So here’s the situation. You’ve successfully negotiated the short sale on the first mortgage. The homeowner told you when you first met that she only had one mortgage and no additionaly liens. Based on that information, you started cleaning up the property and putting a few hundred dollars into it to increase your paycheck when you get it sold. The title company is used to you knowing what liens are on the property, so they do the title search and don’t say anything. So you’re one week from closing and you call the homeowner to schedule a time for her to come to closing. She’s very excited about getting the deal done, and says to you, “Thank Goodness Marty, because this second mortgage keeps calling and is driving me crazy!!!” Now what do you do. Of course you ask a few questions and realize that yes, there is a 2nd mortgage. So you call the title company and verify the title work. They tell you that they thought you KNEW there were 2 mortgages. In addition to that, they say… “so you didn’t know about the 3 mechanics liens, the judgement, and the two tax liens on the property either?”
This is a true story. In fact, as I type this blog entry, the attorney is putting together the final paperwork so we can close this deal today. My paycheck? right around $10,000. So what happened?
1. I did not have a good enough up front meeting with the homeowner. I breezed over the liens and mortgages. I should have been a little more firm with those questions to her.
2. I did not go over the title search closely enough with the title company. We have gotten into a groove and things are going well… we both assumed the other knew something. From now forward, we will be checking title work more closely.
3. I simply got lazy.
Ok, all that being said, we still got the deal done. How did it work? Here’s how I got it all cleaned up.
first off we had 3 more weeks on our approal letter from the 1st and the sale was 5 weeks away. I made the 1st aware of what was happening and told them my plan was still to close on time. The loss mitigator told me to contact her if I needed any help.
First let’s talk about the 2nd mortgage. It was or $18,000 with HSBC. So we ordered a payoff from the foreclosing atorney for the 1st mortgage, got updated financial information from the homeowner, and put together a complete short sale package with two additional items… the approval letter from the 1st and the payoff letter from the attorney. It was all submitted to HSBC. They ended up taking $1000 and it took about 2 weeks to get the aproval letter.
The tax liens. Luckily, both of these were already paid off. We just needed proof from the IRS. I put this on the back of the homeowner, who cooperated and had the payoffs/release in our office within a week.
Now for the mecanics liens. As it turns out, the mechanics liens were in front of the 1st and 2nd mortgages. This told us that maybe they were not paid off when the property was refinanced back in 2000. Sure enough, this was the case. So we called Litton (the 1st mortgage) and asked them to send us a copy of the title policy and the final HUD settlement statement from when the property was refinanced back in 2000. It took about a week for us to receive that. So with the title policy and the HUD, the title company was able to go back to the previous title company and tack on to the previous title policy (basically file a title claim). So that cleared up the 3 mechanics liens.
Lastly, the judgement. The judgement was for the homeowner to receive $9,000 from the sale of the property. Since the property was being sold via short sale, there were no proceeds, and the judgement did not apply.
So just like that! Now we have a “clean” title… or at least one we can close on. 
So what’s your point Marty. Well my point is this. Don’t give up on a messy title. Take it as a challenge and learn from it. Get it cleaned up and get the deal closed and make yourself a paycheck.
