San Diego

[DrBob601]

We're currently in the process of purchasing a short-sale property in So Cal (with an all-cash transaction). We've reached an agreement on purchase price with Bank of America and an "investor," but when I asked our RE agent to recommend a good RE attorney (to generally review final contracts...and to discuss legal title specifically), we were told that "We actually do not use attorneys in CA unless there is a legal action on a real estate transaction. The escrow officer will handle title and there is a title officer who will be your advocate."

Now, I've been reading quite a bit lately about the problems arising from the MERS system with respect to chain of title and the widespread selling of mortgage-backed securities. My understanding is that in some cases, at least, it's not entirely clear who has legal ownership of some properties as a result of the electronic transfers of mortgage ownership among bank and investors all-too-common transfers of to banks, trusts, and investment vehicles via the MERS system.

So my question is: would it be advisable to consult an attorney anyways...simply to ensure that once we hand over this considerable amount of cash, that we'll actually have legal ownership of the property?

We only moved to Calif a few years ago, and frankly, the idea that purchases of RE in Calif generally don't involve an attorney surprises me...especially considering that (at least on our case) it's such a major purchase for most folks. In our case, we're putting a very significant percentage of our life savings into this purchase...so I obviously want to be sure that we'll actually own the property when the transaction is complete. Or agent seems to claiming that an "escrow officer" and "title officer" will be involved , but it's not clear to me whether they're employees of Bank of America or independent operators...and frankly, if the "title officer" IS an employee of BofA, I'd be skeptical that he or she is truly an "advocate" for us.

Any advice from those who are knowledgable in regards to title search and RE transactions (particularly in Calif) would be greatly appreciated.

[Fiddler]

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DrBob601 wrote:

We're currently in the process of purchasing a short-sale property in So Cal (with an all-cash transaction). We've reached an agreement on purchase price with Bank of America and an "investor," but when I asked our RE agent to recommend a good RE attorney (to generally review final contracts...and to discuss legal title specifically), we were told that "We actually do not use attorneys in CA unless there is a legal action on a real estate transaction. The escrow officer will handle title and there is a title officer who will be your advocate."

Now, I've been reading quite a bit lately about the problems arising from the MERS system with respect to chain of title and the widespread selling of mortgage-backed securities. My understanding is that in some cases, at least, it's not entirely clear who has legal ownership of some properties as a result of the electronic transfers of mortgage ownership among bank and investors all-too-common transfers of to banks, trusts, and investment vehicles via the MERS system.

So my question is: would it be advisable to consult an attorney anyways...simply to ensure that once we hand over this considerable amount of cash, that we'll actually have legal ownership of the property?

We only moved to Calif a few years ago, and frankly, the idea that purchases of RE in Calif generally don't involve an attorney surprises me...especially considering that (at least on our case) it's such a major purchase for most folks. In our case, we're putting a very significant percentage of our life savings into this purchase...so I obviously want to be sure that we'll actually own the property when the transaction is complete. Or agent seems to claiming that an "escrow officer" and "title officer" will be involved , but it's not clear to me whether they're employees of Bank of America or independent operators...and frankly, if the "title officer" IS an employee of BofA, I'd be skeptical that he or she is truly an "advocate" for us.

Any advice from those who are knowledgable in regards to title search and RE transactions (particularly in Calif) would be greatly appreciated.

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 If you are interested please email me at karlene@pacbell.net.

[Nanomug]

@Fiddler has your attorney researched title issues?

In many states attornies do title research.  In California title companies do that job. 

@DrBob601 - what exactly do you want to find out?  REOs tend to be more of a problems title wise. Shorts are relatively safe.  With shorts if the property is in foreclosure there can be some bumps.  About two people a year post on Redfin about the sellers lender continuing to foreclose after closing.

My advice is to pick your title company and verify that the title insurance covers this issue.  Know what they will do or not do will be critical int he event a problem comes up after purchase.

[PaulReid]

Hi DrBob601,

Nanomug is right, in California it isn't common for an attorney to research title history on a home like it is in states where an attorney is used instead of a title company.

A title officer should be from a third party title company and you should discuss a buyer's title insurance policy with them. Early on in the escrow process you should also receive a preliminary title report. If you're not comfortable reading that preliminary report I would suggest asking a real estate attorney to review it for you to see if there are any red flags regarding liens, back taxes, HOA dues, judgements, etc.

Nanomug mentioned that MERS concerns are present in bank owned homes, but aren't as much of a concern with short sales. With short sales your main concerns are that you've received written short sale approval from the lender and any secondary lenders and you do your homework in regards to title. With a bank owned property title is cleared by the foreclosing bank in most cases, but in a short sale any lingering issues like the ones I referenced above need to be properly satisfied prior to your closing so that you can be sure you hold a clear title on the property.

It certainly is different using a title company compared to an attorney, but they are similar in many ways, the roles are just a bit different.

I hope that helps and best of luck,

[Nanomug]

If you are getting a mortgage your lender will require that a clear title be delivered to you.  That doesn't help when something shows up after closing.  Title insurance should take care of things after closing.

[DrBob601]

Paul,

Many thanks to you (and others!) for your response. Currently we're waiting for the results of a title search (our agent recently informed us that "The listing agent has an open title order and will forward me the information today.  Once they open escrow, we will have a copy of the title report."). Once we get the preliminary title report, I will certainly heed your advice and at least discuss with the title company both the results of their search and the necessity of purchasing an owner's title insurance policy. Obviously, we'd like to avoid the additional cost of a title insurance policy if it's not needed...and we should have the results of the title search within a few days. The sellers requested a closing date of Nov. 30, which doesn't leave much time to investigate legalities on our own. Besides, neither of us are very good at understanding legalese or interpreting documents like title searches...I guess I was counting on having a real-estate attorney involved in the process (as we've both done in other states) to catch any inconsistencies. We'll just have to wait and see what we get and go from there. It's certainly reassurng to hear that MERS issues won't likely be a problem with a short-sale.

Thanks again for your insights.

[PaulReid]

Hi DrBob601,

Happy to help.

I might reconsider the expense of a buyer's title insurance policy. Judgements, liens, etc. could come out of some weird places and since the sellers are selling short there may be other bills they aren't paying. Ideally these will all show up in a title report, but if you have a title insurance policy there is a company insuring the title report they've done and recourse should any issues pop up down the road.

If you want an attorney to review the title report it should be relatively quick, but it might be pretty expensive. If you're not comfortable with the conversation you have with the title officers it may be something to consider.

Best of luck!

[Nanomug]

Liens can be placed on the property after the last title report.  While it does cost to get owner title insurance it is still less expensive than dealing with title issues down the road.

[elbarco]

Read the exclusions/exceptions in the prelim carefully.  Get copies of any documents that support any of them.  If you don't know what they are or mean, then talk to to the title company and your agent and if you are not satisfied, then take that lone issue(s) to an attorney to gain an understanding of the risk, if any..  In all cases, even if the prelim is clean, buy the title insurance.  Otherwsie, if the title search was wrong and there was something on title, you would eat the cost of their oversight.  They have no liability on the prelim; only once they actually issue the policy.

[594guy]

About a year ago, we paid off ( early ) the mortgage on our condo which we have owned for 21 years.  It took a few MONTHS before we received the deed with releases by the investor party who was actuall holding it.   It had to clear through about 3 different banks who had been the loan servicers.