23 Oct Don’t Underestimate the Power of a Deed
Jeff had been trying to sell a house he’s owned for 20 years. His realtor found a good buyer, but the preliminary title report showed that the man from whom he had purchased the property had a lien against it. The title company won’t issue title insurance for the new buyer until Jeff gets the lien removed, and Jeff has no idea why it’s there or where to start after so many years.
This cautionary tale illustrates the importance of a properly transferred Deed
These kinds of Deed issues are uncommon, but when they do occur, they make you aware of the power a Deed. Without clear title to a Deed, you can neither buy nor sell a property.
Deed of Trust is a mortgage lien on a property
In California we use a Deed of Trust to put a mortgage lien on a property. The Deed of Trust is recorded and serves as a lien. Deeds of Trust usually carry a provision that if the property is sold or otherwise transferred, the bank can call the loan due and payable immediately. Also, the presence of the lien on the property clouds the title, resulting in your not being able to sell the California property without paying off the existing mortgage and releasing the lien.
The mechanics of paying off the mortgage are straightforward
When you close escrow on a property, the escrow officer takes whatever money is necessary from the sale proceeds and pays off the existing mortgage. The escrow office then records a Reconveyance Deed, which cancels the Deed of Trust in the public records, letting the public know that the Deed of Trust is no longer in effect, thereby clearing the title.
So what happened in Jeff’s case?
In Jeff’s case, the most probable scenario is that the title company and escrow company that handled the purchase made a mistake. It happens. It’s likely they paid the balance of the loan, but through an administrative error, either failed to record the Reconveyance Deed or perhaps recorded it under the wrong parcel number.
- At the same time, the title company issued a title insurance policy. The purpose of this policy is to protect you from exactly this type of problem.
- Title insurance works just like your car insurance. If you get in an accident, you notify your insurance company so they can take care of you. The process is the same with title insurance.
- What Jeff should do is call his old title company and find out how to make a claim.
- At this point, the title company should figure out what they need to do to clear the title.
- If the mortgage company that is the beneficiary of the Deed of Trust still exists, they may be willing to go ahead and record a Reconveyance Deed.
- If the lender can’t be found, or otherwise isn’t willing to remove the lien, the remaining step is to file a lawsuit and ask a judge to clear the title.
In Jeff’s case, unfortunately, there’s been a 20-year interlude, and it well may require a legal intervention for him to get the title to his property so that he can sell it.
Do you have a Deed that needs to be transferred?
A Deed transfer is something that we can accomplish fairly easily, sometimes within a day. A cautionary note–many people have done refi’s over the last few years, and it’s easy to forget to move your property’s Deed back into your Trust. Make an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.