Has anyone ever heard of this happening?

We are in contract to buy a house and we just found out that there's a lien on it from a 19 year old mortgage. So basically the person who owned it before the people we are buying the house from didn't have the mortgage paid off when the current home owner bought it. Now they are trying to find this person. Does this make any sense? How can you buy a house if there's a lien on it? Our contract says we are supposed to close on or around October 1st and now I don't see that happening.

Re: Has anyone ever heard of this happening?

The current owner should have something called title insurance. What this policy is for, is to ensure that they have a clean title. Somewhere along the time of purchase, someone did not do their job properly to make sure that the mortgage claim was satisfied from the deed of the home once the home was sold. The old owner, or their bank should hopefully have held onto the mortgage payoff letter. If the attorney can reach the person, and that person has their letter, then it is simply a matter of filing the correct paperwork. If they cannot find the person, or if they died, then does the bank with the original outstanding mortgage still exist? The title company may be able to contact the bank to search their archives for the mortgage pay off data.

Now, let's say there was a complete and total screw up. The original closing gave all the money to the seller and the seller said he would pay of the mortgage, but he did never did. Then title insurance would come into play here too. Hopefully, this third option is not the case.

Just so you know, ten years ago we purchased a home that had six outstanding mortgages because the prior owners attorney royally screwed up. We still closed on time and everything was able to be fixed. We were also able to sell that home and it had no title issues when we sold it.

Message edited 9/18/2015 3:50:22 PM.

Re: Has anyone ever heard of this happening?

Thank you for the reply. I'm happy to hear you were in a similar situation and everything worked out for you!

Re: Has anyone ever heard of this happening?

It's a title insurance issue. Find out which tile company was used and they should be able to track it down. My dh works in the commercial underwriting title industry and this happens all the time. Sometimes deeds and pay offs don't get recorded or documents get destroyed in fires ect. Something that is that old and from 2 owners ago may be able to written off if the title company you are using feels secure in that. Even if they can't find the person they can usually get info from the bank that gives them enough information to omit it in your policy. I wouldn't get too worried title companies are very use to this and know what to do.

Eta once you get hold of the documentation saying who the bank was and when and where the pay off was filled hold onto. Sometimes even if your title company clears it the issue can reappear when you go to sell. You don't want to have to search again for it.

Message edited 9/19/2015 4:09:21 AM.

Re: Has anyone ever heard of this happening?

Something similar is going in with my aunt and uncle. Apparently, when th sellers paid off their mortgage years ago, the title was never properly filed. Similar situation, different circumstances. So far, the sale has been delayed a little over a month and they hope to go to closing soon. They had to add to the contract that the sellers would pay a month of the cost of their furniture storage and interem rent, as they are more than 30 days past the "on or expected" sale date, and are living in temporary quarters.