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When buying a home, the devil is in the details

One of the contingencies written into the Residential Purchase Agreement in California is Section 13 – Title and Vesting.

It specifies:

“Title is taken in its present condition subject to all encumbrances, easements, covenants, conditions, restrictions, rights and other matters, whether of record or not.”

The section goes on to list the following exceptions: monetary liens of record (which seller is obligated to pay off) unless buyer is assuming those obligations or taking the property subject to those obligations; and those matters which seller has agreed in writing to remove.

For buyers, this means that when you receive a copy of the Preliminary Title Report (known in industry jargon the as “the prelim”) in the beginning of your escrow, you should read it.

Yes, there might be some language that you are not familiar with, some new terms and some legal notations you don’t understand. That’s okay. There are resources to help you.

Here’s a brief breakdown of what might show up on the prelim and whom you might ask for clarification.

The water, electric, gas and cable companies often have easements to access their infrastructure, devices and meters on your prospective property. You can’t fight these, nor do you want to, in most cases. This is just a disclosure that people from these entities are allowed access to your property to keep their services in working order or to prevent disaster.

If the property is in a planned unit development like a condo complex or a gated community, there might be a homeowner’s association with covenants, conditions, and restrictions dictating what you can and can’t do outside and around your home. You will receive the documentation of these during escrow, and you should read those as well.

If you have any questions, there will be a contact phone number for the HOA or property management company. Don’t hesitate to contact them.

If the current owners have a mortgage, this will show up on the prelim with the original loan amount and the date it was issued. This may not be the amount the sellers currently owe, especially if the loan was taken out several decades ago. If this is a concern or a curiosity to you, you might call your escrow officer to find out the current loan balance.

Finally, if there are liens on the property, these will have to be resolved before the Title Insurance Policy can be issued.

Who can put a lien on real property?

Well, for starters, the Internal Revenue Service and the California Franchise Tax Board for any unpaid back taxes. The homeowner’s association can also record a lien for any unpaid HOA dues.

And let’s not forget the Department of Justice, which can place a lean on the property for any unpaid judgments.

If any of these show up on the prelim, call your agent or your escrow officer to find out how the seller is planning to clear them off of the title and how long that is likely to take.

Leslie Sargent Eskildsen is an agent with RealtyOne Group West. She can be reached at 949-678-3373 or leslie@leslieeskildsen.com.


Source: Orange County Register

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