Can I purchase title insurance for a trustee deed ?
Submitted by speloza on Mon, 06/30/2008 - 10:26am.
I have queried several title companies regarding purchasing an owner’s title policy for a trustee deed property. I would like to have the title insurance available immediately after the trustee sale, but every title company I contacted refused to provide a complete or timely insurance policy. All required some exceptions. For example, one required an IRS lien exemption for 120 days, another would not insure until 120 days passed, and yet another required a full year of seasoning before issuing title insurance. Each company had these requirements, even if no federal tax lien was found on the subject property or recorded against the previous owner at any time.
Comments:
Right. Title companies don't like to insure buyers at auction for a variety of reasons - some legitimate, some not. As you found you can often get them to issue a policy with exceptions if you push hard enough.
Here is a possible alternative though I've used it myself. Resell the property to another party (perhaps a partner?). I've resold over 100 properties purchased at auction within the 120 period with both owner's and lender's policies in place - so just take title on the trustee's deed in one name, then "sell" it to another as an escrowed an insured transaction.
thanks sean. I wanted to know when you write 120 days, can it really be done say the very next day?
what was your average holding period before you "sell" to a "partner"?
thanks
I was willing to take the title risk, so I didn't use this strategy. But I have resold properties with title insurance in pretty short time periods. I'd have to look, but perhaps as little as a week. I see no reason it couldn't happen in a day so long as title was clean and there were no IRS liens.
I'm confused and please excuse my ignorance. But if you purchase a property at auction and can't get title insurance for 120 days, what are the practical implications?
Do you need to just wait 120 days before being able to sell the property?
I thought an arms-length transaction with a typical buyer (not an investor or partner) would be impossible for a property with no title insurance.
No worries. A couple of things:
1. The "120 days" ONLY applies if there is an IRS lien against the property. You will not be able to get title insurance for 120 days if that is true, period. Some title companies may also have a policy of not issuing title for 120 days from the auction date, but absent an IRS lien there is no good reason for that, so just find a different title company.
2. Title insurance is always optional regardless of the buyer type. However, most lenders will require it, and so should most buyers.
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