Expert: liznarr - 11/27/2010

Question
My husband and I found out six days before our closing date that the short-sale house we were planning on buying has $1,500 worth of HOA liens and $7,500 worth of child support liens placed against it. We're upset that this news is surfacing now, only days before the closing, when we signed the promissory note setting the closing date weeks ago and was not informed of any liens placed against the property, by neither the seller's lender nor our own real estate agent. Why didn't either party tell us about it? Why did the lender let us sign the note setting the closing date when the title wouldn't be able to be transferred with a clear history? It is a VERY scary situation for us, seeing as we're supposed to be out of our present house soon and have nowhere to go since we won't be able to close. I feel like someone should be accountable. Also, is there any way to get the child support liens covered by the seller's lender, or removed from the property and placed on the individual's possessions or wages? Help! I don't want to be homeless.

Answer
Hi Jeni,

You should read your Contract of Sale for starters and see what it says about the Seller delivering a clear title.

Generally, you find out about the true status of the condition of title on a property by having a title search performed.  This is usually at the Purchaser’s expense, and in my area costs about $150.  The title search is performed by either an attorney or an abstractor.

A SELLER’S lender has no obligation to disclose title defects to you (they may or may not know about existing title defects); ditto for your own real estate agent (unless he/she independently knew about the liens).  This is outside expertise a licensed agent is expected to investigate.

HOWEVER, if your agent represents YOU as a buyer client, he/she has an obligation to advise you to have a title search done in order to insure that your title is free and clear of liens to comply with any Contract of Sale language indicating same.  If you are in a buyer agency agreement with an agent representing YOU, he/she has a legal, fiduciary obligation to exercise due diligence and care while representing you; and this most certainly includes advising you on closing procedures.

In this day and age of short sales, buyers should truly “beware.”  Notwithstanding any language to the contrary in your Contract of Sale, unless you are prepared to eat $9,000.00 worth of liens on the purchase of this property, you should refuse to close UNLESS AND UNTIL these liens are removed.  And you need to have this documentation IN WRITING and recorded.

It goes without saying now that you need to have an attorney or title company represent you at closing to insure that you will not have any surprises “after” closing.  Do not take anyone’s word that the liens will be taken care of after closing.  You will have to litigate “after” closing to enforce any verbal agreements.

Call your agent ASAP and tell him/her to earn his keep and go to work for you.  If your agent balks, call his/her Broker-in-Charge.  If you still don’t get results, contact a reputable trial attorney ASAP.

I seriously doubt that the Seller’s lender will absorb the child support liens.   Your other questions regarding the liens should be addressed to an attorney since I have no legal expertise and cannot advise you there.

I hope the above is helpful.  Good luck to you, and please feel free to write again if you have additional questions.

Regards,
Elizabeth