Buying resale- title insurance?

[travellerviajero1]

Hello, and apologies if this was covered already. When buying a MVC deeded week, I imagine that MVC will verify that their record is clean with MFs, mortgage fully paid off, etc. However, what if the seller took out a 3rd party loan, how can I make sure to protect myself to know that the seller does not owe say 15K to a 3rd party lender? Do contracts typically cover that buyer will not take on debt of seller? I am new to this so want to make sure I later don't find out its not a clean title, or there is some type of lien that now I am responsible for amounting to a lot of money? Thanks

 

[davidvel]

Hello, and apologies if this was covered already. When buying a MVC deeded week, I imagine that MVC will verify that their record is clean with MFs, mortgage fully paid off, etc. However, what if the seller took out a 3rd party loan, how can I make sure to protect myself to know that the seller does not owe say 15K to a 3rd party lender? Do contracts typically cover that buyer will not take on debt of seller? I am new to this so want to make sure I later don't find out its not a clean title, or there is some type of lien that now I am responsible for amounting to a lot of money? Thanks

It doesn't matter if the seller owes money, it only matters if any loans are secured by the property. You can buy title insurance from 1st American for about $250. This will search for any encumbrances and provide title insurance.

 

[travellerviajero1]

thanks, but how could I be sure that there are no loans secured by the property? Is the only way to buy title insurance?

It’s fine should the property be taken later from me at worst let’s say, just don’t want to end up taking on say a 15k debt unknowingly later on

 

[sponger76]

thanks, but how could I be sure that there are no loans secured by the property? Is the only way to buy title insurance?

It’s fine should the property be taken later from me at worst let’s say, just don’t want to end up taking on say a 15k debt unknowingly later on

If you're not signing anything that specifically says you are agreeing to assume a loan, you won't be taking on a loan. It might be different if you were buying a company that has debts, but you are simply buying a deed. While a deed can be collateral in a legal entity's debts, a deed in and of itself isn't a legal entity that can own any debts. So aside from annual maintenance fees or special assessments imposed by the HOA or property taxes imposed by governments at different levels, there are no unspecified debts you would be liable for by acquiring it.

 

[jabberwocky]

It would be highly unlikely that a third party would accept a timeshare interest as security for a loan. The only loans you would need to worry about would be those from the developer (who could have resold the debt to someone else - but it would still be developer serviced). The developer loan would definitely come up in the transfer as they likely wouldn't allow a transfer with a loan in place unless you agreed to take over the payments.

If you're worried about this title insurance is relatively cheap peace of mind.

 

[dioxide45]

You can always do a search yourself of county records to see if there are any liens recorded against the property.

 

[davidvel]

If you're not signing anything that specifically says you are agreeing to assume a loan, you won't be taking on a loan. It might be different if you were buying a company that has debts, but you are simply buying a deed. While a deed can be collateral in a legal entity's debts, a deed in and of itself isn't a legal entity that can own any debts. So aside from annual maintenance fees or special assessments imposed by the HOA or property taxes imposed by governments at different levels, there are no unspecified debts you would be liable for by acquiring it.

This is incorrect. Any loan secured by the deed would be the responsibility of the buyer. No different than any other property. It has nothing to do with a legal entity.

 

[davidvel]

thanks, but how could I be sure that there are no loans secured by the property? Is the only way to buy title insurance?

It’s fine should the property be taken later from me at worst let’s say, just don’t want to end up taking on say a 15k debt unknowingly later on

As Dioxide notes, you can do a lien search yourself, but given your questions I doubt you could rely on it. How much is the property you are buying?

 

[TolmiePeak]

Why would any 3rd party lender give someone a loan backed by something of questionable value?

 

[davidvel]

Why would any 3rd party lender give someone a loan backed by something of questionable value?

Not likely, but doesn't mean it could not happen. Could also be judgment liens, or other encumbrances. Again very low possibility. Question for OP is whether value of property warrants a few hundred bucks to be certain.

