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The Importance of Title Searches on the Marital Home During a Divorce in Arizona | Voted “Best of The Valley”

Posted on : April 3, 2018, By:  Christopher Hildebrand
The Importance of Title Searches on the Marital Home During a Divorce in Arizona.

The Importance of Title Searches on the Marital Home During a Divorce in Arizona

We want to share with you the importance of title searches on the marital home during a divorce in Arizona. Arizona is unlike several other states in many ways: We do not change our time with daylight savings time, we are a right-to-work state, we are a community property state and we use title companies instead of attorneys to research property titles in real estate transactions. Property titles provide the history of ownership (also referred to as a chain of title) of the property going back many decades, sometimes as far back as when the property was originally staked when Arizona was a territory.

The title search can also reveal sales history of the property, involuntary and voluntary liens, lien releases, zoning parcels, flood maps, and financial encumbrances such as home equity lines of credit (HELOC), mortgages, and equally as important – state and federal tax liens. When the title to a property has encumbrances as mentioned above these encumbrances are referred to as ‘clouds on the title.’ Before a property can transfer to a new owner all of the clouds on the title must be resolved. In other words, no property can convey to a new owner with a cloud on the title.

Jennifer, thank you for being my attorney. I could not have been more pleased with the outcome of my family court hearing. Everything you have done for me throughout this case reflects in the final ruling of the judge. You helped me keep my head together and taught me a lot about myself as a person. I learned so much about my life from observing and listening to you. I will take all the advice you gave me to continue taking responsibility for my choices, continue to put the kids' needs first, and always stay truthful. Your diligence, dedication, and persistence in my case made what seemed impossible, possible. You are a wonderful person and an amazing attorney and I am stronger and more confident because of you.
A Google User
A Google User
20:31 20 Sep 17
I just want to again thank the Firm for working with me all that it has. I could not have done anything without everyone's assistance. You, Chris and Stacey have been and continue to provide me with compassion and hard work towards my case. Also a very special thanks to Kip for taking my case in the beginning. Also continued support from him and his dedication to providing me with his expertise in this matter.
A Google User
A Google User
21:41 07 Nov 17
After interviewing several law firms, I came across Jennifer Shick, and her firm, who I hired to represent me for my Family Court case. Jennifer has extensive knowledge of the law and is determined to bring the truth to every issue involved within the case. Throughout my case, Jennifer was prepared meticulously as well as went above and beyond all of my expectations. Even when the other party tried to differ from the truth, lie to the Judge, and turn situations around, Jennifer remained attentive and provided substantial evidence to show the judge the facts as well as the proof to support what was the best interests of my children. Additionally, Jennifer helped me endure many difficult experiences, situations and inspired me to remain positive throughout the entirety of my case. Her kindness, compassion, and professionalism helped me through very difficult times and made the process feel a thousand times lighter on my shoulders. She truly has my children and my best interest at heart and I trust her perspective as well as her honesty on each and every aspect of my case. She lessened the burden on my shoulders and even when I felt like the case was not going to go in my favor, Jennifer was open-minded and reassured me that the Judge would, in fact, see the truth, which he did and the case went in my favor. After nine months of court, everything finally came together. I cannot declare how much Jennifer has been an outstanding attorney. She addressed each and every issue with diligence, she cares about her clients and their families. Jennifer genuinely cares about her clients and her dedication to the details of the case was remarkable. Overall, I am extremely pleased with Jennifer’s services and I am truly thankful that I was so blessed to have her represent my children and me. I highly recommend Jennifer as one of the best attorneys in Arizona and if the situation ever arises, I will definitely have her represent my children and me again.
Google User
Google User
14:58 04 Oct 17
