Title insurance not possible on a sub2? - Posted by BK in PA

Posted by ken on March 08, 2007 at 18:49:36:

You need to find an attorney who knows what he is talking about.The title company i deal with gives me title insurance in cases like this whenever i buy a sub 2

Title insurance not possible on a sub2? - Posted by BK in PA

Posted by BK in PA on March 08, 2007 at 18:34:34:

Ok, I have my first sub2 deal typed up, terms already agreed to with seller, and an attorney I met with today just sent me an email stating that " To obtain title insurance on the property, the bank or financial institution ('mortgagee") which holds the first mortgage on the property would have to agree to your assumption of the mortgage and the transfer of the property to you. "

This is a spin on the DOSC I had not heard of prior to now. Are sub2 deals really done without title insurnace or does the use of a land trust somehow alleviate this hurdle?

Title insurance attainable on sub-to - Posted by John Merchant

Posted by John Merchant on March 09, 2007 at 10:37:20:

I’ve seen lots of title opinions and commitments and full policies issued without any notice or inquiry to the lender holding the 1st, so IMHO that lawyer doesn’t know what he’s talking about.

Most lawyers haven’t been closely involved with REI in recent past and haven’t seen the happening of, or trend to, sub-to deals that we all know about from this website.

And those lawyers simply don’t understand that there are lots of sub-to deals happening all around them with NO notice to lender of any kind…and no foreclosures inasmuch as those lenders aren’t really upset so long as they’re being paid as agreed by borrower.

When I first realized some time back that sub-to’s were going on, my first thought was “how risky” and those sellers and buyers were just inviting disaster and foreclosures…and it took some time for me to get comfortable with the whole idea and then to start doing them myself.

Like Bill Bronchik’s great article on this website and others,(“No Due on Sale Jail”) so clearly states, it’s not illegal in any way for the seller to sell, or the buyer to buy, sub-to the outstanding loans and NO notice is required by law to be given to those lenders…and certainly no “permission” from those lenders is required.

So I’d tell you to proceed to demand full title policy by your Seller and tell him you’re NOT authorizing any copy of anything to go to his bank or anybody but you.

In this regard, you should understand that the big, national title companies’ Escrow Offices feel it’s their obligation to fully notify the lender on EVERY sale, regardless of my demands that they notify NOBODY.

So I won’t use those T companies’ escrow offices and now I use only independent (but fully licensed and bonded) escrow companies who work under MY written instructions agreed to by Seller and me…no “head office” to get in the way. And no notice to any lenders.

I do get a title pol on every such deal by simple call to TC of my choice who then sells the T commitment and/or policy to me with no info being given to anybody but me.

Re: Title insurance not possible on a sub2? - Posted by DaveD (WI)

Posted by DaveD (WI) on March 09, 2007 at 09:21:16:

The attorney, as usual, is wrong. Bad premise leads to erroneous conclusion. You are not assuming the loan.

The ownership has changed. You have the deed to prove it. Nothing has changed as far as the encumberances go. Pretty easy for a title company to insure. Pretty tough for an attorney to figure out. Doesn’t surprise me. BTW, title insurance is optional, but a good idea.

Re: Title insurance not possible on a sub2? - Posted by Luke

Posted by Luke on March 08, 2007 at 20:54:57:

In my opinion, the need for title insurance is in escrow closing states where title is not reviewed unless you get a title insurance policy.

In an attorney closing state, my attorney reveiws the title in full and I don’t buy title insurance.
He has an E&O policy to cover him if he screws up.