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Title Insurance for "Subject To" Transactions

Posted by 15789465 on

There's been a lot of comment activity for my prior post about buying a property "subject to" a mortgage. One recurring issue involves clear title.  I just checked with Dwight Blair, of Blair and Parsons in Pell City. They write a lot of title insurance. I've known Dwight and his law partner, Elizabeth Parsons, for a long time, and trust their opinions. Dwight said that as a general matter, his firm would not have any problems writing title insurance on a "subject to" transaction. He did warn that specifics of a particular deal might cause a problem, though. He couldn't think of any examples, off-hand, but he said it is difficult to make a general rule that applies to everything when you are talking about title insurance. Dwight suggested that if you are considering buying property "subject to" a mortgage, please contact a title company in your county before signing any contracts. Discuss your plans with the attorney in the office, not with one of the regular closing people. That's because "subject to" transactions are still unusual, and probably outside the training and experience of the typical closing person.  If you talked to one of the regular closing people, they'd just have to take good notes, talk to the attorney, and then get back with you. I think it's best to cut out the middle man (or woman) don't you? You want to talk to the attorney to make sure they will be able to write title insurance for you, and to discover any concerns that might need to be handled in the contract itself. If a particular title company says they can't write title insurance for any "subject to" transactions, then try another title company. As always, thank you everyone for your thought-provoking comments, and for sharing your knowledge and experiences.

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2 comments

  • I would get whatever kind of deed I would normally get in a real estate transaction. If the buyer normally asks for a warranty deed, ask for a warranty deed. Most sellers would probably want to put on the face of the deed, “subject only to outstanding mortgage to _________________” so that the title warranties would not be violated simply because there’s a mortgage everyone knows about and agrees is okay to stay in place. I don’t see any problem with that, but that’s the kind of thing you want to discuss with a title company in your county.

    I think the bigger problem is the credit score or deficiency issue. If it were me, I’d want the seller to sign something saying they understand that if the buyer pays late, it will affect the seller’s credit score. If the buyer defaults and there is a foreclosure with a deficiency, the lender will chase the seller, not the buyer. I, as the buyer, would want that in writing with a signature so if something bad happened in the future, I wouldn’t get sued by the seller, who might claim they didn’t know this might happen to them.

    deniselevans on
  • When, and what type deed would you get?

    Ed Pepperman on

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