Title Tip: Background Checks When Buying or Selling a Home
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By Lydia Blair
Special Contributor
When buying or selling a home, get ready to reveal some private details through background checks. We’re going to pry, inspect, confirm, clarify, authenticate, and document a lot about you, your finances, and the property. Some of the surprises we unearth would shock your mother, but maybe not your banker.
Just how deep do the folks involved in your transaction probe? Well, there isn’t any kind of testing that involves getting ink on your fingers or peeing in a cup. Nor do we care about your driving record, your education level, your health, or your résumé.
But we will start with requiring your Social Security number and date of birth. We’ll also need to know your past and present marital status, and where you plan to reside after the sale.
As a seller, we’ll run a search of both your name and the property. When something unexpected pops up, like an Abstract of Judgement, a tax debt, or a couple of child support liens, we’ll tell you. This would be the time to ensure your spouse is aware of it as well.
I’m never sure if the “Oh, that” response means “I forgot about that” or “I didn’t think that would come up.” Sometimes, the response is “That isn’t me.” If it’s a common name, it may be true. But we will need to do more research. If the Social Security number or date of birth match those on a lien, I don’t want to call anyone a liar. But that smoke we smell is your pants on fire.
For the title company to close the transaction and issue title insurance, all debts and liens that affect the property must be cured. In other words, they must be paid off at or before closing. We’d rather see the closing date moved back or a sale terminated than to close a transaction without clear title.
The title company also runs the names of anyone purchasing or selling a property through the Patriot Act Name Search. This is a search of names published by the Office of Foreign Assets Control of the U.S. Department of Treasury. It consists of the “Specially Designated Nationals and Blocked Persons,” the “Foreign Sanctions Evaders,” and the comprehensive “Consolidated List.”
All title companies must comply with economic sanctions programs against countries and groups of individuals, such as terrorists and narcotics traffickers. If you’re on the no-fly list, you could also be on the no-buy list.
Your run-of-the-mill criminal usually isn’t prohibited from buying or selling a home. Even if you don’t qualify to buy a gun, you can still buy a house. But you might need to pay with cash.
For homebuyers, most of the vetting process is done by their mortgage company, who looks at income, credit scores, existing debt, etc.
Lenders may often run a background check on a potential borrower before issuing a mortgage on a property. A lender or home insurance company may deny a loan or insurance because of a criminal record if they desire. Especially if it involves a financial criminal act like theft or fraud. However, most only need enough financial documentation to show financial ability to repay the loan. They don’t want to risk giving money to someone who might not pay it back.
What happens in Vegas can stay there — as long as it doesn’t affect your financial records. I’m not saying you need to be squeaky clean to buy or sell a home. Just know that if you’ve got dirt on your hands, it’s going to show up.
The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem.
Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Carlisle Title, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.
