Homebuyers keeping an eye on the title
by Paul F. P. Pogue
Until recently, homebuyers typically paid little attention to title searches and title insurance when closing on a house. But questions about flawed documentation and heavily publicized foreclosure freezes make title concerns a significant roadblock to sales, especially foreclosures and short sales, say several highly rated real estate agents and title professionals in the Tampa, Fla., area.
"Prior to the last six months, homebuyers gave little thought to what was being covered [by title insurance]," says Alan Fields, executive director of the Florida Land Title Association. "Now they're definitely more cautious and knowledgeable."
Angie's List members Patrick and Rosalie Lacey of Newark, Del., say they learned the hard way. When seeking to buy a vacation/retirement home in Florida, they hired highly rated Largo real estate agent Lana McDonald to help with their property search. After their offer on a short sale fell through because the bank lost paperwork and delayed its approval, Rosalie says they chose a different tack.
"Eventually, Lana helped us find a regular sale, and we were much happier," she says. But even then, the final paperwork contained numerous discrepancies, which highly rated title company Coastline Title of Pinellas, Fla., helped sort out. "Hiring a title company who'll go above and beyond is as important as having a good real estate agent," Rosalie says.
With one of the highest foreclosure rates in the nation and nearly half of all mortgages underwater, Florida's fragile housing market is especially subject to paperwork and title issues.
"Once a title company does a search, they're ready to issue the insurance, but it takes time to resolve the clouds on the title," says highly rated real estate agent Jamie Everett of Palm Harbor, Fla. "There are more potential problems and the system is under greater scrutiny, so it's bogging down."
Title insurance, paid for at the time of sale, guarantees a clear property title and provides financial protection if challenges do arise. "The title search shows that the person in possession of the property really does have the right to sell it," says Julie Holt, owner of highly rated Anclote Title Services in Tarpon Springs, Fla.
It gets dicier when there's a foreclosure anywhere in the property's history, guaranteeing a lengthy title search, she says.
"You have to be very sure all the documentation was carried out to the letter," Holt says. It doesn't often shut down a sale completely, she says, but delays may cause buyers to give up. Even regular, non-foreclosure sales are slowing down, she says. "Anyone who writes a contract expecting to close in 30 days is probably way off the mark," Holt says.
Fields says although the search process hasn't changed much, title companies are more skeptical of paperwork gaps in foreclosure proceedings. "If an improper affidavit was withdrawn and a new one not submitted, we won't insure that transaction," he says.
Fields adds that although legal challenges could still arise, that's the point of title insurance. "The courts in Florida have shown a great reluctance to overturning a completed foreclosure after the property has been acquired by an innocent purchaser," he says. "Title insurance protects you from the cost of defending that in court."