Expert: Dick Dennis - 3/18/2010

Question
Hi Mr Dennis,

I hope you can help.  We just found out that the house we are to close on in less than a week has a lien on it from when it was first constructed.  The person we are buying the home from bought it as a forclosure this past summer and finished it with his partner who is a builder.  When they purchased the home they had title insurance, but the lien was not discovered.  My attorney discovered the lien which was placed on the property 1 1/2 years ago.  The title company that insured the current owner is willing to insure us b/c it has been explained to me that it is cheaper for them to insure us than to pay out for the lien.  I also forgot to mention that there are various liens for the same subcontractor on various homes in the area, so there is a pending lawsuit, which is what the title company is waiting for resolution of to prevent them having to pay out.  
My question is what would this mean to us if we bought the property with the knowledge of this information?  Would we have any responsibility in the matter and is there any way that we could ever be held responsible to pay up - the lien is for $37,000.  We live in NC.  Also, how long does the Title company have the right to hold out and not pay?  Could this go on forever or at some point would they be required to pay up to resolve the issue?  Thank you so much for any advice you have to offer -

Answer
Apparently, Julie, your attorney is not a real estate attorney. Title companies are insurance companies, or they are owned by them. And insurance companies are notorious for taking forever and a day to settle lawsuits. How do you know how long this lawsuit is going to drag on? If it was me, I would have a real estate attorney have the title company indemnify you and all your successors (those who you sold the property to when you sell and move) completely.

Otherwise, I believe you are taking a chance of that lien being on your title for a loooooong time. And when and if you ever sell the property, you will have to go through all this all over again with the title company and your buyer. As long as you have the title company completely indemnify you I wish you a long and happy life in your new home. I do wish you well.

Dick Dennis
dixiedee13@aol.com