The Importance of a Pre Title Exam in a Short Sale and Title Insurance Saves the Day:

(POSTED WITH PERMISSION FROM GRUGNALE LAW OFFICE, PC – NO PORTION OF THIS ARTICLE MAY BE REPRODUCED WITHOUT WRITTEN PERMISSION)

Most attorneys who have been practicing real estate law for any good stretch of time have their very own title insurance/title defect story to share. This little nugget of wisdom is usually what they use to explain why title insurance is worth every penny. The following is mine.

My first major experience with title insurance was in 2007 when I represented by first seller who was short selling her home after an amicable divorce. These were good people just trying to do the right thing, but they could not afford the home individually that they could afford together, and the market would not allow its sale. The first thing I did upon receiving the call to represent them, was a title search. The reason? Because right out of the gates I wanted to make sure I knew what I was dealing with, before we made any requests of the lender, so that I could advise them as to what I thought would make the most sense- bankruptcy, foreclosure, or short sale. If a title is laiden with liens that you know from day one will NOT be paid by the first lender on title, might as well direct them towards a foreclosure, or bankruptcy. Here, they only had one lien and title was clean, so I gave them the green light.

Months later, with short sale approval in hand, we were a week from the closing table. My client called me late one day in tears. She had received a call from Sovereign Bank who was threatening to foreclose their interest in a loan from the prior owner on title, my clients seller. I re ran my title and still found nothing outstanding. However, in the letter that Sovereign sent to me, there was a book and page! I looked it up and found out that low and behold this mortgage had been misindexed and that is why I didnt find it. Further, the attorney who handled the closing into my client, had CALLED FOR A PAYOFF!! SO they knew about this loan! A paralegal was actually named in the letter, but apparently, payoffs were never sent and the sellers, for some reason, had been paying this old mortgage on property they didnt own for 5 years!! I will probably NEVER run into this kind of mess again,and the fact that this was a pending short sale just added to the intensity of this new information.

Title insurance saved the day. My client had purchased an owners policy for 500 dollars and change when she purchased the home, and because this policy was after the mortgage on title, it became the underwriter’s problem to fix. We closed on time. And I now have an amazing story to tell my future clients who give me push back on that expensive title insurance charge on the HUD. Five hundred dollars saved my client’s credit, and whats more, saved her from losing her house in foreclosure by a lien holder that wasnt even in her name. As all of my current clients know, I started out in this business searching titles, and therefore happily pull title, same day, even for a quick run down, anytime I am asked. It means my closings will be cleaner with less surprises at the table.

Meghan Grugnale, Esq.
Grugnale Law Office, PC and Phenix Title Services, LLC
400 West Cummings Park 30 International Drive
Suite 6600 Portsmouth NH 03801
Woburn, MA 01801
P: 603-498-4601
F. 800-863-3488
http://www.phenixtitle.com/grugnale-law-office

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