November 14, 2025
Gaithersburg, MD--I had been expecting the call for about a week. There had been hints from some of the comments by the Listing Agent and the Seller that they were trying to do something that was profoundly wrong. And then the call came. “We are going to move the settlement to another company, “said the Listing Agent. “They said they would close the deal.” With those words, I had confirmed my suspicions that this transaction was heading to a bad place for the Buyer.
The transaction started off rather routinely. The Buyer had selected Village Settlements, an Atlantic Closing and Escrow Company, to handle the settlement on the purchase of his first home. Despite being a first-time buyer, it was clear that he had done his homework, and he understood how the transaction should play out. Indeed, we ordered a title search o
What made this transaction interesting is that when the Seller completed our Seller Information form, he had indicated that he had no mortgages against the property. The title report said otherwise. When I contacted the Seller to ask him about these two mortgages, he almost immediately became rather angry, defensive, accusatory and threatening. He did not want to listen to anything that I had to say and somehow felt that it was our fault that we were reporting to him the facts based on the land records report. We did not create the problem. We merely found it.
After 40 years as a settlement attorney, I have learned that an instant confrontational reaction of a party to a transaction issue can often be a clue as to an underlying problem, especially if that reaction is as negative as this Seller. I decided that I would independently search the title myself (old school lawyer here, I actually learned how to search the land records back when the records were literally dusty old books that were almost 100 years old!). As I suspected, there was more to the story. This Seller was not only a serial borrower and refinancer, meaning that he was constantly taking out loans, refinancing, taking out more loans, adding home equity loans and then increasing the balance on those loans, but he also had a series of Federal and State Tax liens over the years. I am guessing that some of those loans were taken out to pay the tax liens, as well as other debts.
Unfortunately for this Seller, somewhere in the middle of this avalanche of borrowing, a few of the loans that had been paid off were never formally released of record. How could he continue to borrow money when he had these “outstanding” loans, you may ask? It was easy. He just kept going back to the same lender, who was out of State, and they likely weren’t even obtaining full title reports. The settlements were not handled by settlement attorneys or title companies, but rather by what appeared to be in-house companies of some sort, and the Lender would send someone by to get the signatures.
It should come as no surprise that this lending company eventually went out of business. They were acquired by an unknown company, and then that company was sold to a fairly reputable bank, at least at that time. But then when the economic meltdown of 2008 came along, this company also went out of business. And thus, the search was on. Who could we contact to sign the mortgage releases so that we could clear up the land records?
This search was the proverbial needle in the haystack pursuit. The Seller finally calmed down enough for me to explain that indeed, he probably did pay off the loans, but that was only part one of the process. Part two required getting the mortgages formally released in the Land Records. The Seller agreed that he would search through all of his old papers and files (except the ones that had already been moved to his new out of state home) and he would look for any hint that the loans had been paid off.
Meanwhile, we began our search and investigation. We poured through every record that we could find, we searched for any clue that would lead us to whoever ultimately had the files or data that could confirm that the loan was paid off and the mortgage releases could be signed and filed. We contacted everyone and anyone who we had ever dealt with over the past 40 years in search of anything that would help solve the mystery. But to no avail. Our company had probably spent a dozen hours of staff and attorney time trying to clear up the Land Records for this man, free of charge I might add, and we just kept coming up empty.
The Buyer was getting nervous and he also had researched the issue enough (and we explained the title issues in great detail as well) to understand that if he bought this house, the owner’s title insurance would not protect him against any claim related to these two mortgages. While we all speculated that the loans had been paid, the fact remained that from a title perspective, they were still there. What would happen if the Buyer wanted to refinance his new loan and these two mortgages showed up in the next title search? They probably would return again and may prevent the Buyer from refinancing his loan. Or perhaps the Buyer eventually wanted or needed to sell the house. If those old mortgages were still there, the Buyer would essentially have inherited the title problem. And so the Buyer finally gave up and asked for a release from the contract. Enough time had passed such that the Buyer had the legal right to do that.
The Buyer may have given up, but at Village Settlements, we didn’t. We continued to hunt and search and dig and then through some miracle, we found the holder of the loans. We probably had $10,000 of attorney time in this project, but we were determined to resolve the problem.
When we called the Buyer, the Seller and the Realtors to let them know the news, they celebrated as if their favorite team had just won the Super Bowl. We ultimately did get our hands on the original releases, we had them recorded, we closed the deal and life moved on.
But what about that title company that was willing to close the loan, notwithstanding the title defect? When the Buyer called them and asked them if the Owner’s title insurance policy would protect him if the issue came up later, the other title company danced around the question but eventually had to admit that the Buyer would not be covered. Nevertheless, that other title company was going to close the deal.
As to the Listing Agent, while we all understand the need to get every transaction closed, it would not be proper to encourage the closing of a deal that everyone knew was incorrect. I am reminded of an article that I wrote nearly 30 years ago when there were a lot of questionable deals being closed. The purpose of the article was to explain to Realtors (it was written for a realtor-based magazine) that no one deal was worth losing your license over. There was one sentence that the editor liked, and they enlarged
and highlighted that sentence in the middle of the magazine page. I will never forget that sentence, and Realtors, Lenders and title companies should commit it to memory, too. It was a rather simple sentence, but the meaning carried great strength.
“While it is difficult to sell a house in today’s market, it is virtually impossible to sell a house from a prison cell. “
David Parker is an attorney and the Managing Director of Village Settlements-an Atlantic Closing and Escrow Company. His columns have appeared regularly in local newspapers, magazines, and newsletters. He is the co-author of the book, “Real Estate Practice in DC, Maryland and Virginia.” If you have a topic that you would like him to write about, he can be reached at dparker@villagesettlements.com
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