Anything that can go wrong will go wrong, especially in real estate, which is why you should take appropriate precautions to minimize financial risk, whether you’re buying a home to live in or an investment property.
Murphy was a competitive mudder, had him the fastest four-wheel-drive on semi-dry land—‘Murphy’s Mud Bucket.’ Like most of us, Murphy wanted to get ahead in life. He knew he wasn’t going to drive around the state forever picking up trophies for crossing the quagmire quicker than anyone. He took his winnings and decided to invest.
So he bought a nice little property on bank auction, a house with a front yard just about the perfect size for a good mud bog, but Murphy was going to sell it before he put any tire tracks through across the grass.
Now Murphy knew you didn’t win races if you got stuck between the starting point and the finish line. You had to get in and get out fast without getting stuck in the middle. The only way he was going to make any money off this thing was to get in there and get out fast. He’d bought the house; all he had to do was sell it and he’d be money in pocket, no prizes for second place.
That’s right, folks, you don’t want to get stuck in the middle between the start line and the finish. The same is true of real estate investments, only Murphy wasn’t so savvy about what he was doing.
You see the previous owner had bought the house and lived there. Then that owner had gotten a reverse mortgage. When that owner died, the property reverted to the Bank, and the Bank had sold it to Murphy at auction. Murphy had made the purchase without a survey and used an out-of-town title company. He also did not get an ALTA 9 Endorsement.
Murphy fixed up the house and found him a buyer. BUT, the buyer got a survey and realized that Murphy only owned the front yard—not the house!! The legal description on the title when the Bank took it over was incorrect. Murphy had WAY OVERPAID for a front yard that he couldn’t sell.
Next Murphy tried to contact the out-of-town title company, but they didn’t answer.
They didn’t answer.
And they didn’t answer.
Also, because Murphy didn’t get the ALTA 9 Endorsement which protects property owners from survey errors and inaccuracies, Murphy had no recourse. Murphy was stuck in the mud with no prize money for failure to finish.
There are ways to get across the bog to the good value side of real estate:
- Use a Local Title Company that can help you if (and too often when) things go wrong.
- Get a Survey, not just to know where your boundaries are, but also so you can get proper title insurance.
- Get an ALTA 9 Endorsement, which is an important part of proper owner’s title insurance.
This is based a true story but the names have been changed to protect the innocent.
By Stephen Collins & C. J. Godwin