Homebuyers of foreclosed properties in the District should think twice when signing a sales contract with release or waiver provisions in it, as it's highly unlikely that any title insurance underwriter will agree to insure the transaction.
In November of 2010, the D.C. City Council enacted the “Saving D.C. Homes from Foreclosure Emergency Amendment Act of 2010,” which shocked the title insurance industry. The purpose of the Act is to protect D.C. homeowners while imposing more stringent standards on lenders undertaking the foreclosure process against owner-occupied residential properties.In order to determine whether or not a D.C. foreclosure sale is insurable, title insurance underwriters are requiring significantly more physical documentation that all aspects of the Act have been adhered to, while also reviewing the terms of the contract for sale. The problem that we are now experiencing, is that Sellers are including addendums to the standard GCARR Contract for Sale that include release or waiver provisions that no title insurance underwriter will agree to insure, as long as they are a part of the contract.Examples of these provisions include the buyer waiving: 1. The remedy of specific performance on account of the Seller’s default or failure to sell and convey the property for any reason,2. Any right to file a lis pendens against any portion of the property,
3. Any right to invoke any other equitable remedy that may be available that would prevent the seller from conveying the property to another purchaser,
4. Any and all claims arising from any agreed to adjustments or prorations, or errors in those calculations,
5. Any trial by jury for litigation arising out of the contract,
6. Any claims or losses incurred by the Buyer due to construction, repairs or treatment of any defects, known or unknown that exist or hereafter exist on the property, and
7. Any right to avoid the sale of the property, reduce the price or hold the seller responsible for any damages due to the marketability, habitability, insurability or condition of the property,
8. Any claim arising from encroachments, easements, etc, and
9. Any right to recover any form of damages as a result of the Buyer surrendering a lease on a prior residence, moving expenses, etc. The waiver or release paragraph then states that any attempt by the Buyer to breach, disregard or disavow any of the waivers or releases described above, will result in the Buyer to pay all reasonable attorney’s fees and costs incurred by the Seller in reaffirming or enforcing the waivers/releases or defending an action brought by the Buyer.Please note, if you are a real estate agent or purchaser, by signing a contract addendum with language similar to that listed above, it is highly unlikely that any title insurance underwriter will agree to insure the transaction, as these waivers/releases essentially void the entire title insurance policy that would be issued to the Buyer and/or Lender. The ability to proceed with a foreclosure settlement in D.C. is difficult enough since the passage of the Act, and these waiver/release provisions are only resulting in foreclosures coming to a complete halt.
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