Dear Stacey and Kip, How can I ever thank you enough for helping me through the most difficult time in my life? I couldn't put into words my heartfelt gratefulness. You both were so compassionate and professional at every given moment throughout this process with me. I thank you from the bottom of my heart. You helped me to regain my freedom.
A Google User
A Google User
16:03 22 Nov 17
I was a client of Attorney Kevin Park for the dissolution of a divorce in 2016. And since I had never had the need to hire an attorney before for any purpose, I was somewhat apprehensive of the process. But the very calm and professional demeanor of Mr. Park eased my fears. He adeptly answered all my questions and I clearly knew the process and what to expect. And the skilled manner he communicated with opposing counsel was perfect. When it came down to negotiating with my spouse’s counsel, I knew I had selected the best attorney for my situation. What I noticed and appreciated was that he was using just the right amount of pressure with opposing counsel as was necessary. If you find yourself in this situation, you will want a seasoned professional like Mr. Park on your side. I'm very grateful that he was my attorney and not the opposition!
A Google User
A Google User
22:14 28 Jun 17
Chris is a smart and aggressive attorney for his clients. Chris always tries to reach a fair settlement of his cases. I’ve represented clients when Chris was the opposing counsel and while he is professional and amicable to work with, he does not back off on what he needs to do for his client
A Google User
A Google User
18:16 18 Sep 17
Kevin Park of Arizona Estate Planning Attorneys was just what I needed for my divorce. He was very approachable and personable. He was quick to recognize what I needed and provided it quickly and efficiently. I hope to never need a divorce lawyer again, but if I know anyone else who does, I will definitely recommend Kevin.
A Google User
A Google User
19:22 23 Aug 17
I feel that Tracey Van Wickler is certainly one of the best family lawyers around. She is logical, intelligent, and truly cares. Tracey always does what is in the clients best interest, does it well, timely and with integrity. She is good at keeping her clients informed as to what is going on and clear in her communication both written and verbally. I have recommended Tracey to other people and will continue to recommend her. I recommended Tracey to someone who was having issues with their ex-wife and his response was, “I know how good she is because I went up against her and she ate me for lunch”. This same person was so impressed with her, he even recommended her to someone else, WOW, that is impressive! I am exceptionally happy with her attention to detail, her ability to explain things in ways that are easy to understand, as well as her ability to keep everyone focused on the most important things. I would recommend Tracey to anyone who may be in need of her services.
A Google User
A Google User
17:44 23 Jun 16
I retained Hildebrand Law after interview a number of firms in the valley. Working with Michael C. was incredibly easy and informative. My case progressed in such a organized and thought out way to ensure that my needs were met. Michael was incredibly proactive and was able to see far ahead into my case to steer clear of some roadblocks. I would not hesitate to recommend Michael Clancy, and Hildebrand Law in general, to anyone.
Bassam Ziadeh
Bassam Ziadeh
21:20 02 Apr 18
I have worked with Hildebrand law for about 8 years. They are always ready to serve, provide guidance and give you a few options. When they provide you options they also take the time to walk you through the pros and cons of each and give you a recommendation of what is best, but will listen to you and support whatever course you choose after making and educated choice. I’d recommend them to my closest friends and feel Chris Hildebrand is now a friend to me.
Larry Flint
Larry Flint
21:53 27 Feb 18
Despite the unfortunate situation I found myself in, Chris Hildebrand @ Hildebrand Law helped me maneuver every step with professionalism, expertise, and even a sensitivity that was an added bonus.Chris and his staff helped me even when I didn't know I needed the help. In other words. . . they made sure we did not leave anything undone. And in the rare instance we needed the expertise of another professional, Chris knew exactly who to recommend.Chris also knew, because of his experience, what to anticipate down the road of litigation. That meant we were better prepared to meet the challenges head on, which lead to a more equitable and fair outcome. I appreciated that Chris did his best to meet my every need in a timely fashion, even if I had a simple question that required only a phone call or e-mail or if we needed to talk face-to-face.I highly recommend Chris Hildebrand @ Hildebrand Law, PC.
Sam Franchimone
Sam Franchimone
22:09 12 Sep 13

