Looking a gift house in the mouth

Discussion in 'Homesteading Questions' started by Jena, Mar 30, 2005.

  1. Jena

    Jena Well-Known Member

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    I getting a house, given to me by deed, free and clear. I have reasons to doubt that the current owner actually knows all the facts regarding the condition of title to this house. This is what I plan to do in order to cover my behind, but want to know if I've overlooked anything.

    I am getting a survey, an appraisal, and plan to get title insurance. The transfer deed will be prepared and filed by my attorney.

    Anything else that can help cover me? It's a free house, but I sure don't want to have a problem in 10 years when I've put a ton of money into it.

    I am also getting a termite inspection, septic inspection, HVAC inspection just so I know what I'm really getting. Those are the things I see as being potential problems so that's why I'm having them looked at. Roof is ok, electric needs work but I can do that, plumbing appears ok. The basement is poured concrete and dry.

    Thanks
    Jena
     
  2. OldYellersGhost

    OldYellersGhost Well-Known Member

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    Are you getting a free dog house to go with it?
     

  3. JackieA

    JackieA Well-Known Member

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    Is your attorney checking to see if there are any leins/judgements against the house?
    JackieA
     
  4. Jena

    Jena Well-Known Member

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    I thought that was what the title insurance was for?

    Jena
     
  5. angus_guy

    angus_guy Well-Known Member

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    Jena

    The attorney will give a title opinion

    Title insurance is kind of like insurance to cover you from any omissions (shoddy work) that the lawyer would have done

    Why would you want something with a cloud over the title "..........I have reasons to doubt that the current owner actually knows all the facts regarding the condition of title to this house. "
     
  6. JackieA

    JackieA Well-Known Member

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    I think there is another part to it - but ask your attorney or maybe someone on this forum is more familiar with it - just to be on the safe side!
    JackieA
     
  7. VALENT

    VALENT Well-Known Member

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    Actually, once they check the title and offer to sell you title insurance, without restrictions, that is a pretty good indicator that the title is clear. The problem is that the title insurance will only be for the amount of current value or purchase price (I think) and improvements must be dealt with additionally. The title company you deal with should be able to provide your specifics. I know in my past that errors in title were found by the title company before they offered insurance. Then they excluded all the problems they found in their title policy.
     
  8. jack_c-ville

    jack_c-ville Well-Known Member

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    Get a title search done as well. A good real estate attorney can refer
    you to a reputable company. A title search will let you know about any encumbrances.

    What are the potential encumbrances? Are we talking about leins or might someone else actually have ownership dating back to the settlement of an estate or something? The reason I ask is that if there is someone in specific who you know of that may have eventual claim to the title, you might be able to get them to sign something called a 'quit-claim deed.' It all depends on who this person is, of course. A quit-claim deed is a document by which a person forfeits all claim to a piece of property in question. It does not guarantee that the person actually has any rights to convey, but rather acts as a 'just-in-case.' Sometimes you can get someone to sign it for free or sometimes you might have to pay them.

    It sounds like you know what you're doing and generally have your act together. As with all out-of-the-ordinary real estate transactions, always talk to your attorney and be diligent in getting all of your inspections done. The potential for these kinds of things to turn into disasters is always there, but there's a great up-shot if you can pull it off.

    -Jack
     
  9. Jena

    Jena Well-Known Member

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    It was my understanding that when you buy title insurance, they do the title search. I know I can go down to the courthouse and check myself, but I don't know if that covers everything.

    Must I get a title search seperate from title insurance?

    This house is part of a farm that is encumbered, however, the house itself (with 1.5 acre lot) was seperated and was supposedly left unencumbered due to there being a life estate in effect. The life estate has ended because the man went into a nursing home. I will get a quit claim from him, just in case, but I want to make sure that the mortgage on the farm never becomes a mortgage on the house as well.

    I was also told that they know where the survey pins are, but I'd rather get the official version as whatever is outside those pins is encumbered.

    Does that all make sense?
     
  10. longshadowfarms

    longshadowfarms Well-Known Member

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    Your lawyer should be able to answer a lot of these questions once the title search is done. That must be done before anyone will grant title insurance. None of us here can really answer these questions since we don't have the documents in front of us. The mortgage on the other property and how the life use was set up all feed into this. Don't bother to try to research the title yourself unless you have a lot of experience in it. I spent about 10 years in this field and I'd still have a lawyer check things out if it was me ;) I'm sure practices differ from state to state but here in NY we would search back 40 years on a simple title. If nothing was out of line, that would be it. Other titles you'd end up searching back until the beginning of records in that area due to this complication or that.
     
