Ask the TITLEMAN™ - Authorized Receiver; Family Carryback; Increasing Loan Amount

by John T. Lotardo aka TITLEMAN™-Sr VP/General Counsel, Stewart Title & Trust of Phoenix

Q. This Receiver opened an escrow. He doesn’t know why the Escrow Officer asked him to file in our County and then record a filed copy of an order here. He isn’t very cooperative with her. I believe information is going to be hard to come by, and there are conflicting messages in what little we do have. For instance, the Receiver said that the couple he was appointed for has been married for 30 years, yet the Husband took title as a single man in 2000. This property is of little value. So, here’s my question. Is it appropriate that this property be sold by the Receiver without any contact from the owner? The commitment was written without any knowledge of a marriage or Receiver in a divorce action, so no requirements were made. I don’t believe I’ve ever dealt with a Receiver in a divorce. What do I need to know?
A. The mere recording of the order from an out of state court is not the appropriate way to appoint a Receiver here. Perhaps they are looking to have the Receiver act as agent for the seller. Some time divorces are messy. So messy, in fact, that they need to hire a third party to act on behalf of the parties. That is the case here. Hopefully the order should have been entered after appropriate notices were given. But the Receiver needs to be authorized to deal with Arizona Property. You would need the receiver confirmed in an Arizona court before he can sell.

FREE 3-in-1 Credit Report + FICO Scores with trial! Click here!

Q.. As I understand it, there’s this daughter who bought a house from her mom with a seller carry back deed of trust. Mom is trying to take the house back from daughter. There’s even litigation! A Lis Pendens has been recorded. The daughter may decide to just stop making the monthly payments to mom and let the property go into foreclosure. Mom’s questions: What would happen? Do outside parties usually pick up properties at Trustee’s Sales that have litigation against them? And what happens to the Lis Pendens if someone bought the property at sale? Can a property even go the foreclosure route with a Lis Pendens hanging out there? I’m so glad my family is “not like this”. What a drag! Thanks for any words of wisdom.
A. You bring up several good problems, not to mention the problems that could happen between family members when they have real estate involved. (Litigation-Yikes!) If the daughter stops making payments, then the mother as the beneficiary under the seller Carryback deed of trust could foreclose. That foreclosure, could be conducted either through the non-judicial process, usually called a trustee sale, or the judicial foreclosure, which is much more complicated. As part of the process the property is put up for sale via a public auction and third parties could bid on the property. That said, I am curious what the lis pendens is for. A lis pendens is recorded to give notice that there a litigation involving the real estate. Perhaps the mother had started the foreclosure process through a judicial means already and the lis pendens is the notice of that along with other issues. If the lis pendens is for other issues regarding the real estate, a third party bidder would want to assure themselves that the matter would go away when they were the successful bidder. I would want more assurances before I started bidding on such a property.

Q.. I have a private lender that does a lot of loans for owners who are also the builder. Frequently, the borrower needs additional monies over and above the amount of the original Deed of Trust amount. Can the lender have the borrower execute a modification of deed of trust showing the increased loan amount? I assume they would execute a new note for the amount of the advance. We’re wondering about title questions especially if a subsequent deed of trust has been recorded.
A. You bring up a good question. The private lender would do a modification increasing the amount of the loan to secure this additional monies advanced. It is a concern if there has been an interim deed of trust or other adverse items recorded especially if the original deed of trust does not address an increase in the loan amount. In your scenario, I would get a subordination from the intervening lienholders to protect the private lender’s additional money given to the borrower.

The information supplied is of a general nature and should not be relied upon as comprehensive legal advice. Please consult with your own local legal counsel. To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Copyright John T. Lotardo. All rights reserved. John Lotardo (aka the TITLEMAN™) is Senior Vice-President and General Counsel for Stewart Title & Trust of Phoenix, Inc., and State Underwriting Counsel for Stewart Title Guaranty Company. He is a member of the National Advisory Councils for GoGetEscrow.com, GoGetLoan.com, GoGetNotary.com and GoGetRealEstate.com. The information supplied is of a general nature and should not be relied upon as comprehensive legal advice. Please consult with your own local legal counsel. For more about John, visit: www.GoGetEscrow.com/Get/Titleman or www.AskTheTitleman.com.

Back to top