesting as well. Was that from the Bank (a "cash for keys" deal) or did that come from you, the buyer?

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It IS a warranty deed which is why he cannot file it as such. All that I stressed to the realtor when we started this process was that the property have clean title (this is NC) and that the attorney make sure all ROW's and Easements transferred with the property and she basically stated, "of course". She informed me that a title search would be done before closing and before filing. Given that she told me she regularly used this attorney, I was confident that he would take necessary steps to insure a thorough search. I mean, companies that can't do proper title exams are not going to be in business long, right? In NC attorneys or licensed individuals or companies can perform title searches.

The $5000 is from the bank..."relocation assistance". Want to hear something even crazier? The seller hasn't lived in the property for at least 4 years.

The bank most likely wants the seller to take less which would require him resigning paperwork which at first glance I would say I'm sure he won't do. However, I've since talked to the realtor who is going to talk to the seller and try to explain that he is legally in breach of contract in hopes to get him to give up something if not enough to cover all of the liens. However, if he won't budge or cover the whole thing then the bank or the lawyer is going to have to come off the hip. The banks got the money but the attorney screwed up the title search. I don't know if you call it malpractice but it seems like negligence on his part to me.

[justbroke]

If it's a Warranty Deed (WD) and is indicates as such on the transfer of deed, then it must have clean title. You should be able to rescind the sale. I did purchase property in NC and I found it odd that NC real estate transactions are typically performed by attorneys and not title companies!

Relocation assistance... what a nice carveout for the seller when they don't even occupy the property.

Since this is a WD, then the seller must make sure the title is clear. The seller should have purchased the title insurance and/or you should have demanded that it be paid at closing by either the seller or the seller's bank (form the proceeds). Did you buy an owner's policy as well?

In any event... I don't know what recourse you have and your attorney seems to be worthless... unless and until s/he figures out who is going to warranty the deed.

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If this were any other property I would have flown the coup months ago. This is going on 6 months now to get to this point and has had several crazy turns before now. The story behind this is that my wife was "supposed" to have 7 acres given to her by her grandparents but due to gold diggin psycho relatives, what should have been hers became theirs after the grandfather passed away. Eventually 7 acres at the waaaaaay back part of the property was given to my wife's mother who in turn gave it to my wife. We had no plans for it. We WERE looking for foreclosed land however and by sheer luck I spotted the only old farmhouse adjacent to our property was in foreclosure. My brother-in-law owns land on the other side of the farmhouse and he had expressed interest in selling it before this. My BIL agreed to sell us his land and when we got approval for the SS we bought the BIL's land. The SS property is basically the "elbow" of three tracts forming an "L" so it is essential for our vision to make this a loving homesite/farm/non-HOA/homesteading/zombie bunker

On my HUD-1 statement their are charges coming from my funds for:

Title services and lender's title insurance

and

Owner's title insurance to Title Insurance Co.

and

Owner's title policy limit...........which is the amount of the accepted offer.