Katrina,

I have read your posts on this thread. It would appear that your argument fails to focus on the big picture. There are a number of players in the closing process...buyer...seller...mortgagee...title insurer...appraiser...abstractor. Each has a vital purpose in the closing process.

While the mortgagee may rely on the appraisal to determine issues such as the debt to equity ratio and will undoubtedly hedge its bet with title insurance...there is a difference between the appraised value of the property and marketable title. If the title to the property is heavily encumbered the appraisal is meaningless. The appraisal represents a best case scenario. The question remains as to whether there is sufficient equity in the property to back up the appraisal. The under appreciated roll that the abstractor plays determines whether the marketable title value and the appraisal coincide.

I had an amusing situation two weeks ago when a title insurance company called me about a closing I had performed a year and a half earlier. I did not do the title search on the property. Apparently the mortgagor applied for a reverse mortgage on the property and subsequently died. The mortgagee wanted title to the mortgaged property only to find that the mortgagor never held title to the property. He held only a life use of the property. Apparently someone screwed up. Either the abstractor failed to verify the chain of title...seems unlikely that an abstractor would miss something that basic...or the title insurance agent failed to pick up on the title when he issued the title insurance commitment...or the lender screwed up the closing docs. As usual the lender is protected seven ways to Sunday through the title insurance, and the title insurer is on the hook for the face value of the policy. The title insurer did not seem to think that the abstractor was at fault, but rather one of the other players.

I would also take issue with your above statement that the lender always has a first place priority. It depends on what lien or mortgage is being foreclosed. When one acquires a property through foreclosure sale or tax lien certificates...he is insane if he fails to perform a title search to discover the state of title. If the foreclosure is of a second mortgage...the buyer takes subject to the first mortgage which has priority. In Connecticut real estate taxes have an automatic priority over mortgages and liens, and would have to be paid notwithstanding the foreclosing financial institution's priority. There are also the issues of inchoate liens such as mechanic's liens which may not be recorded until 90 days (Connecticut rule) following completion of work, and thus may not show up on the record in a timely manner. The unrecorded mechanic's lien may predate the recording of the foreclosing entities lien/mortgage, but if recorded in a timely manner may predate and relate back to a date earlier than the priority of the foreclosing entity.

In Connecticut the Plaintiff in a foreclosure action is required to perform a title search to determine the encumbrances on the property. Those encumbrances that predate the priority of of the foreclosing entity are simply identified in the complaint as prior encumbrances. Those that are subsequent to the Plaintiff's priority are identified in the complaint as junior encumbrances, and are named as defendants in the foreclosure action.

In summary, the objective is to have the appraised value and marketable title value coincide for a property. If they do not someone...buyer...mortgagee or title insurer is going to be rather upset with the outcome. The seller could also be sued for breach of warranty. Without the abstractor's work marketable title can not be determined.