Thrifty Joe is a graduate of late night tv “get rich in real estate with no money down” seminars. He avidly scours the newspapers looking for foreclosure and tax sales where he can buy real estate at bargain prices. Joe found a property that had been foreclosed on and purchased at the foreclosure sale by the bank. The bank was offering a “deal” in order to move the property. Joe figured at the price the bank was offering the house, he could sell it under market and still make a tidy profit. Plus the bank was offering a title policy for Joe to “tack onto”. Joe put a contract on the property, and the bank gave him a copy of the title policy, which they had gotten from Titles R Us Closing Shop, a lay settlement company. Being the thrifty guy that he was, Joe decided to go back to them and save some money. He just knew going to an attorney for the closing would be too expensive. Besides it said so on page 12 of his No Money Down real estate course to avoid using attorneys for closings because they charged too much. Joe closed on the house, got his title policy and immediately listed the house for sale in the real estate want ads of the newspaper.
Within a few days he had an interested buyer. The buyer liked the house a lot and gave Joe an offer to purchase on the North Carolina Bar Offer to Purchase form, which he then took to his attorney. The buyer’s attorney phoned him a few days later to report a problem with the title. It seems that the deed of trust that the bank had foreclosed on didn’t have a legal description on it at the time it was first recorded. The closing shop had later re-recorded the deed of trust and attached a description right before the bank instituted foreclosure. The attorney further advised the buyer that this was outside what was permissible for re-recording and that the bank had not acquired good title in the foreclosure. Accordingly, he advised buyer not to go through with the purchase because Thrifty Joe would not be able to deliver marketable title as required in the North Carolina Offer to Purchase contract.
Thrifty Joe took the news hard because now he was not going to be able to sell the house as soon as he thought and might be stuck with a mortgage for awhile. So, he decided it might be worth his hiring an attorney to try and straighten this mess out. The attorney he hired noted that the purchase contract the bank used when he bought the property only obligated the bank to deliver insurable title, not marketable title, and the bank had done that by providing a title policy to Joe that he then “tacked onto”. He was further advised that since the deed he received from the trustee was a Non Warranty Deed he could not sue the bank on warranties.
This example underscores the importance of the attorney in the closing process and why Statewide Title is a strong proponent of the attorney closing system. It also illustrates the difference in insurable title and marketable title. Although the description problem had been insured over, it had not truly rectified the problem that existed and title remained unmarketable as a result.