However, there are some exceptions to this rule such as – if a property has Covenants, Conditions, and Restrictions (CC&Rs), or an easement right (this might be for a utility company to have access to your property to take care of the utilities) or homeowners association bylaws – these are all ‘exceptions’ to the no cloud rule and these ‘exceptions’ pass from buyer to buyer of the property.

Title Companies Perform the Title Search

As discussed above, when people purchase a home in Arizona a title company is hired to perform a title search. The title company will work to make sure they are no clouds on the title, or if there are clouds, the title company will work with the seller to arrange for the clouds to be removed from the title. In most cases, this requires the seller to pay off any financial encumbrances and the monies needed for the payoffs are acquired from the sale of the property.

Incorrect Information on the Title

The Importance of Title Searches on the Marital Home During a Divorce.

The Importance of Title Searches on the Marital Home During a Divorce.

In some cases, the title company will find information that is completely inaccurate on a title to a property. For example, a few months ago I was working with a man to sell one of his homes in a distant city. My client’s name was James Karl Brown (not his real name). When the title company did their preliminary search a tax lien for James Brown showed up on the title to the property he wanted to sell.  The title company asked my client to pay off this $18,000 tax debt to clear the title. Of course, my client came unglued because the tax debt was not his.

The title company had to do some digging, but they later discovered the James Brown who had the tax debt was James Edward Brown, but because my client had a similar name the tax agency had attached the tax lien to my client’s house. It took a few days, but we did get the issue resolved when we proved that these two individuals were not the same person and the tax lien was released.

Explaining Lien Hierarchy

The hierarchy of liens on a property can be difficult to understand. The position of a lien on a title indicates which liens get paid off first when the property is sold. In a case where there are two mortgages on a home, but no additional tax liens the lien hierarchy is as follows:  Position 1 – 1st Mortgage, Position 2 – 2nd Mortgage. In the case where there are two mortgages and two tax liens the lien hierarchy is as follows: Position 1 – Federal tax lien, Position 2, State tax lien or property tax lien, Position 3 – 1st Mortgage, Position 4 – 2nd Mortgage.

Do you notice who gets paid first when there are tax liens? If you guessed the government you are correct!  Federal, state and property liens always jump into a position ahead of the mortgage when tax liens are filed against a property. The government will get their money!  More on this in a moment.

Title Commitment and Title Insurances

Title Insurance on a House During a Divorce.

Title Insurance on a House During a Divorce.

In the process of a traditional sale of a property, the title company will do a thorough search of all the records of the property. Once the title company has performed their search they will offer a Title Commitment. The Title Commitment has many details of the title and shows the legal description of the property, sale price, lenders name, and other factors. It also shows what requirements (clouds) are present, if any, that must be resolved before title can transfer to a new buyer. Once everything has been cleared on a title the title company will offer Title Insurance. There are two types of Title Insurance policy’s – one for the seller (which benefits the buyer), and one for the lender.

The Owner’s Policy is for the benefit of the BUYER – yet paid for by the SELLER….confusing, isn’t it?  This is paid by the seller because it reduces the seller’s liability in case of problems that may arise with the title years down the road, such as forgeries, and errors by the title company. This policy remains valid as long as the buyer or his or her heirs own the property. It is rendered void when the property sells to a new buyer. The policy for the lender is called an ALTA policy and this policy is for the mortgage company or person who granted the loan to buy the property but is paid for by the buyer.

Hildebrand Law, PC | Voted Best of Our Valley in Arizona Foothills Magazine.

Hildebrand Law, PC | Voted Best of Our Valley in Arizona Foothills Magazine.

Is All of This Going Anywhere?

I’ve gone through all of this with you so you can understand the title search process people go through when buying a house. However,  few people go through this process when requesting to keep a family home when divorcing, thinking that they know everything there is to know about the house because they shared the house with their ex-spouse for many years. The other issue is that some legal professionals rely upon the standard of ‘the appraisal minus the mortgage equals the equity’ and that is not a great assumption. It’s not a great assumption because there could be many underlying and hidden problems wrapped up in the title of the house and this could be detrimental to the divorce settlement if not uncovered during the discovery stage of the divorce, prior to the divorce being finalized.

She Got the House and the Ex-Husband’s Tax Debt

Using a Title Company in an Arizona Divorce.

Using a Title Company in an Arizona Divorce.

We know of a case where a man and woman were divorcing. They both owned companies independently one from the other. The house was valued at $620,000 and the mortgage owed on the house was $320,000. The wife suspected she was getting $300,000 in equity in the house. The man owned his company independently from the ex-wife and had not paid income taxes for several years. This tax debt rose to $148,000. The soon to be ex-wife did not know about the tax debt, nor did she know that a lien had been placed on the family home for $148,000 due to the husband’s unpaid taxes.

The wife was awarded the house in the divorce. Because neither she nor her attorney had performed a title search on the property, with the award of the house she also took on the tax-lien encumbrances of her former husband. Why? Because the tax lien was placed on the house prior to the divorce. A title search could have avoided this disaster for the ex-wife.

We’re Here to Help

Unfortunately, there are many unforeseen pitfalls with real estate properties in a divorce and you should take the time to understand these possible unforeseen minefields. If you or someone you know is contemplating or going through a divorce let us help you understand this and many other situations to consider the marital home.

Peter Hudson

REALTOR®

Real Estate Collaboration Specialist – Divorce (RCS-D)

HomeSmart International

divorcereagent.com

Peter Hudson first obtained his Arizona real estate license in the early 1990’s. He is a member of the National Association of REALTORS®, the Arizona Association of REALTORS®, and the Southeast Valley Association of REALTORS®. Peter acquired the Real Estate Collaboration Specialist – Divorce (RCS-D)  by working under the tutelage of Kelly Lise Murray, J.D. Harvard Law, and Co-Founder of Divorce This House.  Less than 1% of all REALTORS® have this designation.