My nephew, hearing a knock on his front door, found a real estate broker asking if he knew Robert and Marianna Polson, my parents. My nephew told her yes, and came to learn my parents are beneficiaries of a purchase money deed of trust on a duplex they sold in 1975.
A deed of trust is a security instrument used in conjunction with a promissory note. A deed of trust, used widely in California, is similar to a mortgage. The promissory note describes the terms of the loan and how it is paid back while the deed of trust describes the lien and what happens if the borrower defaults.
When my parents sold the duplex in 1975, they provided the buyer with a purchase money deed of trust and a promissory note for $15,600. Most likely, the $15,600 represented a portion of the downpayment the buyer needed to secure a loan from a bank. Still, I do not know without reviewing the purchase agreement.
The inquiry by the broker to my nephew came about because the address on the deed of trust is my parents’ former residence, where I grew up and the home my nephew currently owns.
The broker is selling the duplex, and the title company that is handling the escrow researched the documents recorded with the county clerk. The county clerk holds all the recorded documents for all real estate in the county and is public record. Discovering the deed of trust from 1975 now created the need for another document that was missing.
When a promissory note is paid in full, a deed of reconveyance is recorded. Our deed of reconveyance is missing–either the loan was never paid in full if at all, or my parents never recorded it. Unfortunately, I do not have any documentation regarding this transaction.
There is a possibility the loan was never paid because, during this time, my father was very ill and passed away shortly after that. This outstanding loan may have been overlooked. The unusual part of this is that the duplex was sold a second time after my parents’ transaction. The outstanding deed of trust was just discovered, almost 40 years later.
I am assuming the second sale involved a title company. Having an outstanding deed of trust overlooked by a title company is unusual because reviewing the recorded document history is a significant part of having a title company handle a transaction. Plus, a title company’s job is to be sure there are no outstanding liens before providing title insurance on a transaction.
In my opinion, the previous title company should be on-the-hook for missing the lien and should make my parents or their heirs, whole.
The broker is working hard to find any documentation about the promissory note and a record of payments made. They cannot close on their transaction until this is resolved. Her search is now going international as she tries to locate the previous sellers. I will give you an update in a future article.
Burt M. Polson, CCIM, is an active commercial real estate broker. Reach him at 707-254-8000, or [email protected] Sign up for his email newsletter at BurtPolson.com.