Title Company not standing behind information provided

Has anyone else been on the short end of a title company not standing behind their work? Like many, we are regular purchasers of foreclosures - over 250 in past year alone - and we rely on title companies to provide us with tax/title information. We recently acquired a property where the title company informed us the TD was in 1st position but it actually turned out it was in 2nd. When we contacted the title company - whom we’ve done 100’s of transactions with - they basically were unapologetic and said sorry - we make no representation of the accuracy of our work. Now we are out over $150k.

Hi Jeff,
Unless they are insuring the transaction (and you are purchasing a title policy) they are only giving you a verbal based on a general index search. This is just an opinion and is not guaranteed. This is why Sean O’Toole so emphatically states that you MUST know how to do your own title research unless the person/entity you are relying on is willing to cut you a check if a mistake is made.

Hello Jeff,
I am sorry to hear for what happened. Again, i agree with Michelle that it is always good to do own title search, but i understand sometimes it is hard.

My name is SImon and I work for Advantage title. For last 2-3 years, with about 500 deals i have closed with many people, I have not made any mistakes yet. My people who do title search has more than 25 years+ experiences in title. (they were title officers) I would like to ask for a chance to do your title search and help you buying. Please give me a chance. BETTER THING! My title company offers 50% rate on title fees. Can your title company match??^^

SIMON WU
simonwu01@gmail.com
626 589 8822

To the OP -
There are 2 types of bidders at sales these days:

  1. The few “old-time” professionals who have been around since long before 2007 - perhaps for decades.
  2. The hordes of new bidders who don’t realize all the pitfalls and risks involved. They are often bidding close to retail because they don’t know the risks.
    The old time professionals know you shouldn’t bid over 75%. 80% of value, tops.

My guess is you fit in the 2nd group. My main question to you is: Were you the only bidder? Did any professionals bid? If not - did it occur to you why the professionals didn’t bid?
In many counties the professionals won’t clue in a non-professional they are about to be had. In some cases it doesn’t do any good. There was a sale in Oakland last month where a non-pro qualified to bid. To suck him in further, one pro qualified, but of course didn’t bid. No one would tell him he was about to lose close to 50-75K. (His bid was 150K but he’ll get some back upon sale.) As he was placing his bid I told him he shouldn’t be bidding. He didn’t listen. He should have realized that no one else was bidding and I had nothing to gain by telling him that. What made him think he could get a property at 30-40% of value w. no one else bidding. There are always 15-30 bidders when sales take place.
What happens more often is that what might appear to be a second is really a first. During the loan frenzy a few years ago lots of reconveyances were never processed. Thus, loans that are paid off still show on the record.

no we fit in the first category of old time bidders - and if you’ve been doing this long enough your bound to buy a 2nd now and then - just ask around. This particular instance, everyone was bidding as all the title companies missed it. My issue is we pay the title companies $100’s of thousands each year and they aren’t willing to stand by the information they provide. That isn’t right and the lack of accountability is criminal.

Just curious Jeff if the “missed” 1st (causing you to unknowingly buy a 2nd) by all of the title cos (as everyone at the steps, as you say, was bidding), was an old HELOC? I’m finding that many title companies have been sloppy in confirming the reconveyance (payoff) of HELOCs and have issued clear title when and old HELOC remained open. It seems that many title companies rely on the work done by other title companies …hence an error can be compounded until it rears it’s ugly head further down the road. The other day I came across a NTS that was for an old un-reconveyed HELOC that was foreclosing, and this particular HELOC was take out two (2) owners previous to the current property owner. The current owners must have had a shock when the NOD/NTS was posted on their door. This one was cancelled relatively quickly as the title company apparently made good on there error and paid off the HELOC.

We all have taken losses.
I think Trustees should be required to make TSGs available to prospective bidders. The title companies now charge huge fees for these. In the past, a Trustee, for $50, could simply order what was called a “letter report” - a report that just showed the parties (owners and juniors) that had to be noticed. Even full TSGs, which most Trustees did order, cost $250-$300. Now they see a huge windfall to be made and have tripled the charges.
This is a windfall for title companies because there rarely are challenges/claims made for failure to disclose to the Trustee all the parties entitled to be noticed. It doesn’t matter if they miss a senior.

Couldn’t agree more Mike. As always, thanks for your great comments!

Thank you all for your feedback. We will be litigating this and let you know how it turns out. In short, I don’t think it is acceptable for the title companies to have no recourse for providing bad information.

I believe too many auction investors are relying on calls to someone in customer service at a title company right now for their “title research”. Sure these folks have access to the thin title plants (DataTrace, Property Insight), but who knows how well trained they are, especially on deeper title issues. Typically these aren’t the folks that prepare pre’s every day, and they certainly are NOT the title officers that have to sign off on real title policies. I believe learning how to do a proper title search yourself is critical in this business, but even then, anyone who regularly buys at the courthouse steps will ultimately find themselves facing a loss over a title issue sooner or later.

Jeff - if you do litigate this it will likely result in the title companies no longer allowing their customer service desks to do this for you, and for that matter anyone else. As such, please carefully weigh the profits from your 250 deals and how ready you are to do your own title research going forward against the loss on this deal. I wish you the best either way. I’ve faced this a couple of times myself and it really sucks.