Lien on Property; Neighbor's HELOC issued on wrong property

[musicianamanda]

My husband and I are trying to purchase a house and a lien has been found on the property. The seller originally bought the property for cash and flipped it. Because he didn't have a mortgage and paid cash he did not have Title Insurance, however, he used a company to do a title search and it came up clean. Fast forward to this month, the seller signed an agreement that we could move into the property two days before closing so that we could vacate our current home and prepare it for the new owners. We moved all of our belongings and personal property into the new house. We were also granted permission to install our new kitchen appliances as well as a new hot water heater.

The day of our closing, we first closed on our old home and received our check for the equity (made out to the settlement company as we were closing on the new home several hours later.) 45 minutes before closing on our new home we received a call from our real estate agent that a lien was found on the property. After many conversations we have finally found out where the lien is. The neighbor lady took out a HELOC in 2011 and M&T Bank issued the HELOC with the wrong property. In the legal description it says "Lot 1" but instead of Lot 1 from her property, they took the parcel number of Lot 1 from the property we are trying to buy. The lawyer from our Real Estate Agency is talking with a liens lawyer at M&T, but they are unwilling to relinquish "our" property from the lady's loan because they they will not have collateral in her loan. They talked about Foreclosing on her house or a Deed in Lieu of Foreclosure so they would get their money back, but this also seem so wrong as it was their mistake, and also she has been making consistent payments on the loan every month. We were granted permission to stay in the house until December 13 and hopefully a resolution will come of it in the meantime, but this all seems so wrong on so many levels. The bank screwed up and yet they will not relinquish the property or try to make it right.

I am wondering what we can do to help this process along both for us as well as the neighbor. We are looking out for ourselves, but also don't want to see this lady lose her house because of a mistake. Also, we put over $6,000 of appliances in the home as the seller was sure we would be good to go. He had fixed it up to our specifications over the summer, and had no intention of putting it on the market. He had many opportunities to back out of our contracts, so it's not a case where we think he wants to get out of our contract. If he does, I am sure there will be some other legal route that we would need to go through because all of our personal property is in the house, we cancelled our storage unit contracts, and we now have no where to live (as of December 13.)

Any words of advice would be much appreciated.

 

[quincy]

My husband and I are trying to purchase a house and a lien has been found on the property. The seller originally bought the property for cash and flipped it. Because he didn't have a mortgage and paid cash he did not have Title Insurance, however, he used a company to do a title search and it came up clean. Fast forward to this month, the seller signed an agreement that we could move into the property two days before closing so that we could vacate our current home and prepare it for the new owners. We moved all of our belongings and personal property into the new house. We were also granted permission to install our new kitchen appliances as well as a new hot water heater.

The day of our closing, we first closed on our old home and received our check for the equity (made out to the settlement company as we were closing on the new home several hours later.) 45 minutes before closing on our new home we received a call from our real estate agent that a lien was found on the property. After many conversations we have finally found out where the lien is. The neighbor lady took out a HELOC in 2011 and M&T Bank issued the HELOC with the wrong property. In the legal description it says "Lot 1" but instead of Lot 1 from her property, they took the parcel number of Lot 1 from the property we are trying to buy. The lawyer from our Real Estate Agency is talking with a liens lawyer at M&T, but they are unwilling to relinquish "our" property from the lady's loan because they they will not have collateral in her loan. They talked about Foreclosing on her house or a Deed in Lieu of Foreclosure so they would get their money back, but this also seem so wrong as it was their mistake, and also she has been making consistent payments on the loan every month. We were granted permission to stay in the house until December 13 and hopefully a resolution will come of it in the meantime, but this all seems so wrong on so many levels. The bank screwed up and yet they will not relinquish the property or try to make it right.

I am wondering what we can do to help this process along both for us as well as the neighbor. We are looking out for ourselves, but also don't want to see this lady lose her house because of a mistake. Also, we put over $6,000 of appliances in the home as the seller was sure we would be good to go. He had fixed it up to our specifications over the summer, and had no intention of putting it on the market. He had many opportunities to back out of our contracts, so it's not a case where we think he wants to get out of our contract. If he does, I am sure there will be some other legal route that we would need to go through because all of our personal property is in the house, we cancelled our storage unit contracts, and we now have no where to live (as of December 13.)

Any words of advice would be much appreciated.

When exactly did the seller learn of the (misplaced) lien - before or after the seller signed the agreement allowing you to move into the property two days before closing?

