Star, Home Buyer in 19114

Why is a title search required for 203K rehab loan after 50% of draw requests payments have been issued? how long does this take?

Asked by Star, 19114 Tue Nov 22, 2011

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Rob Weber’s answer
Is this a full 203k or a streamline 203k? If this is a streamline 203k, it sounds like you're at the every end and your contractor is waiting for his final payment. If it's a full 203k, I can't comment about another lender's process but yes, they're ensuring their interests are not second to anyone else's at the moment (a mechanic's lien will supercede a first mortgage as referenced below which a lender wouldn't be happy about).
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2 votes Thank Flag Link Tue Jan 10, 2012
Lenders need to make certain that there are no liens on the property from the contractor.
This typically takes only a few days, if done properly.
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2 votes Thank Flag Link Sun Jan 8, 2012
Star, there are those that have secured a 203k and then received a line of credit unbeknownced to the bank. This is problematic since you were lent money based on a certain future value of your home. The bank is protecting their investment by doing the title search.
2 votes Thank Flag Link Wed Nov 23, 2011
Hi Star,

Jim's answer below is probably correct. I can't imagine why they would want a title search 1/2 way into rehab. It makes sense that the lender wants to be certain to assure all work completed has been paid for. They want to see that the construction money is being managed properly.

It makes no sense that they want to re-run title because any mechanics liens and claims from recent contractors wouldn't show up until it was litigated. I don't think any claims would show up that quickly. However, a Lis Pendis can be filed to stop any transfer of title while the litigation is pending. Maybe they want to see there are no Lis Pendis filed? I would ask the lender the reasoning behind this before agreeing to pay for another title search. Basically, if your deal is a good deal, the extra $100-200 for an additional title search shouldn't be a deal breaker.

Hope that helps. Good luck with your renovations.

All the best,
Larry Lichtman
REALTOR, Property Manager
Your Real Estate Resource For Life
Cell/Text: (267) 254-7994
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2 votes Thank Flag Link Tue Nov 22, 2011
It has been years since I closed one of these, I do not remember requiring a full title search, maybe they are just requiring an update. The reason would be to make sure there are no mechanic liens against the property for the work completed to that point. Hope this helps, good luck,
1 vote Thank Flag Link Tue Nov 22, 2011
Star, You have received some great (and accurate) answers. I was "struck" by your comment that you did not want to contact your mortgage professional because you were concerned you would annoy them and delay the process even further. First, it's incredibly sad to hear you are intimidated (were intimidated, by the date of your comment) and I hope no client of mine ever felt the same way!!! Second, contrary to popular speculation no mortgage consultant has the ultimate POWER over a loan transaction. A lender's process is THEIR process, not the mortgage consultant's. We (consultant's) cannot hold up a transaction for want of inflicting pain on unsuspecting clients.

Further, if a transaction is particularly "painful"; I promise ANY mortgage consultant would be trying every step possible to close it ASAP....both because we are paid upon completion of the transaction and because human nature ensures we all want headaches to go away, not stick and stay!!! Best to you, hope it all came together!
0 votes Thank Flag Link Thu Jan 12, 2012
Thank you for all the responses. My contractor is not happy about this as it already takes almost a week to get the draw check now the title search will add additional time until he gets his check and I didn't want to ask the lender so I dont annoy her and delay the draw check even more.
0 votes Thank Flag Link Tue Nov 22, 2011
It's to make sure the subs are being paid with the draw money and that there are no liens. The search only takes an hour or so at the courthouse once the person gets there to do it.
0 votes Thank Flag Link Tue Nov 22, 2011
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