My partner and I are first time homebuyers and needed some outside perspective on a house we are trying to close on. We are waiting to speak with our lawyer, although we get the sense she would rather not deal with this. For context, we have been trying to buy for over a year in a very competitive market where, despite bidding over price, we have been beaten out by cash offers 10 times. We finally got an offer accepted on a house that initially accepted a cash offer but that offer dropped. When we received the contract is when the seller disclosed that the house was currently involved in a lawsuit due to an easement agreement with the neighbors.
We were able to speak to the neighbors and (since we live in the community already) did our own research on the matter. The neighbors seem to be lovely people so that didn’t seem to be an issue- the day after we contacted them they called us back and said they were dropping the suit. We were waiting until we got some confirmation from our lawyer and saw something filed to that effect at the county clerk’s office- meanwhile we kept getting asked if we had signed the contract. This is when I started to understand that the neighbors were ONLY dropping the suit if we signed. So after confirmation that our lawyer spoke with theirs and this was happening, we signed the contract.
For numbers, house was 799k asking, we offered 870k and no contingencies (what a world). The roof will need to be replaced ASAP or the homeowners insurance will drop us. But due to the difficult market and not wanting to delay this further (we initially had our offer accepted 7/1) the only thing we have asked for so far is for the seller to buy owner title insurance for us.
We finally received the title on Friday- the only thing keeping us from closing- and the lender’s attorney told our agent that the title still shows the lien. Read on the county clerk’s office that on 9/2 the seller’s lawyer had asked for a stay on the lawsuit court appearance as the papers for releasing the lis pendens are currently in escrow and will be filed at closing. So this means we would have to close with a cloudy title.
The title insurance has a clause stating that they will not cover the current lien and our contract has a section where if there is a defect (such as a lien) we can ask for an abatement on asking price. The seller has 90 days to try to remedy this unless beforehand any of our mortgage commitments expire (our rate lock expires tomorrow 9/4) and our expected closing date is on or around 9/15.
Although it seems that things will get resolved we are being asked to take some risk due to closing with a cloudy title, with a title insurance that does not cover this lien. This agreement between the seller and the neighbor essentially pulled us into it without any conversation or discussion (or informing us mind you) about it depending on the closing. All of this I had to discover for myself. We were thinking of asking for an abatement of $25,000 off the asking price in addition to the owner title insurance. We already gave them the full 20% down which has been in escrow now for weeks, which is what they had originally requested.
Sorry for the length, just a complicated situation and we would like to buy a house finally but also ready to walk away if truly necessary.
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source https://www.reddit.com/r/RealEstate/comments/1n7c26x/about_to_close_with_cloudy_title/
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