One of the most important relationships title agents forge is the one with realtors and real estate agents. In addition to providing clients with prompt and efficient service regarding the title search, real estate agents are looking for title companies that will value their clients and look out for their best interests. Building this kind of trust doesn’t happen overnight. One of the best ways to lay the foundation for a long and beneficial partnership for both will involve excellent communication, attention to detail, an effortless closing process, and the willingness to educate and give guidance regarding title.
Understanding the impact of a municipal lien search on a homebuyer and seller should be a part of that education. A municipal lien search is an important part of real estate due diligence. While the title search shows any recorded liens and encumbrances on a property’s title, this type of lien search will show anything held by a governing municipality that hasn’t been or won’t be recorded publicly. This search may be commonly referred to as a municipal lien search in the state of Florida, but searching for unrecorded debt and property issues is something that title agents and real estate agents need to be aware of no matter what state they work in.
Why should a Realtor worry about Municipal Liens?
“Your reputation as a realtor is really the only thing you’ve got,” explains Allison Werner. As a Broker-Associate, she relies on title companies and real estate attorneys to be doing a full search of unrecorded municipal liens and issues like open and expired permits before closing. You can watch her and James Tassell, a Realtor, explain why they only work with other professionals who conduct this search.
We understand how some consumers can be sensitive to additional closing costs, so they may want to forgo certain pieces of due diligence like the municipal lien search, but the peace of mind and protection it gives these buyers is totally worth it.
Often times, the buyer’s and seller’s agents work together to ensure a deal closes if there’s disagreement over cosmetic issues like a paint color or chipped tile.
If these issues that have no long term financial consequences matter so much, imagine how relieved the buyer would feel paying a little extra to avoid any monetary liabilities and obligations after closing.
Realtors need to communicate the benefits of this search to their clients and be sure to write a real estate contract with requirements for a muncipal lien search that will protect a homeowner's interests in the property.
Title agents need to stay competitive in the market, so justifying the additional costs of these searches as part of their standard for writing title policies can be difficult. However, once Realtors understand how much these issues affect their clients, the value of working with a title agent who provides the highest caliber of due diligence becomes a priceless partnership.
Explaining the importance of a Municipal Lien Search in every real estate transaction
A while ago, I received an email from a title agent who was trying to explain to a real estate agent the importance of obtaining a municipal lien search before closing. The problem was that she knew it would be an important piece of information to protect the homebuyer, but the closing date would have to be pushed back to accommodate the municipality’s turnaround time.
In order for her to write and issue a title policy that would protect against unrecorded liens, special assessments not reported on the property taxes, and code enforcement violations, this search was necessary. In fact, the necessity of these searches have become more apparent that many contracts delineate requirements for them. These new standards are a reflection of state statutes giving local municipality’s the right to lien at any time for unpaid utility bills and ongoing code violations.
While these statutes cover utility charges, special assessments, and code violations, a full municipal lien search will include a tax summary and information on open and expired permits. This is vital information to give a private building inspector to determine if any unpermitted work was conducted or if a potential mechanic’s lien could be filed after closing. A municipal permit search will also reveal any building code issues that a typical home inspection will miss.
Because every state and even region differs in how municipalities conduct record keeping and lien rights, you can modify your municipal search reports with PropLogix to the specifications of any contract.
Extending the inspection period to meet total due diligence
We understand how important closing on time is for our clients and everyone involved in the transaction. Some homebuyers and investors may be willing to forgo the peace of mind in obtaining full search, but they should be made aware of the potential risks they’re taking. Of course, most municipalities are willing to reduce some of these charges when the property changes ownership; however, it’s much easier to negotiate such debts BEFORE closing than after. Some buyers may be fine with taking the gamble of leaving the exception to such issues on their title policy.
The fact is in some counties or cities, buyers and sellers will be held at the whim of the governing authority -- whether that is prior to closing by waiting on a search with a 30-business day turnaround time or after the closing when the new owner receives notice of the issue.
Extending the inspection period to meet complete real estate due diligence may be a preference for buyers who are more risk averse.