Title Issue - Indemnification Letter not to correct amount

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Latest post 03-23-2013 8:33 PM by karen2222. 18 replies.
  • 03-22-2013 12:22 PM

    • TPELL
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    Sad [:(] Title Issue - Indemnification Letter not to correct amount

    Good afternoon!

    Recently I tried selling my home and there turned out to be a title issue from when I purchased the home. The buyer's closing attorney requested a Letter of Indemnification for approximately $135k (the buyer's purchase price of the home) from my original title company in order to allow the sale. My original title company provided the letter; however, only to my policy limit, which is roughly $132k (purchase price of my home years ago). The closing attorney then asked the title INSURANCE company to cover the $3000 difference; which they then advised it was best for the me to put in a claim with the title insurance to resolve the issue.

    My confusion at this point is why the buyer was requesting more than my policy limit, should my original title company be responsible for it, and what exactly this means. I'm not selling my home for a profit, I am pretty much breaking even at the price I have it, but I feel I'm going to run into this issue every time I go to sell the house now (the $3000 issue).

    Can someone please explain to me how this process works and what the real issue is with the lawyers/insurance piece?

  • 03-22-2013 1:22 PM In reply to

    • Drew
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    Re: Title Issue - Indemnification Letter not to correct amount

    One guess is buyers lawyer is playing the contract language  to try to force you into a price concession --whatever the title wart is can be used to leverage you to reduce price  if the fine print requires you deliver a title w/o a blemish on it blah blah.

    There is no legal requirement that one insure over  a title blemish --just a practical one that says I get to play stall ball until you fix it.

     

    BTW, just what is the  title issue at hand?.



  • 03-22-2013 1:31 PM In reply to

    Re: Title Issue - Indemnification Letter not to correct amount

    TPELL:
    My confusion at this point is why the buyer was requesting more than my policy limit,

    To protect his entire investment of $135,000.

    TPELL:
    should my original title company be responsible for it

    I don't see why. The policy is for $132,000. That's the limit of their obligation.

    If you insured your house for $132,000 and it burned down your insurance company wouldn't change the policy to cover it for more than that.

    TPELL:
    I'm not selling my home for a profit, I am pretty much breaking even at the price I have it, but I feel I'm going to run into this issue every time I go to sell the house now (the $3000 issue).

    You might. Or you might not. The next buyer or attorney might not be as sophisticated or as picky.

    TPELL:

    Can someone please explain to me how this process works and what the real issue is with the lawyers/insurance piece?

    Asked and answered.

    If you lower your price to $132,000 you don't have a problem. If you don't want to lower your price you let this buyer walk and you put the house back on the market.

     

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  • 03-22-2013 1:49 PM In reply to

    • TPELL
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    Re: Title Issue - Indemnification Letter not to correct amount

    Drew - Here is what the issues are, personal info removed.

    A) Substitution of Trustee recorded in Book XXXX, at Page XXX does not contain a legal description and the foreclosed upon Deed of Trust states that the Substitution of Trustee shall have a description of the property.

    B) Notices were mailed in May prior to the recording of the above referenced Substitution of Trustee, which was not recorded until June.

    C) Substitution of Trustee was recorded the same day as foreclosure sale, not 20 day prior to sale date.

    D) Notices were sent out by Morris, Hardwick & Schneider but the Substitute Trustee was named as Ryan Keesee and Teays Valley Trustees.

    E) <ex husband> is an owner of the property and did not sign the Deed of Trust recorded în Deed of Trust Book XXXX, at Page XXX.

  • 03-22-2013 1:51 PM In reply to

    • TPELL
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    Re: Title Issue - Indemnification Letter not to correct amount

    Jack -

    The buyer has already walked and the unfortunate part is I can't lower the price... not without going into a short sale situation... my house is literally priced in a way that I walk away with very little (<$100) or nothing at all.

    I get the insurance issue, which is why I'm a little confused on the whole thing... but another question... what does putting a claim in vs. the letter of indemnification mean?

  • 03-22-2013 2:30 PM In reply to

    • Drew
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    Re: Title Issue - Indemnification Letter not to correct amount

    I get the technical point--that there is a wart on the title chain --as you describe and the buyer probably has a legal right to walk away if you cannot remove it or insure over it and there is probably several lines of fine print on point.

    In a practical sense is your EX going to come out of the woodpile and lay effective claim to the place?.

    I don't know the sequence of your title and your title insurance --but if the bungling of late was after you get title insured I don't see where its their job to fix it.  If EX was under order to deliver title to you and his delivery was defective --I suppose you could go back after him.   And/or any lawyer who supposedly represented you and did not get his or her work right in a professional context --malpractice. 

    But  my guess is all the legal stuff takes time and money...for a rather silly problem.

    I'd be inclined to remarket it at a higher price  with a full disclosure of the title  and some very careful words in the listing and check any offers to get in same words that buyer takes it subject to the included title issues --with all the right jargo so the buyer cannot bail over an excuse by lender or title firm on this point --or ---file a quite title action --or eat the loss.

    I got hung up for well over a year as to about a trivial 1" to -4 " encroachment along a property line  and at least one buyer walked --there is no fast easy cheap answer to even tiny issues unless you want to give away the store  ( I got a quite title action in place.)

    .

     

    .

     



  • 03-22-2013 2:35 PM In reply to

    • Drew
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    Re: Title Issue - Indemnification Letter not to correct amount

    Seems to me at least one of the trustee bungled it --but getting them to correct it may prove daunting.

    I'm not sure I follow waht happened--did you buy out/ back in just ahead of foreclosure or was it foreclosed upon and you exercised some redemption rights as homeowner --or what?

