Selling Your House - An Important Tip about Title Preparedness

When a person decides to sell their home, typically, they begin by cleaning out years of accumulations and unneeded items so that the house doesn’t appear cluttered.  One often will hire a broker, accept an offer, and with any luck, the home quickly goes into contract.  While this is happening, it is not uncommon to spend time looking for a replacement home, sometimes in another city.  A typical house sale happens in approximately 60 days, so there is not much time to waste.  In New York, Purchaser’s counsel will typically order a title report which becomes available to the parties within a couple of weeks after contract is signed.  While all involved hope for a smooth process and closing, upon review of the title report, you may instead receive a call from your attorney who advises you that your title report or lien search revealed an issue which may delay closing or ultimately result in the purchaser canceling the contract. 

A title report outlines vesting of title, the existence of liens against the property, including but not limited to mortgages, judgments, covenants and restrictions, encumbrances, taxes, and tax lien information, all affecting title to the property.  The report also includes a property description detailing the property’s location, it’s boundaries and its relation to nearby streets and intersections, along with a survey and survey reading and/or inspection, and, if it is a condominium, the description will also provide pertinent information such as the lot number of the specific unit, percentage of common elements, storage facilities and parking space(s), if any, appurtenant to the unit.  This is generally referred to as the “abstract”.  Additionally, most if not all title orders will include municipal searches, which are not part of the “title” search or “abstract” but rather are provided for information only, and generally include Certificate of Occupancy search (“C/O”), Violation search, Emergency Repair search, Housing and Building search, Highway Search and Street report, Bankruptcy search(s) and more recently, Open Permit Search, and Patriot search(s).       

Before they prepare and send out a proposed contract, most experienced real estate attorneys will ask the client for copies of their most recent Deed, Title Insurance policy, Survey, C/O, most recent mortgage statement, and if the mortgage was satisfied, a copy of the satisfaction of mortgage[i] and any other document the attorney deems necessary.  If the transaction involves a cooperative unit, these may include a most recent loan statement and maintenance statement, and if paid off, a copy of the recorded UCC-3 (release of lien), as well as the original stock certificate and the proprietary lease.   

As attorneys, a common problem we encounter here is that the above items were either misplaced or discarded in the past, or perhaps neatly packed for your impending move, or worse yet, they were shredded and discarded with the rest of the accumulations.  Either way, they are now unavailable.  The secret here is to be prepared.  This is not only applicable to sellers but to brokers.  Earlier in this column we discussed typical preparations before placing the house on the market, which would likely result in a quicker sale and at top dollar.  Likewise, as important as the need to prepare the house for sale is the need to review all your documents and to organize a “house file” prior to clearing out the house of unwanted items.  

If you are unsure about anything you see or don’t see, consult with your attorney, or better yet, schedule an appointment to meet with your attorney to review the relevant documents while you are preparing your house to be marketed.  The earlier you bring it to your attorney’s or broker’s attention, the sooner you will be put at ease, or if necessary, the sooner we can begin working to rectify the issues.     

These issues have become more common for various reasons in recent years.  While most title issues can be addressed by connecting the title company that originally insured your title with the purchaser’s title company, or, by providing affidavits satisfactory to the insuring title company, not all title or C/O issues are that simple to resolve. While performing this due diligence will not preclude delays due to title issues, they certainly put you and your attorney on notice of the issue(s) and will give you and your attorney a head start in resolving these issues, so that the transaction proceeds as smoothly as possible under the circumstances.  In some cases, your purchaser can assume the risk by alerting them to it in advance of signing the contract and adding language accordingly.  Once you are in contract, it is usually much harder to convince a purchaser to take on additional risk, especially without compensation.

A real estate transaction should be non-adversarial and, whether you are buying or selling, should be an exciting experience as you move on to a new phase in your life.   The most agonizing position to put yourself in is to believe that everything is going smoothly, only to realize you were not prepared.       

[i] NYC has gone digital and many of these items may be available online, but not all documents are uploaded.  Many other jurisdictions are also slowly moving in that direction, but records are far from complete.  In almost all cases, a full title report is recommended by our firm.      

Prior results do not guarantee a similar outcome. All information posted is general advice only, based upon the rules of NYS, and is not intended to be a substitute for personal legal advice. Although information provided here was accurate as of the date of posting, laws change frequently and rules in other jurisdictions may differ. Therefore, readers should not rely upon these postings but should consult an attorney to discuss their specific factual situation.