Deeds and Titles Question

[tango]

I'm including this link, because it mostly deals with my question but I didn't want to be piling on to someone else's topic.

http://tugbbs.com/forums/showthread.php?t=84037&highlight=warranty+deed

What I'm wondering is, is it up to the buyer to request that he get a warranty deed, and not a quit claim deed.
Should any reputable closing company be able to execute a warranty deed?
Would the issuance of a Warranty deed require also the purchase of title insurance?
If title insurance is not mentioned as an option by the closing company, should the buyer beware? (all other things being above board).
Not really asking for absolutes here, just what is usual and customary when dealing with an ebay resale.

 

[Lawlar]

Quit Claim Is Appropriate

I would recommend the use of a Quit Claim deed and the buyer should get title insurance.

Why should the buyer rely on a warranty from the seller? Does the seller know all the technicalities involved with a warranty deed or title issues? I doubt it. Does the seller have the financial wherewithall to back-up the warranties? Not necessarily.

Why take any chances? Only a title company can verify the title issues and give an insurance policy that can be relied upon.

 

[Talent312]

I would recommend the use of a Quit Claim deed and the buyer should get title insurance... (deleted rationalization)

Nonsense.
We've had these debates B4. I stand by my remark that telling a buyer to accept a Quitclaim Deed (QCD) is terrible advice. Of course, the Seller may not know all the implications of the warranties, nor be able to fix them, but the reasons why a Warranty Deed (WD) should be required anyway are almost to numerous to mention.

First, in most, if not all states, a QCD is simply not insurable, so its a no-go from the start. Second, a QCD does not represent that the Seller has the authority to sell or even owns the property that he is selling, meaning that the Buyer has no recourse against the Seller if it turns out the owner had already sold the property to someone else or misrepresented the absence of mortgages, judgments or other clouds on the title.

Some TS programs do not accept QCD's as a sufficient instrument of title to make a transfer on their books. Its a reasonable position... How do they know what else the Seller may have done with the property, and why should they get in the middle of a quarrel over who is the real owner.

Lastly, a Seller who would not be willing to sign a WD could reasonalby be suspected of hiding something fishy, like a contigent claim from a divorce or probate case which would cloud the title. If a Seller is not willing to say in a document which supercedes the contract (i.e. a deed) that this is not the case, I'd torpedo the deal in an instant...

Well, unless the TS was a gift, and I was willing to assume the risk that heretofor unknown claimant, like the guy's ex-wife, a judgment-creditor or a relative, wouldn't show up and stake a claim.

As for the value of title insurance... Buy it only if you believe the potential loss makes the expense worthwhile, 'cuz it is true that the Seller is not a deep-pocket. That, however, is no reason to let the Seller off the hook for selling a defective product and subject to rescission.

 

[Talent312]

... What I'm wondering is...
(1) Is it up to the buyer to request that he get a warranty deed, and not a quit claim deed?
(2) Should any reputable closing company be able to execute a warranty deed?
(3) Would the issuance of a Warranty deed require also the purchase of title insurance?
(4) If title insurance is not mentioned as an option by the closing company, should the buyer beware? (all other things being above board).

To Answer the Questions:
1. Unless conveyance by WD is expressly offered/required, a Seller is free to use whatever effective instrument he wants. So, this needs to be in writing, and yes, its up to you to insist on it.

2. Technically, its the owner who "executes" (signs+delivers) the deed, but yes, anyone with a notary + witnesses can execute a WD.

3. No one is "required" to purchase title insurance. However, some title companies say its "included," so that if they close the deal, you pay for it, regardless.

4. They may not have a tie in with a title insurance company. So maybe they can't provide it. If they say, you'll have to hire your own title company, that's likely the case. But if they say, "Its not a good idea," I'd be leary of dealing with them.

 

[Denise L]

I will chime in my $.02 since it was the subject of the thread that you referred to in the first post.

When I purchased the TS that I was asking about, I had been given a contract that stated that I would be provided with a warranty deed. So when the QCD showed up, I was surprised. From reading threads on TUG, I would have requested a warranty deed if the contract had stated a QCD in the first place.

Anyhow, I didn't buy title insurance, but I did have the estoppel letter from the resort, plus the seller gave me permission to call the resort to check on the account status/fees. I checked up on the original deed on the county website and tried my best to make sure that any liens had been cleared up. I felt comfortable enough with the sale to go through with it at that point.

Good luck with your purchase. My journey began in May and it is now November.... .

 

[tango]

To Answer the Questions:

3. No one is "required" to purchase title insurance.

So if I understand right, a warranty deed without title insurance, merely puts the recourse back on the seller to fulfill the obligations of the sale. Instead of having an insurance company pay me for the failure of seller to provide a free and clear title.

 

[Dave H]

So if I understand right, a warranty deed without title insurance, merely puts the recourse back on the seller to fulfill the obligations of the sale. Instead of having an insurance company pay me for the failure of seller to provide a free and clear title.

A Warranty Deed ALWAYS puts the recourse back on the seller. The seller is the one making the Warranty. That is what you want.... A Quit Claim Deed if you break down the meaning of it is as follows... I Quit (another word for give) Claim (another word for interest) Deed, I give you any interest THAT I MAY HAVE. Notice it does not say I have any interest, but if I do it is yours.

A Warranty Deed on the other hand says I Warrant (guarantee) that I possess good any lawful title and that I Warrant to you that I have the authority to sell and I Warrant to you that there are no liens that effect this Deed.

Now, I am no lawyer, but that is the simplest way to put it. Also, Talent is correct, you can not purchase title insurance on a Quit Claim Deed. Why.... because the seller may not really own the property that is subject to the deed. Remember the seller is only giving you any interest they may have, might have, might have had, might someday have. How do you issue a title policy on something that might not be there's?

As a closing company, I truly dislike Quit Claim Deeds. Prefer never to use them and always prepare a warranty deed for my new buyers with 1 exception. If the seller took title on a Quit Claim Deed, the seller would have a hard time going back to defend the warranty of title back to the original title holders, HOWEVER that being said, if a title search is being done by a professional AND the chain of title is properly documented and established a "Special" Warranty Deed can be given. If no title search is being done, then a Quit Claim would be in order to the new buyer.

A Special Warranty Deed basically says I can warrant as long as I have owned this that I have the right to sell, it is free of all liens etc, but I do not warrant what has happened in the past to the chain of title. A Special Warranty Deed is insurable for title insurance.

A side note to this is that a closing company can do a warranty deed from a quit claim deed, I have seen those, but understand the new seller who just got the warranty deed is now the one that has to defend title if thiere is an issue and has no recourse on prior sellers as there are no warranties to rely on. That is a buyer beware issue.

My biggest complaint with these kitchen type closing companies is they often lack the proper licensing, bonds, E&O etc and the proper knowledge and skills to do title work. This is not to say that all of them are bad, but it raises a lot of red flags when you have the seller who "owns" the closing company who can not be found as a true closing company and then they do Quit Claim Deeds and tell people how wonderful they are.

As far as calling to the resort to verify that the resort has no liens on the property, that is good, estoppels works for that liens that the resort might have placed against the unit, BUT as we have discussed before, there are other matters like probates, tax liens etc that come up in the chain of title that the resort may not know about, so it is a gamble if you rely on just the estoppel from the resort.

I would hate to buy a timeshare or anything else for that matter and find out the seller has a tax lien or judgment that clouds my title and that to sell it the judgment has to be paid off by me since I took it subject to the lien or judgment.

The resort only knows about liens they have created. Not what owners have had levied against them.