 

[dioxide45]

This is incorrect. Any loan secured by the deed would be the responsibility of the buyer. No different than any other property. It has nothing to do with a legal entity.

The difference is they can't force the buyer to pay the outstanding balance, but they could still foreclose on the property and take the deed. If the buyer wanted to retain the property, they would have to satisfy the deed somehow. With traditional real estate, property transfers usually go through a title company. The title company would pull a title report in order to issue a title insurance policy. An outstanding lien would kill most deals unless it was to be paid off at closing. With a timeshare, the sale proceeds aren't usually enough to cover the outstanding lien. Though we did this with our first Grande Vista purchase in '07. It still had an outstanding loan but because prices hadn't crashed yet, we paid enough to just cover the outstanding loan. Marriott wouldn't have done the transfer without it being paid off at closing.

 

[Fido Chuckwagon]

Do contracts typically cover that buyer will not take on debt of seller?

It’s fine should the property be taken later from me at worst let’s say, just don’t want to end up taking on say a 15k debt unknowingly later on

You dont’ assume someone else’s debt just because they convey property to you that is securing their loan. Your worst case scenario is always that you don’t have clear title and the debt holder could move to foreclose on the property to force it to auction to satisfy the debt.

 

[travellerviajero1]

@dioxide45 @davidvel - I also was under the impression that MVC would first disclose an outstanding balance with them so not worried about that but who knows if there is some other 3rd party secured loan then I would theoretically become liable for in full? I’m new to this so I’m just overthinking perhaps using unrelated understanding that say when companies are bought out new owners then become liable for the past, or say buying a house.

I just want to make sure I protect myself. If I’m buying for say 2k, worst case im okay if down the road a 3rd party makes a claim to take it from me. 2k is one thing but being liable to pay out outstanding balance of say 20k is a whole other story.

 

[Fido Chuckwagon]

This is incorrect. Any loan secured by the deed would be the responsibility of the buyer.

Only to the extent they don’t want the property to end up foreclosed upon to satisfy the debt. You still can’t be held personally liable for the debt of someone else (assuming you don’t sign something assuming that debt).

 

[elaine]

Possible Unclear title would be incentive for me to get title ins for $250. Because it could affect one’s ability to divest it later. I didn't do it for a freebie HGVC years ago, thinking estoppel was sufficient. But, might do it in the future for $250.

 

[davidvel]

Only to the extent they don’t want the property to end up foreclosed upon to satisfy the debt. You still can’t be held personally liable for the debt of someone else (assuming you don’t sign something assuming that debt).

Correct.

 

[dioxide45]

@dioxide45 @davidvel - I also was under the impression that MVC would first disclose an outstanding balance with them so not worried about that but who knows if there is some other 3rd party secured loan then I would theoretically become liable for in full? I’m new to this so I’m just overthinking perhaps using unrelated understanding that say when companies are bought out new owners then become liable for the past, or say buying a house.

I just want to make sure I protect myself. If I’m buying for say 2k, worst case im okay if down the road a 3rd party makes a claim to take it from me. 2k is one thing but being liable to pay out outstanding balance of say 20k is a whole other story.

Marriott would be unaware of any third party liens. It is doubtful there would be any anyway because as previously mentioned getting third party secured financing on a timeshare doesn't happen. Perhaps if it was Disney Vacation Club, but nearly unheard of for most other timeshares.

 

[sponger76]

Correct.

Um, I was saying the same thing; the buyer can't unknowingly assume liability for a debt by buying a deed is what I was saying. The loan issuer being able to foreclose is a separate matter. A property being collateral doesn't mean the the property itself owes the debt or that liability for a debt transfers with the property. A piece of property (building, car, tv, etc, or evenatimeshare deed) can't owe a debt. Only the legal entity (person, company, trust, etc)that owns or controls that property can owe a debt. That's why you can't loan money to or sue a house or building, but you can loan money to or sue the entity that owns/controls a house or building.