I'm under contract on a home and was on track to close early when the title company found a defect, in the form of a tax title. The land that the home was built had a lien placed on it due to unpaid property taxes. The land was foreclosed and sold to the sellers I'm buying from in 2020. They built a new home on the land this year. However, the title can't be cleared because in my state, the original owner has up to one year petition the foreclosure, and that one year has not yet passed. The title company will not insure the title until the year has elapsed...and that won't be until December. My original closing date was next month.
We've gone back and forth with the sellers about options for moving forward:
- Prepossession: My lease ends on August 31. The earliest new closing date would be December 4. I need a place to live between those two dates, so one option was to move into the new home before closing. The sellers initially agreed without restriction, and then balked because the home is a new construction. If anything prevented closing, they'd lose the "new construction" value. Makes sense to me. They suggested:
- Move in and make earnest money deposit nonrefundable.
- Move in and pay rent for the months I lived in the house before closing.
My earnest money is pretty high--$50k. I don't anticipate that my finances will change in the next few months, but my lender wants to order a new home appraisal because the current appraisal will have expired by December. The home appraised above my offer earlier this month, but I'm uncomfortable putting $50k on the line for an appraisal outcome that I can't control. December is a ways away. It puts me at the mercy of the winter market.
I opted for the rent option. Sellers changed their mind and said they'd only except the nonrefundable earnest money option.
- No prepossession: I suggested not moving in, so that the home would remain a new construction. I requested that we extend all the contract dates--financing, appraisal, closing. And I asked the sellers to pay the pair off penalty my lender would charge for unlocking my rate and relocking it in October/November. Sellers agreed to extend the dates (but have not agreed to any specific dates yet and, according to my attorney, may negotiate any dates we submit). They won't cover any of my fees.
At this point, I'm thinking about walking away. The sellers are professionals--husband is the builder, wife is the agent. This isn't the first house they've sold. They ought to have known about the title issue. If I had known that I wouldn't be able to close until December, I wouldn't have put in an offer on the house at all.
But beyond that, the delays are costing me more than I anticipated spending on this house. I'm looking at:
- A $4,000 fee to pair off the rate lock
- $300-$600 for the new appraisal
- Lease termination penalties between $6000-$12,000 since my landlord will not allow me to go month to month and my only option would be to renew now and break the lease come December.
- Potentially a higher interest rate
In the grand scheme of things, maybe it's not a huge extra amount to pay. The home is new, I like the location, and I'm in an extremely competitive market (Eastern MA). But even though I could pay it, I'm uncomfortable. My options seem to be incur up to $16,600 in extra upfront costs or risk losing $50,000, for a problem that is entirely the seller's fault. But they won't budge at all on the fees.
Is there another option I'm not seeing? Would you folks walk or would you pay up the $16k? I'm at the top of my budget for the home--it's comfortable, but what I offered is the most I want to pay for the house. I would not regret walking away, but I want to make sure I haven't left any options on the table.
Thanks!
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source https://www.reddit.com/r/RealEstate/comments/otpn0q/title_issues_delaying_closing_creating_unexpected/
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