It was a day like any other day at Realty Title in East Brainerd when a man walked in and handed one of the employees a piece of paper.
“This is related to one of the properties you’re selling,” the visitor told the worker.
Cristina Rance, a closing coordinator with Realty Title, says the man didn’t realize the property – a piece of local land valued at $35,000 – was slated to close at the company’s Market Street office. He also had no idea he was trying to pull the wool over the eyes of seasoned professionals.
“The piece of paper was a $6,000 lien on the property,” says Rance, who works out of Realty Title’s Market Street office. “He claimed he’d done work on the property but the seller hadn’t paid him.”
Six grand is “a big chunk of change,” Rance notes, so she called the listing agent to inform him and to learn more about the situation. As luck would have it, the Realtor had already sniffed out the truth behind what he said was a fraudulent lien.
“The lien made it look like the man actually had done work on the property. It provided the company’s name, dates and specifics,” Rance continues. “But not only had he not done any work, he’d also placed pallets and other junk on the property and used heavy machinery to tear up some of the land.”
The man had tried to purchase the property before the current buyers and had gone as far as paying a $5,000 nonrefundable deposit, the Realtor says. The seller then held the property for three months while the man tried to secure financing. When he failed, the seller terminated the contract and the man lost his deposit.
In an apparent attempt to recoup his losses, he then completed an online form for the lien and paid $12 to have the register of deeds in Hamilton County record it, Rance says.
“And there we were, three days before we were scheduled to close with the new buyers, and we had a lien on the property,” Rance adds.
One might wonder how the man was able to place a lien on a property for work he’d allegedly never done. Rance says there’s nothing in place preventing someone from tossing a wrench into the works of a sale.
“Maria could be here, working, and I could cut the grass at her house and say, ‘You owe me $1,000 for mowing your lawn,’” Rance says, referring to Realty Title closing coordinator Maria Dedmon. “And she could say, ‘But I didn’t ask you to cut my grass,’ and I could say, ‘Well, I want $1,000 for mowing your lawn so I’m going to place a lien on your property.”
Not only can any entity place a lien on a property without having to jump through a single bureaucratic hoop, but removing a fabricated lien can leave the victimized party feeling like it’s a no-win scenario.
In this case, the seller contacted a lawyer to inquire about his options. The attorney assured the seller he’d easily win a lawsuit that fought the lien, but taking legal action would delay the sale of the property to the new buyers, possibly for months, and cost a pretty penny.
So, the seller paid the man $2,000 to sign a piece of paper saying he released the lien. “The seller didn’t want to risk losing his buyer,” Rance explains.
Liens are often hidden, like snakes in grass, but are not difficult to uncover. The underwriters with which Realty Title and similar companies work generally discover them while performing title searches, while the staff at title companies might unearth one while pulling tax records, spotting a bankruptcy, or finding a deed of trust on the Register of Deeds website, Rance says.
Although liens are an inconvenience, Rance continues, clearing them is part of a seller’s duty to ensure a title is in order before the prospective buyer purchases the property from the seller.
Realty Title endeavors to assist its clients with releasing liens against their property, which is no small task considering up to 70% of properties have an issue, says Realty Title closing agent Angie Herndon.
Fortunately, not all of them involve significant obstacles, she adds.
“The title work for one release showed there was still a lien of record. There had been a mistake on the first recording of the lien and the lienholder had to refile it, so they recorded the lien twice. They released the refiled document but not the original document. They should have released both.”
Resolving the matter required Herndon to don her detective hat – a proverbial fedora every closing agent keeps within reach – and make a few inquiries. But from time to time, a closing agent will encounter a lien so entangled in administrative rope, they need a sailor’s skill for untying knots to put things in order.
Rance’s fingers are still sore from unraveling one especially thorny problem in February.
The matter involved the sale of a piece of private property to the state of Tennessee. The lien harkened back to 1987, when the city of Chattanooga’s now shuttered Better Housing Commission charged the owner $834.70 for demolishing a dilapidated building on his land and then filed a municipal lien against the property after he let the bill languish.
Because the owner still had not paid the city for razing the rundown edifice, the lien remained in effect and needed to be released in order for the sale to close. That was easier said than done, Rance says.
“In Tennessee, it’s the seller’s responsibility to clear all liens. Our clients were willing to write the check but didn’t know where to begin.”
