Foreclosure in Memphis>Question Details

Jdpenn, Other/Just Looking in Memphis, TN

I sold a house; title was not clear,b/c my line of credit. I defalted.Bank is foreclosing on new owners.

Asked by Jdpenn, Memphis, TN Wed Oct 22, 2008

When selling a house 2 years ago, the buyers title company called me and said there were 2 loans on the house. One was the mortgage(full purchase price of the house) and the other was my line of credit(also the full purchase price of the house), meaning the amount owed on the house was twice the value of the house. A week later, the title company called me to say my bank(with the line of credit)had released the lean, turning my line of credit from a secured loan to an unsecured loan. I have made payments on the line of credit for 2 years now, until recently I encountered a financial crisis and stopped paying. The bank sent me a letter of foreclosure on the property I no longer own. I called them, and they said there was never a release of the lein, and county records show no lein release. The say the new owners will get a letter of foreclosure soon. Will the new owner lose his house if he has title insurance? If the title company pays it off, can they come after me? Am I responsible?

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First let me say that this is a legal question. As required by law and being a real estate agent, I definitely recommend consulting a real estate attorney. The title insurance company does have the right to go after the original lien holder as a remedy. You mentioned several things that limit the ability to answer the question; secured loan, unsecured loan, release of loan, etc... I would check to see if the release was ever recorded. I would also review my closing documents to see if the buyer's closing attorney actually issued title insurance. Or, did the buyer's purchase the home for cash?

I also raise the questions on how or why the bank allowed you to continue making payments and under what terms? There are many things that need to be answerred and unfortunately can not be resolved on a blog. Again, I am a licensed REALTOR and the answer you seek goes beyond my legal parameters. Please contact an attorney that specializes in real estate law to resolve the issue.

Good Luck!
Jason Gaia
1 vote Thank Flag Link Wed Oct 22, 2008
In florida: seller usually pays this part, but is it OK if a buyer agrees to pay taxes and surtaxes on the deed and recording fees for the documents needed to cure title? ..Big mistake? Or common when negotiating a deal ... Any information much appreciated!
Flag Fri Feb 22, 2013
First, pull all your closing documents and your executed contract (final contract) so that when you contact the closing agent (the company/attorney) that closed the sell of your home, you will have the needed info at hand.
Most contracts (especially TAR - Tennessee Association of Realtor's standard contract) state that seller must furnish clear title to convey the property. The evidence of a lien is found when your closing agent performs an abstract title search - which they did and supposedly remedied the situation. Then the buyer's closing agent issued title insurance (or did they?). Did the buyer's title company issue a policy for the lender & the buyer's (called an owner's policy)? Every title policy is suppose to go through a review (called an opinion), but in the hayday of the real estate boom - many closing companies hired bodies to perform their closings, while the attorneys were enjoying great leverage. Some horrible mistakes were made!

The fact that the bank allowed you to continue making payments on an instrument secured by your primary residence after that property changed ownership shows that someone came up with the "executive decision". Now the bank is saying that this is just not so and they want their money. If the title company pays if off, then it was their fault - that's why it's called insurance.

This is a legal matter and since I do not have a license to practice need to consult the attorney that closed you. If you went the conservative path and there is no attorney on the closing companies staff, then get a consultation with an attorney that handles real estate matters to find out first hand what is the liability here.

Don't delay and best of luck to you.

Jo Shaner
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1 vote Thank Flag Link Wed Oct 22, 2008
You should contact the title company to see if they received a release of teh lien, they should have never closed wioth the buyer without clear title. if teh new owner purchased title insurance they will fight for their behalf, if they did not buy title insurance they may be in some trouble. as far as teh amount owed you will either still owe it to your creditor or of the title company has to pay they will come to you to seek payment from you. you need to see an attormey for your rights/responsibilities. but first check with the title co to see if there is a release in writing. good luck
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1 vote Thank Flag Link Wed Oct 22, 2008
The closing attorney/closing agency for this transaction will have proof of a clear title for this property. Contact them; they will be able to help you regarding records recorded or not recorded.
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1 vote Thank Flag Link Wed Oct 22, 2008

In Arizona we use title companies as part of the real estate transaction and transfer of equitable title process to clear any existing liens or encumbrances, I'm not familiar with your stale laws and practices of course, but if you used a title company to do the "Step Down" title search then your title was insured against this type of problem. In this case, I would contact the title company.

If you used an attorney to close and handle the paperwork, call the attorney immediately.

Best of Luck,

1 vote Thank Flag Link Wed Oct 22, 2008
Consult an attorney of choice asap
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0 votes Thank Flag Link Wed Oct 22, 2008
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