No Clear Title But I Have TI

I purchased an investment property from an Investor in Georgia. Unknowing to me, the investor sold me the property with a lien on it to me via a Limited Warranty Deed. I got an Owner's Title policy along with a $57,000 loan which has been sold to another lender. I was about to refinance the property and a Title Search was done and the problem still was not found out.

Here's the problem:

Got a call from the Lawyer representing the First Seller. She has a problem because she has no insurance and if the house burns down she will lose $20,000. She does not want to foreclose.

Basically, she agreed to sell the house to the seller for $300.00/month as long as he has a property with Insurance with her as a loss payee.


How do I protect my interests.

The seller may not have a choice to foreclose. Suppose the Investor does not pay her or the taxes do not get paid. What about the Mortgage company?

[HomeGuru]

You did not get a title search when you bought and the title insurance only covers the title and not the lien since it was pre-existing.
You need to remove the lien and get a new mortgage to clear everything or have the new mortgage payoff the lien.

Home Guru

I apologize, but I don't understand your answer. What are you telling me?

Removing the lien will require paying it off. Who will pay it off?

If the house is foreclosed, the $57,000 mortgage will be wiped off. What is the possibility that the Mortgage company will walk away from a $57,000 Security Deed for a $20,000 lien.

What is the Title company's responsibility? Why would the Mortgage company mortgage $77,000.00 on a property that's only worth $71,000.00.

What was the purpose of the Title Search? I thought they would have verified there were no outstanding liens on the property before issuing Title Insurance.

How could I have a clear title if there was a pre-existing lien.

Please tell me where I can find Case Law on Property issues such as this.

[HomeGuru]

You need to hire an attorney. If the attorney has any questions, he or she can post here.

Thanks Home Guru

You are right. The problem is - Finding one that knows the law and how to apply it to my situation.

I had a (so-called) Real Estate Attorney review some documents for a closing via a Real Estate Trust and he didn't have a clue.

I have reviewed the Security Deed and here is the problem restated.

Hypothetical Issue

Investor(Grantor) buys a property from a widow(Grantee) for $22,400.00 on a no interest loan with monthly payments of $300.00 per month a Trustee for a Land Trust. Grantor agreed to to keep hazard insurance on Property for at least $100,000.00 with the Grantee as loss payee.

"the Grantee shall have the right to accelerate the maturity of the debt hereby secured, by declaring the entire debt to be in default and immediately due and payable, upon the failure of Grantor to make any payment when due, pursuant to the note hereby secured, or upon failure of Grantor to perform any obligation or make any payment required of Grantor by the terms of this deed."

"Grantor reserves the right and Grantee acknowledges such right of Grantor to have this deed modified so that the property described herein is released if additional property is substituted therein and such additional property has a net equity value approximately equivalent to the property described herein."

The property is located in Georgia, which is a Non Judicial Foreclosure state.

Grantor sells the property without telling Grantee. Purchaser buys Owner's Title Insurance and gets a Mortgage on Property. An Attorney representing the Grantee contacts Purchaser stating there is a problem. Grantor cannot(will not) provide Insurance and instead offers a subordinate property that the Grantee refuses to accept.

The question is - which takes precedence: The Grantee's right to foreclose or the Grantor's right to modify the deed so that substitute property will be used as collateral?

[HomeGuru]

My response remains the same.