    If EX has some  remote rights --why not just get a quit claim from him?



  • 03-22-2013 2:36 PM In reply to

    Re: Title Issue - Indemnification Letter not to correct amount

    TPELL:
    what does putting a claim in vs. the letter of indemnification mean?

    My guess is that the letter of indemnification protects your buyer from getting hurt due to title issues and filing a claim means that you've been hurt and are seeking compensation.

    Where the title issues discovered after your title policy was issued when you bought the house?

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • 03-22-2013 2:42 PM In reply to

    • TPELL
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    Re: Title Issue - Indemnification Letter not to correct amou...

    Drew -

    My ex is actually working with me, at the time we were married and he was just on the deed, so when we were closing someone forgot to ask him to sign something.

    When I purchased the home it was a HUD home (foreclosure), no one is 'claiming' the property, and it does seem the foreclosure paperwork was 'filed' on the books the same time as the sale, which is apparently incorrect procedure.

    Regarding the quit claim, its $200 I don't need to spend. Ex and I are on good terms and he lost his rights to the house in the divorce (per the decree), but we have a child and I wanted him to have say on the house should something happen to me. So I'm good in that respect, luckily.

     

    Jack -

    The issues were discovered during the sale of my home... up until this point (now 3+ years after my original purchase) we had no clue there were any title issues. So we were about a week from the sale closing (the new sale) and the closing attorney noticed these issues. The original title company did provide the letter of indemnification to my policy limit, but the closing attorney wanted the insurance company to cover the different between the new buyer's price and my original price... which I feel they should be required to pay, but at the same time I'm not sure why... its a weird situation. Their screwup has cost me the sale of my house right now...

  • 03-22-2013 3:06 PM In reply to

    • Drew
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    Re: Title Issue - Indemnification Letter not to correct amou...

    But the practical problem is that all the fancy solutions take a lot of time and money and it sure seems to me that the gap caused by the glitches in the title chain are all covered over by him extinguishing his rights via a quit claim --$200 may be cheapest fastest cure in the book!

    But triple check with some reliable resource that a quit claim closes the gap.  I think it does but my vote does NOT count.



  • 03-22-2013 3:13 PM In reply to

    • TPELL
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    Re: Title Issue - Indemnification Letter not to correct amou...

    No I think you're missing it... my ex isn't causing any issue... the quit claim won't fix the issue... the quit claim will fix one of the issues (the last item), but its a moot point because of the other 4 items. The other items have something to do with the owner of the home before us. My ex is claiming nothing to the home, he's trying to help me sell it in every way he can.

  • 03-22-2013 3:14 PM In reply to

    • Drew
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    Re: Title Issue - Indemnification Letter not to correct amou...

    The deed recording fees for a 1 page correction H-W ex spouse  may be $50 or less...



  • 03-22-2013 8:27 PM In reply to

    Re: Title Issue - Indemnification Letter not to correct amou...

    TPELL:
    No I think you're missing it... my ex isn't causing any issue... the quit claim won't fix the issue... the quit claim will fix one of the issues (the last item), but its a moot point because of the other 4 items.

    I don't think the ex is a moot point at all, it's the only issue you can solve but you should definitely solve it.  Seems to me there are two ways to solve it, one is for him to sign a quitclaim deed giving you his share of the house before you sell it, and the other is to have him sign everything you sign (as co-seller) - from the listing agreement on down through the purchase-and-sale agreement to the closing documents.

    Have you asked your original title company for advice?  Would they be willing to give you a Letter of Indemnification in a larger amount (for example $135k) if you paid them an additional premium to raise your coverage limit?  Would they be willing to write a new policy for your (next) buyer that didn't exclude these items, and if so, how much would they charge for that?

  • 03-22-2013 10:00 PM In reply to

    • TPELL
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    Re: Title Issue - Indemnification Letter not to correct amou...

    Ok, I guess I'm not making something clear... my ex is NOT an issue... he wants it gone just like me and is signing everything with me b/c we don't want to pay $200 if we don't have to. So yes, it is a moot point, and the ex part actually isn't a big deal b/c push come to shove all he has to do is sign the form if they requested it... so again moot point.

    The original title company is a piece of <insert profanity here> company and does everything in their power to make a buck. I had nothing but issues with them from the start, but unfortunately HAD to use them, it was required by HUD (HUD has since dropped them as a company). They did NOT give me the indemnification for 135k, that's why I lost the buyer. I will not pay them extra for a home I'm trying to sell when I'm already losing money, I have been told they'd charge me 3k... so that's a no-go. Yes I realize this means I can't sell the house and that's a choice I'm making; however, this is not my fault, the reason for insurance is for them to do their due-diligence and they didn't... these issues should have been caught when I purchased my home.

    I'm not sure what you mean by "would they be willing to write a new policy for your (next) buyer that didn't exclude these items"... Regardless they have to 'indemnify' against those 5 items saying they messed it up. This might be an option to talk to them about, but I don't really understand the question... can you elaborate?

  • 03-22-2013 10:28 PM In reply to

    • Drew
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    Re: Title Issue - Indemnification Letter not to correct amou...

    Now I think I get it..there was a flaw in the recording sequence at time you bought the home and you bought title insurance at that time?  Nowmwhen the flaw comes to light the. Title firm seeks to punt. I have heard that time and time again..title firms are experts at doing very little ..and I bet the fine print allows them to just insure over /Indemnify up to policy limit..and if that what in the fine print you won't get more. Now I think buyer is being overly cautious ..but that's buyers right.



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