Clear Title ? ...who Cares
I've identified a property which would be quite a good deal but the husband has a couple of judgments against him for around $8000 which would make the deal...not so good.
Anyways, this property would be a rental property and I'd like to hold it long term. So, I was thinking....why couldn't I purchase the property despite those judgments. Who cares about a clear title if I never plan on selling the property? I'd rent it out for the rest of my life or maybe try to settle with the judgment holders some time down the road.
Anything wrong with this approach?
Maybe this has to do with the following question (which is maybe covered in other posts): Do judgments on the homeowner(s) necessarily cloud titles? How do they attach to the property as a lien?
Not familiar with your area, but I believe (not 100% sure though) that a judgment against "A" can't be recorded against real estate if title is held by "A" and someone else. In PA, when a judgment is entered, the creditor "executes" on the judgment--that is, tries to find all assets (real and personal property) owned by the debtor and attaches them or, in the case of real estate, records a lien.
As for your not getting title insurance... When buying any property, you should always think like a seller because someday you will be one. You cannot predict the future and cannot say unquestionably that you'll never sell. I would want to have the title insured and all recorded defects removed before I took title.[ Edited by NancyChadwick on Date 03/24/2004 ]
Maybe buying title insurance would be a good idea even if the title isn't clean. The title ins issuer can always leave that as an exception, right? Meaning they'll insure title except for things they say they won't. Over even just the last 5 years or so they've continued to exclude more and more things anyways as I understand it.
Are you quite averse to buying property if the title isn't clear? Have you ever taken title "subject to" or sub 2 any other encumbrances? I would think that you could get some really good deals if you're willing to take over property that has some title issues. You can still get title insurance to protect you from the unknown things. And then the things you *do* know about you can incorporate into the price you pay and maybe attempt to clear them up later.
I would not be comfortable taking title to a property where I knew that title was not good and marketable. I suggest you contact a title company and pose your hypothetical to them and let them tell you if they would insure or to what extent they would insure the title to the property.
I agree with Nancy. I would like to add the thought that life can be very unpredictable. We don't have crystal balls to see our future circumstances. Things can and do change overnight. Prudence is crucial to our existence. Z
1. You will not be able to get a loan on the property as the judgement would be senior to the mortgage.
2. Should the debtor ever decide to act on the judgement and collect, you could lose the property though a foreclosure type process. The process is different for every state but it is only a matter of time before they can take your property.
Good job thinking outside the box but unfortunatly this isn't the best idea.
Thanks for the feedback. The only way I'd consider buying a property with a judgment outstanding on the current owners is if it was still a good deal if I ever ended up having to pay it off.
But, that kinda gets to my last question in my original post. Do judgments on the homeowner necessarily cloud the title? These currently are just judgments on the people themselves. There is no lien attached to the property. If I bought the property and got title in my name (or LLC or trust or whatever) how might the judgment end up getting attached to the property as a lien? ...especially if it's now in my name?
As I believe it has been posted by several people above, it may be possible for a judgment against a property owner to be recorded as a lien against that property. You indicated that that hasn't happened yet, but it could happen. Once again, I suggest you talk with a title insurance company about the extent that they would insure title and also to explain to you whether a "personal" judgment can attach to the debtor's real estate as a lien.