Volume 12 Number 2
Title Tips by Tute
Volume 12, Number 2
When I came to work today, I was asked to respond to a list of questions from a new (out of state) title examiner/underwriter. I know some of the answers, but can you help me out with the others?
Donna donna bo Bonna
Dear Fe fi fo Fonna - Donna:
I haven’t heard that song in years . . . and it is probably a good thing. In the interest of saving space, I’ll insert your list of questions here, rather than just repeating them and consuming vast numbers of the Association’s column inches. There are some very insightful questions among the list . . . and some that I’m sure you were embarrassed to let me see. I think the VLTA needs to lobby the Bureau of Insurance to repeal the agency licensing reciprocity rules and make it a pre-requisite for any out of state license applicant to attend at least two eight-hour VLTA sponsored continuing education events.
1. In your state; if a purchaser has judgments listed against them do they immediately attach to the new property that is being bought?
I wasn’t aware that state laws differed so greatly. Are there states in which a judgment against a purchaser would not attach? Or would wait a week or a month or a year, and then attach?
To answer what I think is the implicit question that was not asked – does that pre-recorded judgment have priority over a purchase money deed of trust – well, that depends on who the creditor is. In the event the judgment is one in favor of the United States of America, or one of its agencies, the Federal Debt Collection Procedures Act preempts state law and results in a judgment that would “prime” even a purchase money deed of trust. A notice of lien in favor of the Internal Revenue Service would be entitled to notice and a right of redemption in the event of foreclosure. Most other creditors would fall behind the purchase money deed of trust, since without financing, the debtor couldn’t have bought the property, and the lien never would even have an opportunity to attach.
2. In your state; if property is being bought out of a land contract/contract for deed that has been recorded, do judgments on the new buyer attach to the property? What if it is unrecorded?
Yes; yes; and even better news, judgments against the seller still attach too! Every judgment for money rendered in this Commonwealth by any state or federal court or by confession of judgment, as provided by law, shall be a lien on all the real estate of or to which the defendant in the judgment is or becomes possessed or entitled, from the time such judgment is recorded on the judgment lien docket of the clerk's office of the county or city where such land is situated. Virginia Code § 8.01-248. Operative words here are all of the real estate of or to which the defendant in the judgment is or becomes possessed or entitled.” Under the land sales contract, the defendant has an estate and is likely possessed (even if their head doesn’t turn a full 360°). If they close on the contract, they are in title; until then, they are entitled to call for closing. If they flip the contract to a third party, not only was there an estate or interest in real estate, but it had value, and the judgment still has to be paid. Don’t stop running the land sales contract seller for judgments, he still has at least what some call a “bare naked” legal title, and depending on the nature of the contract, may have more. From an examination point of view, both seller and buyer may have an estate sufficient for judgment liens to attach.
3. In your state; on a refinance, if the current owner has judgments that are from prior to the current warranty deed, would we show them?
Why, yes we would. And require that they be released.
4. In your state; if title is vested as husband and wife do judgments/liens attach if only shown against one person?
That depends on the creditor and how the husband and wife hold title. If the creditor is the IRS, the answer is yes in all scenarios. US v. Craft. If the husband and wife hold title in a tenancy other than as tenants by the entirety, the answer is yes.
5. In your state; if a current owner is deceased, what is needed to transfer property?
In the last couple of months, Tute has discovered the concept of amanuensis. Unfortunately, that doctrine appears to be limited in its application to living people. Tute would be interested in seeing how a current owner could be deceased . . . when learning to examine titles, Tute was instructed that at the moment of death, the owner switched from “current” status to “former.”
6. In your state; if a current owner is deceased and property is still in probate, can property be refinanced or sold?
See number 5 above. Typically, title insurers have required a bond from a surety company or an escrow of sales proceeds in order to insure a sale without exception to “probate” type risks like later discovered wills or claims of creditors. In recent years, it appears that the underwriters have authorized the use of an extra hazard premium in lieu of a bond or escrow, retaining the risk of these losses, rather than shifting it to another form of insurance.
7. In your state; if property is foreclosed, is there a redemption period?
For the IRS – yes; for the debtor – no.
8. In your state; if the property is sold in tax sale, is there a redemption period?
In Tute’s unlettered opinion, it doesn’t matter – run away as fast as you can. It doesn’t matter if you know the difference between the African and European swallow, tax sales are a chasm into which title insurers fall with distressing regularity, not to be released until their checkbooks have disgorged all their blank checks.
9. In your state; how long are the following types of judgment valid:
10. In your state; must the vesting on the deed and mortgage match? i.e. 1 person shown on deed, 2 people shown on mortgage.
Thanks for the clarification. Tute is aware of a couple of situations in which the vested owner was not the borrower, and it seems that the claims department has no shortage of work, so it may be I am not the only one. In addition to helping prevent losses on the title insurance policies, there are some traditional “title examination-type” questions. How do you know that’s the only deed? What if the vested owner got married or divorced or died?
11. Does your state recognize homestead rights?
Yes – but since Virginia opted out of the federal homestead provisions for bankruptcy cases, it is governed by state law. If the question deals with the kind of homestead rights that make Florida a haven for retired football players with extremely large attorney fees from California, deadbeat dads and others who fit generally into the “chiseler” model, the answer would be no.
12. Is your state a dower state?
Not anymore – while the augmented estate looks a little like and seems to have the same general result in many cases, dower and curtesy were officially abolished in Virginia in 1991.
13. In your state if owner is listed as a third party defendant does it attach to the property owned?
A defendant is a defendant – if the court renders judgment against a third party defendant, it’s a lien. See 1-3 above.
14. In your state is there any special verbiage that needs to be included in the legal description?
Tute knows an underwriting counsel who “goes postal” at the term “legal” description. Questions such as “What would be an illegal description?”; “What if it was drawn by a surveyor, is it still a legal description?” and “Did a lawyer or judge approve that description?” have been heard to emanate from said counsel upon hearing those words . . . but I digress. An accurate and correct description is always preferable – one sufficient to describe the property in such a way that it can’t be confused with any other property. It should include the city or county and state, and, where appropriate, the subdivision name, lot number, block or section or phase. Reference to the correct subdivision plat helps avoid lengthy metes and bounds descriptions with the possibility of inverted numbers, dropped lines and other typographical errors. When there is no survey description, the courses and distances should be verified to make sure all the boundaries are presented.
15. What are your state requirements for properties with mobile homes?
For new mobile homes, the underwriters require the wheels and hitch be removed and the home installed on a permanent foundation, the DMV title surrendered, and the home added to the real estate tax rolls. From an examination point of view, the only thing you can check for existing mobile homes is whether or not the structure is listed as an improvement on the real estate tax bill. Beware of the possibility of multiple structures – a barn and a mobile home may both be on the property, but only one taxed.
Or we recycle them at Busch Gardens.
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