Short sale title company is not shwoing buyr or buyers agent the approval letter from the lien ? Is this safe to close?

Asked by Noni, 85535 Thu Dec 16, 2010

The title company is also part of the law firm representing the seller in the short sale. They will not show the realtor or buyer the 1st lien approval . Not sure if this is safe to do .

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Justin Ruzicka’s answer
Justin Ruzic…, Agent, Greenville, SC
Mon Jan 31, 2011
most approvals for short sales are requiring signature of buyers and sellers. Often we are seeing Arms Length Transaction Addednum's that need to be signed by all parties as well, so it would seem odd that you don't get to see some paperwork at some point. A little word of caution, since the attorney and title company are same company i would read through your title insurance with a microscope, even hiring an attorney to read it might be money well spent.
1 vote
T.E. & Naima…, Agent, Dallas, TX
Mon Dec 20, 2010
Normally, you get clear title to a property. This means no unpaid liens except those listed in the title commitment remain when you close. If the title company is telling you they will issue title insurance, then all the liens must have been addressed, not just the 1st lien. This would include any 2nd lien, any HOA liens, any mechanics liens, any personal liens on the seller that might cloud the property, etc.

If the escrow officer is telling you that they cannot issue a title policy or that exceptions are out of the ordinary, you need outside counsel as to what to do, but at least ask the escrow officer what the title commitment says.

The title insurer will want to see an agreement from the bank(s) that all liens will be satisfied. Normally, the 1st mortgage gets the bulk of their lien paid off and the 2nd may get a nominal several thousand dollar payoff. In a non-short sale situation the payoff letter from the banks would dictate the amounts to be sent to each bank. In a short sale the banks agree to a lesser amount than the full payoff, but it is in writing.

Does the buyer have a "right" to see it? Good question. The escrow officer must see it in order to get the title insurance. As long as buyer gets a general warranty deed plus clear and insured title, I don't see why anybody else needs to see the letter.

The escrow officer has a fiduciary duty to buyer on the issue of title insurance. So, regardless of whose name is on the door of the title company, they can't deceive you into buying a property with liens in place. That would set them up for a major lawsuit and Texas DTPA would punish them and they'd probably lose their TDI license.
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Tracey Martin, , Salinas, CA
Fri Dec 17, 2010
This is a huge red flag. What are they trying to hide? If they are not willing to show the buyer or the buyer's agent the approval letter, obviously there is information in the letter they don't want to disclose. Attorneys are human, and as there are in any profession, there are those who are unethical and who are willing to break the law to make money. If the buyer's agent can't convince the title company that they need to share the letter, then the buyer and the buyer's agent should seek legal advise.
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Bruce Lynn, Agent, Coppell, TX
Thu Dec 16, 2010
I would imagine they will not close without it....they will not be able to issue the title insurance or get the lien release.
Sounds a little strange...but I would discuss it with your realtor and the title company at the same time in the same place.
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Barbara Capo…, Agent, Collins, MS
Thu Dec 16, 2010
Do they have it? A title company cannot close a property unless they have a letter from the lender, that they are accepting the Short Sale. The title company cannot satisfy the lender without knowing what is owed? He does not have to physically show you. But if the title company is said to go? Then they must have everything that they need.
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Dallas Texas, Agent, Dallas, TN
Thu Dec 16, 2010
Your buyers agent should be diffusing the drama with you. NO TITLE can be transferred to you till all liens are paid therefore you have clear title.

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
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Greg Fowler, Agent, Dallas, TX
Thu Dec 16, 2010
As others have recommended, it would be a great idea for you to obtain independent legal counsel on this matter. In comparison to the cost of the home, their fees will not be that onerous and you will get peace of mind that your deal is sound.

If you need a referral, I would be happy to point you in the right direction.

Greg Fowler
Keller Williams Dallas City Center
0 votes
Anna M Brocco, Agent, Williston Park, NY
Thu Dec 16, 2010
In order to best protect yourself, why not consider consulting with an attorney of your own who specializes in real estate, he/she can best advise.
0 votes
Brian Rayl, Agent, Dallas, TX
Thu Dec 16, 2010
While it is certainly suspicious, the title company provides title insurance stating that the title is free and clear as of the time of closing. If the Title company provides proof of a free and clear title, then I don't see a problem with closing, but it would be important to insure that the the title insurance policy is complete and clear. It might be a good idea to have the title insurance policy reviewed by a real estate lawyer.

I'm also curious if perhaps there is a second lien that they are having to contend with which is why they are not showing the letter from the first lien?

There are some red flags and definitely needs to be thou roughly researched by an impartial person prior to closing.

Brian Rayl, REALTOR®, e-PRO
Keller Williams Elite Dallas Park Cities
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