Have you ever gotten and approval on a short sale to only find out a week before settlement there is a cloud in title? This is happening more and more every day, and can be avoided if a simple title search is done at the beginning of the short sale process. More times than not, homeowners who have trouble paying their mortgage have had trouble paying other bills, and before you negotiate for 30-60 days in a short sale, this is information you need to know. In some cases the liens may prevent the house form settling period. Depending on what state you are in, the homeowner may have to get a lawyer involved to handle active liens. One good thing about the HAFA program is in cases I have handled, lien holders were paid based on HAFA guidelines, which made things simpler (not referring to second mortgages) I personally have run into many homes that have HOA liens that have to be taken care before the property can settle. Some banks actually require you to provide a copy of title before moving forward with the short sale now. Others like Wells Fargo, are starting to pull title their self. On cases where the banks will pull title, I still pull title myself because will the volume of short sales there are doing vs. the staff they have to handle it, they can make mistakes (Robo-signers ring a bell?!). Case in point, I just had a short sale with Wells Fargo where they pulled the wrong title!! Pulling title early can eliminate problems later on for you in a short sale and make you aware in case in the process to handle.
So, who pays for a title search? I personally have a lot of attorneys that I work with that will pull title for me, in exchange for business I send them. So in my case it is a service I provide to the transaction for free. This, I know may be unique to my situation so I would advise to get the Buyers settling attorney to do what is called a “Bring to date” from the last chain of title to the current owner. This is not a full title search so if the property doesn’t settle there isn’t a huge cost involved, but can determine if there has been a lien put on in conjunction with the latest owner. If the buyer doesn’t want to foot the bill this may be something you as a selling agent look into to strike a deal with a local attorney or title company. They give you a reduce fee, in exchange for sending them settlements. Agents in my market that I have trained and work with said they have gotten agreements to get bring to dates for $40. That is well worth it, as it can alleviate serious potential issues down the road. This is one step I would not look over as it can save you time, money and headache when dealing with short sales. Good Luck!!