It can be a big mistake to move into a house prior to closing, as it is often at closing that problems with the sale will first arise.

 

[musicianamanda]

Our realtor was told on the day of our closing that the seller and his agent found out about the lien earlier in the month. They did not tell us or our realtor. He signed the agreement for us to move in early after he knew there was a lien.

 

[LdiJ]

One possible option is to try to negotiate a lease with the seller for whatever amount of time it will take for them to resolve the issue of the lien. Someone may have to sue the loan company to get them to correct their own error. The seller will have the same problem with any other potential buyer that they have with you, so they should be motivated to get the problem resolved.

 

[Taxing Matters]

The neighbor lady took out a HELOC in 2011 and M&T Bank issued the HELOC with the wrong property. In the legal description it says "Lot 1" but instead of Lot 1 from her property, they took the parcel number of Lot 1 from the property we are trying to buy. The lawyer from our Real Estate Agency is talking with a liens lawyer at M&T, but they are unwilling to relinquish "our" property from the lady's loan because they they will not have collateral in her loan. They talked about Foreclosing on her house or a Deed in Lieu of Foreclosure so they would get their money back, but this also seem so wrong as it was their mistake, and also she has been making consistent payments on the loan every month. We were granted permission to stay in the house until December 13 and hopefully a resolution will come of it in the meantime, but this all seems so wrong on so many levels. The bank screwed up and yet they will not relinquish the property or try to make it right.

Sucks for the bank. It doesn't have the borrower's property as security for the loan and while it will huff and puff to try to cover the mistake by getting money from someone, that someone won't be you. It has recorded a lien on the wrong property and if it fails to remove the lien you may sue them to force removal of the lien and for your costs in pursuing it. If you go to a real estate lawyer and have him/her send the bank a letter explaining the law and the consequences for the bank in refusing to remove the lien the bank is almost certainly going to quickly relent and take you out of picture. It's problem is with its borrower, not you.

When I was a revenue officer for the IRS I encountered a similar situation. The taxpayer whom I was pursuing to pay delinquent income tax owned two homes that they purchased about the same time and that were both in the same county. They used the same lender to mortgage both properties. I did the research and discovered that, oops, the bank screwed recorded the mortgages for both loans using the exact same property description, leaving one property with two mortgages on it and the other completely unencumbered other than the notice of federal tax lien I had filed. The bank tried all kinds of contortions to try get the incorrectly recorded on the unencumbered property. I didn't relent and got tired of all the excuses and finally told the taxpayers that if the tax liability wasn't paid by a certain date I was going to seize the unencumbered property and sell it for the tax owed. That would have left the bank with no leverage at all. My threat to seize the property panicked both the taxpayer and the lender enough that the taxpayer was willing to have the mortgages redone properly and the bank was willing to extend an extra loan to pay off the tax lien so I wouldn't seize the property. I got the money the government was owed and closed my case, the taxpayers were happy not to have me seize the home, and the bank was breathing a sigh of relief that it was able get both mortgages secured. My point with this is that you are in a bit of position of strength here because there isn't anything the lender can do to you but you can put pressure on the lender to get it to fix the problem.

 

[Litigator22]

* * * It has recorded a lien on the wrong property and if it fails to remove the lien you may sue them to force removal of the lien and for your costs in pursuing it. * * * My point with this is that you are in a bit of position of strength here because there isn't anything the lender can do to you but you can put pressure on the lender to get it to fix the problem. * * *

Aren't you overlooking the fact that given the current state of affairs the OP and her husband lack the required status of the real parities in interest entitling them to sue the lender in tort for slander of title; a title that is in someone else's name?

 

[quincy]

In what state is all of this happening in, musicianamanda?

 

[musicianamanda]

In what state is all of this happening in, musicianamanda?
[/QUOTE]
Pennsylvania

 

[quincy]

Pennsylvania

Thanks. I forgot to ask this question of you when I first responded.

Unfortunately your ownership of the property rests in the hands of others. It is up to the current owners to remedy the issues with the title so you can proceed with the closing. With some luck, and perhaps the threat by the current owners of a slander of title suit against the bank, you might be able to close on the property before December 13.

Following is a link to Forman v. Cheltenham National Bank, a Pennsylvania case that speaks to “slander of title,” a remedy mentioned by “Litigator22” for the owners to consider if an out-of-court solution is not possible.

https://law.justia.com/cases/Pennsylvania/supreme-court/1985/348-pa-super-559-1.html#:~:text=An action for slander of title safeguards an owner’s marketable,owner’s title to the property.