What legal recourse do you have if you purchased real estate that has a lien on it?

Question

We purchased a piece of property-it was a burned house and we bought the whole thing for 10K-with the intentions of immediately turning around and selling it to an interested builder. We did not do a title search (I know-not smart) and now we have discovered a 5K lien on the property from the previous owner. We are acquaintences with the sellers and if there is nothing illegal about transferring the deed without a clear title then can we sue? We obviously don't know what the heck we're doing and we're in quite the pickle! We are supposed to close with the builder on Thursday! Help!

Answer 1

I bet you paid cash, and unless the sales contract SPECIFICALLY stipulated that the transfer must be made with clear title, then you have absolutely no recourse.

Did you purchase title insurance?  Probably not....and title insurance (had you bought it) on a $10K property would probably have cost you about $150.00...and would have PAID the $5,000 for you.

Now you know why buying a house is not a do-it-yourself project unless you really, really know what you are doing.

You can't close with the builder unless YOU PAY the $5,000.

You are going to get sued for breach of contract b/c I guarantee the builder was smart enough to get YOU to sign a contract stating that one of the conditions was clear title...if you cannot provide that, you are in breach of contract.

Answer 2

You ARE in a pickle, and there is nothing you can do about it, save for clearing the lien yourselves prior to closing with the builder.  You have ZERO recourse other than asking your 'acquaintances' if they would make good on the situation.  If they refuse, you're out the money.

Yeah, you're right.  It WAS stupid to buy without checking the title first, but since you didn't check, you bought the place complete with the lien.

Answer 3

You bought the property subject to the lien.  That's why God invented title searches.

You either sell the property subject to the lien or you pay off the lien.  And no, you have no basis for a lawsuit.  Face it, you were negligent.

Answer 4

If the conveyance was by quitclaim, then you have no recourse.

If it was by general or special warranty deed, then you MIGHT have recourse against the seller, depending on your state statutes.  Talk to a real estate attorney.