Surprise! Liens on your prelim – breath first and don't fuss
When it comes to closing escrow quickly and smoothly, it’s always best to get ahead of the game by ordering your preliminary title report prior to opening escrow. Most importantly, when reviewing this preliminary report, keep in mind the word “preliminary” truly holds meaning with this report.
The prelim typically has items that are meant to be cleared during escrow, and the most concerning are unsecured or involuntary liens such as tax liens or judgments.
These types of liens are not found by researching the specific property but rather by searching an index of files associated with a name.
Unknowns
When seeing these liens in a report, you must consider that the title company does not yet know anything about the homeowner, other than where they live and the property they own.
We haven’t yet received a statement of information that helps us cross-reference key facts about the homeowner to decide whether such liens need to be satisfied.
If we find a lien against any person(s) with the same or very similar name, we have a responsibility to disclose this in our first issued prelim.
This is crucial to you later achieving that quick and smooth closing. With this in mind, consider that a lien such as a child support or tax lien may not be your home-seller.
Execution
Let’s face it, in this market, every deal is important, so when liens show on that prelim or even when they don’t, the best course of action is to have the sellers fill out a statement of information early on and submit it to the title officer for review.
If you are a real estate agent stepping in to help with this, consider opening a pre-escrow with a preferred escrow officer or having them connect directly with the title officer. If you don’t want to show them the report with the lien prior to us clearing their statement of information, you don’t have to. It’s best to confirm whether we’ve found the lien(s) to be a direct match.
If a lien does match and we found it early, congratulations… You have done some very proper due diligence, and title and escrow can work to resolve the lien before you start a 10-day all-cash escrow.
Takeaways
In closing, here are the key points and tips for having a smooth closing:
- 1
Order the prelim ahead of opening escrow. - 2
Have the seller complete and turn in all basic forms and requirements, such as a statement of information, owner’s affidavit, and applicable trust or entity document. - 3
Consider starting a conversation with your escrow officer to get involved in these requirements. - 4
Remain calm and explain all of this to your client as “due diligence”, to maintain integrity and respect.
Support
If you have a new listing coming up, I’d be honored to work with you and help get all of this started. If you are already working with another title but aren’t getting proper answers, feel free to run your situation by me.
I’m always here to provide clarity with title-related matters.
