Question: Cynthia, in a recent transaction, the closing was delayed because at the last minute the title company found a Child Support lien against my seller, and the escrow officer had to scramble to get it released. Why wasn’t this on the prelim to begin with?
Answer: Teamwork and cooperation between escrow, title, and the prompt return to escrow of the seller’s escrow instructions all work together to avoid delays such as the one you described.
A title search has two levels. The first level is a search of liens specifically tied to the property by the legal description. Common items on this search are deeds, easements, CC&R’s, First Trust Deeds, Second Trust Deeds, mechanics liens, etc., which are all indexed by the legal description of the property.
The second level is a search of the general index. These are liens that are tied to the Seller by name. These liens, when recorded, attach any and all real property owned by the seller in the County that the lien is recorded. Common examples of these liens are IRS liens, state tax liens, judgments, child support and spousal support liens.
In a county the size of Los Angeles, with a population the size of Los Angeles, there are bound to be many individuals with the same or similar names. This is why the title company will require that the seller complete and return a Statement of Information. This enables the title company to run a General Index search on the seller’s name, and sift through all the liens of people with similar names, and using the information from the Statement of Information, or “SI”, figure out which liens apply to our seller.
The reason a lien might show up at the last minute is because either the seller delayed returning the SI, the escrow officer failed to forward the SI to title in a timely manner, the title officer failed to run the General Index until the end, or the lien is a very recent filing which didn’t record until sometime during the escrow, and isn’t discovered until the final title review before closing. This is why it is so important for the seller to return the Statement of Information to escrow as soon as possible, and why it is so important to use an Escrow and Title Company you know will be on the ball.