Recently, an institutional seller accepted my client’s purchase offer. At the seller’s insistence, the P&S’s Addendum contained a 10 days to close provision, time being of the essence. Naturally, the buyer quickly set about to allocate and gather his closing funds. My partner and I each suggested that he not jump through too many hoops just yet, as it was likely that, despite all of the seller’s drum pounding that the sale needed to occur on the seller’s schedule, using the seller’s documents, and at the date and time dictated by seller, the seller would not be able to perform within the timeframe the seller itself mandated. That was 23 days ago – and counting. We are now on our third closing extension. Each extension has been required because the seller has yet to perfect its title to the property.
Most real estate professionals reading this article have their own similar tale of woe. I’m not an attorney, nor do I claim to be an expert at titles. That said, surveying a few colleagues has evidenced that these seller-side impediments to our buyers reaching the closing table most often emanate from about a half dozen title issues. So here we go…
6. The Power of Attorney (POA) which authorized the lender’s officer or attorney to execute the foreclosure deed is defective. Even if the POA appears valid on its face, the defect may be that the POA is dated after the date on which the foreclosure deed was signed, or perhaps the POA grants signing authority to someone other than the individual who in fact executed the foreclosure deed. Watch out – I’m told that RI title carriers do not accept language in the POA which would ratify the deed’s earlier execution. A new POA and a confirmatory deed may be required.
5. Apparently institutional owners don’t enjoy paying recording fees. Watch out – Often, even if drafted properly, and notarized in a timely fashion, the POA may be recorded in a jurisdiction different from that in which the property is located. Someone will need to attain a certified copy of the POA recorded out of state, or in the wrong city, and record it in the proper RI land evidence records.
4. The seller is not the same legal entity as the most recent prior lender of record, nor is there an assignment which satisfies/explains this issue. Watch out – readvertising the foreclosure takes a long time.
3. Prior to the foreclosure someone owned a life estate in the property. Watch out – if they weren’t given proper notice, they may still own it…for the rest of their lives….
2. Some Rhode Island municipalities have local ordinances that mandate the lender and borrower/owner attempt to renegotiate the terms of the existing promissory note pre-foreclosure. The foreclosing lender must certify in writing that it actually abided by such a municipal ordinance. Watch out – particularly on the older foreclosures, lenders appeared to be reluctant and/or challenged to evidence that they satisfied the municipal requirement.
1. I’ve heard it referred to as the 75 day rule, the 30 day rule, and the 45 day rule. Not being an attorney, here is my lay-woman’s take on it; Watch out – it appears as though foreclosing lenders had difficulty coordinating State/Municipal notice requirements, advertising requirements, re-notice requirements, and actual foreclosure dates. This could mean the most definitive of all issues – a defective foreclosure.
The aforementioned list isn’t intended to constitute an even remotely conclusive list of title issues we real estate professionals will encounter in our bank-owned practices, and in which we need to be versed to most fully aid our clients. It is intended to provide some food for thought the next time we’re asked, “The seller bank is pushing us to wrap this up. Could anything stop this from closing on time?”
By: Shamila Ahmed