Title caught a 2009 HELOC nobody had released. We closed anyway.

$2,410 on $585,000 is about 41 basis points, which sounds normal for a residential-rate policy in a filed-rate state. Two things I want. First, did the underwriter charge you anything extra for taking on the HELOC, an indemnity fee or a holdback? Second, what were the seller's per diems? You wrote it like it was free to you and I don't believe closing costs ever move in one direction only.

@keystone An open lien of record and a paid-off loan are different problems, and the commitment only speaks to the record. If a 2009 line of credit still appears as an open mortgage, the underwriter treats the encumbrance as live until something recorded says otherwise. That's why the payoff letter alone rarely finishes the job.

Two paths get used most. The current holder of the note records a release or satisfaction, which is what happened on your file, and the chain matters because the release has to come from whoever holds the interest today, through whatever mergers or assignments happened in between. The other path is the underwriter agreeing to insure over the item, sometimes against a seller indemnity or an escrow holdback, sometimes for a fee. Whether that's available is a per-file judgment by the underwriter, not something you can count on when you write the offer. If neither works, clearing it becomes a legal question about the statute in that state, and that's a question for a real estate attorney licensed there.

On @ledger's point, the release recording mechanics and how long a mortgage stays enforceable of record both vary by state, and some states have a statutory process for releasing stale liens that others don't. Confirm what applies with your escrow officer and counsel in writing.

The thing your timing bought you was calendar. Nine days of servicer chasing is unremarkable for a lender that changed hands twice, and it's a queue you can't speed up with money. Ordering the search early is the cheapest risk control available on a purchase, and your outcome still rested on the seller staying motivated for eleven extra days. A less motivated seller cancels and you're out your inspection spend.

Question from the cheap seats: is the HELOC thing common or did you get unlucky? Because if paid-off-but-not-released is a normal occurrence I want to build it into how I look at every deal, and if it's a one in fifty thing I don't.

@kestrel it's common enough on older paper. I look mostly at raw land and I've seen unreleased liens sitting on parcels for twenty years, usually because the small bank that made the loan doesn't exist anymore. Nobody notices until somebody tries to sell.

The part I'm taking away is ordering title early. My agent said we'd "open title" after inspection and I didn't question it because I didn't know there was a choice. Is there a downside to opening it the day you go under contract, other than you might pay for a search on a deal that dies?

So the owner's policy is what pays if this kind of thing shows up after closing instead of before? I've been reading about notes for weeks and I still don't have a clean picture of who's protected against what here.

@vellum that's my understanding too, the owner's policy covers defects that existed before you took title and weren't found. The whole point of what keystone described is that they found it before closing, so nobody had to make a claim at all. Somebody correct me if that's wrong.

What happens if the seller says no to paying the $2,900 judgment? I keep building spreadsheets for the clean version of a deal and then a thread like this shows me the version where a line item just appears out of nowhere.

@windlass then it comes off your side or the deal dies, and that's the negotiation. From the lending angle the more interesting question is that no lender funds over an open lien of record in first position ahead of theirs. So keystone's timeline wasn't only about the seller's patience, the loan couldn't close either. Which means the escrow officer's nine days of phone calls were carrying the whole transaction.

Dumb question that I actually want answered. Who was paying that escrow officer for nine days of work? Was it inside the $1,180 or does chasing a release chain get billed extra?

@compass usually it's inside the fee, which is why the good escrow officers are worth finding and why the cheapest quote isn't always the cheap one. The boring answer to this whole thread is order title early and answer the phone.

Six units and eleven days of extension is survivable. Try this with a 1031 clock running and the eleven days is the whole deal. @keystone did you have any deadline behind the closing date, or was the only pressure the seller's patience?

The bit I'll remember: the release had to come from a company two names removed from the one on the document. That's the sort of detail that never shows up in the pretty version of how a closing works.