Debt attached to title of a Seller’s Property: a Blockchain Use Case
(Based on a true story)
By: Team Ubitquity
A debt from an old credit card (now in collections) was recorded and attached to the title of a seller’s property which was discovered during the title search a week prior to closing. The seller was informed this would have to be paid in order to transfer clear title, and instead of just allowing the debt to be paid off through the settlement statement and simply be addressed at the closing table subtracted out of the seller’s proceeds, the seller decided on her own to just pay the judgement off early. The seller then contacted the collection agency and paid the amount due in full. Unfortunately, the seller did not know that she needed to request a certificate of satisfaction and that the creditor must now record the certificate to remove the debt attached to the title.
In fact, there was another debt collection from which the seller negotiated and settled years ago. Soon after the seller pays the debt and thinks it is squared away but the creditor never bothers to record the Certificate of Satisfaction and the debt remains attached to the property as if it was never paid.
Now the seller is left in an unfortunate situation of having to prove it was paid and then contact the creditor to request they record the certificate of satisfaction. In order to clear title and transfer the property at closing, the buyer’s attorney still sees the recorded lien and will not allow the closing to proceed until the judgment is removed. The only proof acceptable is the certificate of satisfaction recorded at the courthouse; it is not enough to simply have the seller show proof of payment nor is it enough to have the original creditor acknowledge the debt was paid in full. The debt in question is not gone until it is removed off title with the municipality, which causes the closing to be delayed.
The creditor now has to go through the arduous process of maneuvering multiple layers of administrative procedures to issue the certificate of satisfaction.Their company policy also does not allow them to record the certificate of satisfaction simultaneously with the sale of the property.
The buyer’s title company must wait for them to send it down to the city and wait for the municipality to record it. By this time, the city is already about a week behind in their paperwork processing and then a snow storm hits the area and all courts are closed for several days, which creates an even bigger backlog at the city.
Now an additional twelve days have gone by past the anticipated closing date and the seller is forced to make another mortgage payment they were not planning to make. However since the seller moved out in time for the original closing date and moved into a new apartment, they are strapped for cash from their move and unable to pay the first month’s rent and security deposit. They also do not have the additional mortgage payment so they are forced to either borrow money or incur late fees and possible credit consequences.
The buyer had scheduled movers around the original closing date and has now incurred fees for canceling that move. Those movers are also not available for the new closing date and the buyer must now scramble to find family, friends, and a moving company who can accommodate a last minute move which will also cause them to endure additional costs. On top of all of this the buyer also happens to be eight months pregnant and is going into labor early, so now a notary must be sent to the hospital so they can still close and sign the paperwork once everything is ironed out.
If the municipality offered a streamlined, electronic method of recording using blockchain technology in parallel to their existing infrastructure, the buyer in this scenario would be able to avoid the effects of a hardship.
Since the administrative nightmare can be structured in a newly organized cryptographically trustworthy manner, the use case scenario I mentioned could easily prevented simply by using newer methods of record keeping (such as with blockchain technology).
A blockchain-powered platform has the potential of addressing this as well as many other issues; such as errors in public records, unknown liens, illegal deeds, missing heirs, delayed property ownership transfers, and more.
About Ubitquity LLC
UBITQUITY, a blockchain-secured platform for real estate recordkeeping offers a simple user experience for securely recording, tracking, and transferring deeds. The company is partnered with academia, and US title companies. A private alpha version (1.1) of their platform is now available for select e-recording, municipalities, and title companies.