Property Lien

Q: I purchased a home that had a lien against it. It’s a child support lien that goes back 2 owners ago. The lien was not disclosed to me and the attorney who did a title opinion letter didn’t discover it either.
 

If I had known of the lien, I would have never closed on the property.

To make a very long story short, I was forced from the property and the house was sold to pay off the lien, which was for an amount more than the house was worth.

I had mortgage insurance, so the mortgage was paid off. I went back to the attorney I used, and he is now suing the title insurance company that I purchased the title policy from. I have recently found out from the lawyer that the title company is suing him because of his faulty title opinion.

Meanwhile, I’ve been renting for the past two years since I was kicked out of my house, and I’m miserable. I lived in my house for almost 5 years, made payments and improved the property, and paid my real estate taxes.

I am on Social Security disability, so I don't have a lot of money. That house was my only asset. The people I purchased it from went back to court 3 times to try to get the lien removed while I was living there (I had no knowledge of their actions).

They were totally dishonest and I believe they committed fraud. This story goes on and on. The sellers want me to come up with a dollar amount for my trouble and I think it should be for much more than what I paid for the house, which was $125,000. I had the property appraised two years after I bought it for $145,000. I need an outside opinion.
What do you think I should do?

A: Let’s start at the top of this nightmare. Did you purchase an owner’s title insurance policy when you purchased the lender’s policy? If you had purchased an owner's title insurance policy and not just a lender's title insurance policy, it should have protected you in a situation like the one you described.

The title company’s responsibility would have been up to the amount you paid for the property. In addition you may be able to sue your seller’s for your loss depending on your contract and other documents for the sale. But you might not have been able to recoup some of your investments in the property

Although you weren't specific in your email, it sounds as though you may have only purchased a lender's title policy, which is why your lender was paid off in full when this happened, but you didn’t get a check.

It also sounds as though the attorney reviewing the title of the property did not do a thorough job, as he didn't discover the lien. If you live in a state where buyers and sellers aren’t usually represented by attorneys and the attorney you used was a closing agent, you may not be able to sue him or her for the mistake unless you obtained an “owner’s” title insurance policy. But you’ll need to consult with a good attorney where you live, who can look over your documents and see where you stand.

It does appear that the sellers you bought from may not have been forthcoming about the lien. You may be able to sue them, but that will cost you time and money, especially since the amounts owed may be more than the limit allowed in small claims court.

If someone is asking you for a dollar amount that will make you happy, and they have the means to pay you off, then by all means you should give them a number. If the house was last appraised at $145,000 and would now appraise at $160,000, then you should subtract out the amount of your original mortgage and ask for the difference. If it would cost you $180,000 to buy a similar house in a similar neighborhood in similar condition, and you had had a $100,000 loan on the property, then you should ask for $80,000.

It doesn’t seem fair to ask these people to pay for the cost of the mortgage, when the lender was paid back. If you want to tack on a little more for your time and trouble, then you can do that. But you don’t want to scotch the deal.

Please talk to a competent real estate attorney who can help you with these negotiations and see you through to the end. The attorney may agree to represent you for a flat fee, or may take your case on an hourly basis, or even on a percentage of funds recovered.

But at this point, you need to find yourself a good attorney to help you sort through the many issues you are facing and one that can help you recover what you might be entitled to.

NOTE: Ilyce R. Glink's latest ebooks are "Credit Scoring Secrets" and "How to Find a Great Real Estate Agent," which are available at her website, www.thinkglink.com.If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. You can also write to Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact her through her website, www.thinkglink.com © 2007 by Ilyce R. Glink. Distributed by Tribune Media Services