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posted: 8/4/2012 5:14 AM

Lawyer can clear up 'cloud' on the title

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Q. We bought our home many years ago. We paid cash and did not get a mortgage, so nobody required us to have a title insurance policy, but we bought one just to be safe. Now we are trying to sell our house, and the buyer is backing out because our title may be questionable. What is the obligation of the title insurance company? Aren't they supposed to help us at this point?

A. Your title insurance policy states which unknown things in your property's history you are insured against (forged documents, incompetent granters, for example) and which specific defects, or "cloud" on the title, the company has already found and will not insure against. You may want a lawyer's help in reading over the document and deciding if you could use a suit to quiet title.

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Q. I recently put my house up "for sale by owner." I had it with a Realtor for almost two years, but all the offers coming in were way low. So taking it off the market and doing "for sale by owner," I could drop my asking price. I have my first walk through tonight. I am really nervous. I am fine with doing my own marketing and negotiating, but what if he wants to buy it? That is when I get scared. I have spoken with a gal who is a lender's agent who said she would help me with the paperwork.

Do you have a list of things I should do so that I know I am taking care of everything? Any suggestions would be great.

A. A beginning real estate salesperson must spend many hours in the classroom on topics like real estate law, finance, law of agency, environmental regulations, human rights legislation and the like, and pass examinations. After that, the salesperson is licensed to work only under the close personal supervision of an experienced broker.

So I'm afraid I can't tell you what to do in a couple of paragraphs. My book on "Selling Your Home" runs to 256 pages. You need to spend some time in the local library and on the Internet, researching real estate brokerage and the state's regulations in particular.

But don't bother negotiating face to face. Nothing is binding in the sale of real estate unless it is in writing. If someone wants to buy, tell them you'll gladly consider any written purchase offer. They can hire their own broker or lawyer to draw up the paperwork.

I will tell you one danger to watch out for -- getting your house tied up in a contract that eventually goes nowhere because the buyer isn't financially able or isn't sufficiently motivated. You'll be safest with a buyer who has already been preapproved (not just prequalified) for any needed loan.

I can't imagine that "lenders' representative" is legally authorized to help with a sales contract. Perhaps you can find a real estate broker willing to step in for a reduced fee, or perhaps by the hour, to assist you. Otherwise, you'd better involve your lawyer from the start.

Q. The home we are selling has a home inspection completed, title work all set and appraisal finished. The appraisal came in $9,000 below selling price, but the broker says the buyer has decided to go forward with the purchase. The closing is supposed to take place in two weeks. I am uneasy that we have nothing in writing (official) stating the buyer is committed to this purchase other than emails from her broker. In the next two weeks, can the buyer back out?

A. Probably. It's likely your sales contract gives the buyer the right to void the contract if she can't get a mortgage loan, or a specific amount, which would be based on the appraised value of the property. If she's looking for a VA or FHA loan, she can void it simply for a low appraisal.

It's quite possible the buyer does indeed still want the house, but there's some question about whether the agent's email assurances bind her legally. I'd want an explanation of where the additional money is coming from. Is the buyer requesting a reappraisal? Putting up $9,000 more as down payment? You have a right to know what's going on. You can certainly ask for something that will let you sleep better for the next two weeks.

Q. My house is in both our names. Would we be wiser to put the house in one name for future tax advantage or whatever?

A. No. Not for tax advantage, and not for whatever.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

2012, Creators Syndicate Inc.

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