Rance started online and saw that the Better Housing Commission was no longer operating, so she called the city of Chattanooga. The person who answered her call transferred her to the office of the city attorney, where someone put her in touch with the chief code inspector.
As Rance interfaced with city officials, it became apparent she was trying to loose a Gordian Knot. The property at the heart of the matter was actually a parcel on another piece of land the owners had subdivided. And because the owner had purchased all of the tracts individually, the property essentially didn’t exist, the Register of Deeds reported.
But to provide a clear title, the seller needed to clear the lien, Rance continues.
Through additional detective work, Rance located another parcel attached to the property and then took a field trip to the code enforcement office to connect with someone face to face. Her extra legwork paid off, as she spoke with an individual who later sent her the release.
“They released the lien because it’s 35 years old and the commission is no longer in place,” Rance explains. “I felt like I’d won the lottery.”
Scant options were available to the seller if the code enforcement office hadn’t released the lien. Herndon says “the rare title company” will have an in-house attorney with enough errors and omissions coverage to risk having to assume financial responsibility for a mulish lien if someone crawls out of the woodwork and says they own it.
Pamela Underdue, another closing agent with Realty Title, says the seller also could have hired an attorney to pursue a quiet title action – a legal proceeding used to confirm the owner of a property.
“Those are an option when you can’t obtain a release on a lien and no one will insure it,” Underdue explains.
For the closing team at Realty Title on Market Street, most transactions proceed either smoothly or with only a minor bump or two, Rance says. Yet each agent has a stable of stories about stubborn liens or scams.
Underdue, who’s been doing title work for 35 years, tells the tale of a Realtor who was suspicious of a seller who continually put off presenting his identification to her. Since the brokerage had previously sold the property, the agent pulled the file, checked the driver’s license of the buyer and then called him.
A different man answered the phone and assured her he was not selling his property.
“Someone was trying to sell his property out from under him,” Underdue says, shaking her head in disbelief, as if she’s hearing the story for the first time instead of telling it.
Herndon can remember a case from the late ‘90s in which the adult son of the sellers filed a lien against the property his parents owned because he didn’t want them to sell the house.
“He was living with them, and when they listed the house, he filed a lien for a long string of nines (a high dollar amount),” Herndon recalls. “The attorney in that case took the risk because he said it wasn’t a valid lien and it would never become an issue.”
Although the occasional property will have an obstinate lien against it and the rare fraudster will try to manipulate the system, property buyers and sellers can have confidence in the closing industry and the processes that are in place, the agents of Realty Title unanimously declare.
The man who tried to sell the property that didn’t belong to him encountered a Realtor who followed privacy policies and stopped his scam before it gathered steam. Likewise, closing agents work closely with underwriters and attorneys to ensure a seller has a clear title.
Realty Title and its competitors also sell title insurance, a one-time charge that covers a buyer up to the date of closing. Underdue urges people who purchase real estate to obtain title insurance, which unlike car insurance is not required by law.
“You might purchase a house three siblings inherited from their deceased parents, and even if two of the siblings sign the papers and you close, the sibling who didn’t sign the papers can come back and put a lien on the property. Title insurance protects you from the unexpected.”
Buyers can take additional steps to protect their investment, Herndon says, including saving every email and scrap of paper related to their purchase.
“I had a closing in which the seller had paid off their mortgage more than 25 years ago, but there was a lien against the property,” Herndon says. “The seller brought in some old paperwork, including the original release. The lender had mailed the release to him with a letter, and even though he didn’t understand the terminology, he’d held onto it.”
An elderly widow whose husband had been dead 20 years was less fortunate when she tried to sell the house they’d lived in. He’d tended to their financial matters, Herndon says, and she didn’t know who they’d paid.
“We had to put on our detective hats for her,” Herndon says.
Rance also recommends every property owner register with the Hamilton County Register of Deeds Property Alert System, a free service that notifies users when a lien is placed against their property.
Located at register.hamiltontn.gov/OnlineRecordSearch/Home/IndexNotification.aspx, the form requests only the property owner’s name, contact information and the address, making registration quick and easy.
“If the seller [of the $35,000 property] had registered for this service, he would have learned about the lien the man placed on his property immediately, not three days before we were scheduled to close,” Rance says.
Plus, Rance and the others affirm, he would have rested easy knowing he’d taken a small step to protect his investment.
“You can’t put a price on peace of mind,” Underdue says, “especially when it comes to the largest investment you’ll ever make.”