  11. Maura

    Maura Well-Known Member Supporter

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    They aren't going to give you title insurance without first searching the title. Once they guarentee that the title is free, they have to pay you if Uncle Bob shows up with a recorded title. If possible, you may want to have all of the heirs sign off on the property. Once a person signs a Quit Claim deed, if they come back later with a deed from a previous date, it is no longer valid. Quit Claims are often used when an estate is sold, just to cover all the bases. A quit claim doesn't mean you ever owned the property, it basicly says, you don't have any claim over it.
     
  12. Ann-NWIowa

    Ann-NWIowa Well-Known Member Supporter

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    As I understand a life estate, it doesn't end when someone goes into a nursing home, it ends when they die. I'd definitely want all of this gone over with a fine tooth comb by a compentent real estate attorney. You're smart to get everything straight BEFORE taking title.
     
  13. Siryet

    Siryet In Remembrance

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    Recently sold one of my rent houses and the title company hadso many exclusions that the insurance, to me, seemed worthless. I would definitely have an attorney working for me to protect my investment in my future.

    This has become another real estate scam (exclusions)in my opinion but I guess it's necessary.

    Its like they tell you "We will insure your property for fire but it isn't covered if the property burns"

    BTW; The house I sold was given to me free and clear by my neighbor many years ago
     
  14. Jena

    Jena Well-Known Member

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    The life estate was written in such a way to cover this possibility. He loses his interest once he vacates the home for 90 days. He's not coming back, even he knows that. He will sign a quit claim I'm sure.

    Jena
     
  15. amelia

    amelia Well-Known Member

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    Jena,

    The title company will, in fact, do a title search. The report should be available to your attorney in the form of a preliminary commitment. Title reports are not particularly easy to interpret, and they routinely require legal judgment calls about the effect of the particular transactions listed.

    What concerns me more than actual chain of title is the rights that the mortgagee (lienor?) may have in relation to the smaller parcel. If the encumbrance is a mortgage or deed of trust, and the mortgagee's interest was specifically made to exclude the smaller parcel, you might well be in a different position than if the life estate had been granted in a unilateral attempt to exempt a portion of the property from the effect of the mortgage. Ditto if the encumbrance is a creditor's lien: I could easily see the creditor arguing that the life estate was a fraudulent transfer. In addition, what implications the termination of the life estate might have vis a vis the mortagee or creditor is beyond anything that I could hazard a guess about.

    One thing's for sure--I would NOT leave it to a title insurance company to ferret through these questions, which are properly dealt with by an experienced real estate attorney. DO get title insurance, but make sure you get good legal advice.
     
  16. Mike in Ohio

    Mike in Ohio Well-Known Member

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    Jena,

    In order to get title insurance there must be a title search.

    The title search will have a list of exclusions. These will be things like easements,mineral rights owned by someone else, liens, life estates or any other encumbrances.

    A life estate is just that.....rights for the lifespan of the person who has the life estate. I don't believe (but I am not a lawyer) that you can stipulate termination based on non-occupancy for 90 days. I've been looking into this as our neighbor who has had health problems and once owned all the land in the area (including all of ours) might lose his place. DW and I decided that in that event we would grant him a life estate to stay on a piece of our land.

    If the house/parcel is being split off from a larger parcel with a mortgage, the mortgage holder will have to sign a release or you will be subject to forclosure if payments aren't made on the larger parcel.

    Hope this helps.

    Mike
     
  17. bethlaf

    bethlaf Homegrown Family

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    jena, the attorney and title insurance company will cover you pretty good, the insurance company wont insure if they uncover any thing negative on the search , so you should be ok ,

    sounds like you have things well in hand, and yes , his quit claim will help too in case his great uncles nephew in law comes by after he passes and says uncle so and so promised me this house , etc.....
     
  18. Laura Workman

    Laura Workman (formerly Laura Jensen) Supporter

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    Along with the rest, the survey is a great idea. Once you know where the property lines are, be sure to walk them so you can see whether there are any encroachments on your part or on the part of neighboring landowners. If there are, you may have adverse possession rights or liabilities that the title company may not know about.
     
  19. agmantoo

    agmantoo agmantoo Supporter

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    Jena, as the new owner you will be responsible for all property taxes that are in arrears! Better check that also.
     
  20. Jena

    Jena Well-Known Member

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    That is a good one. I do know they are paid though.

    Jena