We polled our members to see what questions they have for asset managers. A few of our members want to know: Why isn’t title cleared before listing a property? Also, why aren’t tax, title, and lien searched before listing?
Clay Lehman, principal at Resolute Asset Management explains: Title is one of the more interesting aspects of a property’s life cycle. There are any number of title issues that can impact a property. Some are simple, taking very little time to resolve, and some are extremely complex and may take a very long time to reach resolution.
The primary reason that assets are not held off the market until title is clear is that the majority of title issues are cleared during pre-marketing or early in the asset’s marketing process. Asset managers make every effort to clear title as early in the process as possible, but often, there will be a minor cloud on title that for any number of reasons is not clear prior to marketing.
Clearing these minor issues is often as simple as obtaining a prior title policy, or contacting the foreclosure attorney. But at times, even the seemingly simple/straightforward title issues will turn out to require a more time-consuming solution. An example of this might be a prior interest in the property that is identified in the title search. Frequently, a simple request for information from the foreclosing attorney will clear this issue. However, if the party with the interest was not properly noticed in the foreclosure, there will be a more involved and time-consuming process required to clear the title.
The basic answer to this question is that it is not as simple as just saying, “We are going to wait for title to be clear prior to marketing a property.” This could potentially extend the amount of time a property sits vacant, creating risk for the property owner and the community. And as explained above, in most cases, it is not necessary. For the majority of properties, title is clear prior to marketing or cleared soon after listing.
It wouldn’t make sense to add an unnecessary delay to all properties due to issues on a few.
In regards to the question of why title, tax, and liens are not searched in advance of an actual listing, my answer would be that they should be. Our firm initiates a title search as soon as the property is brought into inventory. This includes a tax and municipal lien search. Then we run another when we go under contract. The only reason someone might not run a search at the beginning of the property life cycle is the cost. The investor may not allow for lien or tax searches until the property is under contract. The searches have to be updated as liens may record during the marketing process.