Take the money and run....

I found a 2015 Chevy Volt owned by a private party that I was prepared to buy as a replacement for my daily driver. The owners are retirement age and we agreed upon a price after I drove the car. They threw me a curveball when I asked to review the title (to confirm VIN matched) and they do not have it as the vehicle has a bank loan (a lien was not mentioned in the ad).

They wanted to transfer the car to me with a bill of sale and then would forward the title to me once they paid off the loan. The bank is not local so it would not be easy to go with them for that transaction. I was not comfortable handing over nearly $10k cash and receiving car keys and a bill of sale in return. In all of my prior transactions with private sellers, the title has been available at time of sale.

I think the car is a very good deal but not a great deal so I am willing to walk away unless they can figure out a way to get the title and conduct the transaction all at once.

Am I being too paranoid? I would have the car in my possession and a signed bill of sale, but I still see an opportunity for things to go wrong (they owe more than what I would be paying so they have to come up with the rest of the payoff).

Thoughts on how to eliminate the risk that I perceive on this type of transaction?

Banks usually have a process for this. It will probably involve a lawyer or some other "official" person to hold the title until payment is made. 

I would start with calling their bank. 

That’s weird.  In MI when you finance a car purchase you get a regular title that has the bank’s name shown as “Lien Holder”.  When you pay off the loan, the bank sends you a Lien Release Letter which you attach to the title.

I've done this exact thing before from both sides.  

What they should be having you do is pay the bank directly via wire transfer after you've talked to the bank.  The bank can earmark a transaction to pay off a loan and deposit the remainder into the sellers' checking account.   So a quick call to their bank should take care of it.   When I was selling the car with a loan on it, I met up with the buyer @ their bank to do the transfer paperwork, and after chilling for about 20 minutes, we were able to get confirmation from both of our banks that the loan was paid off and the title was released.  They drove the car away from there with a bill of sale in hand and a form you that allows them to register the car directly (some sort of release-of-title form that the bank filled out?).  That was in PA for reference.

AngryCorvair said:

That’s weird.  In MI when you finance a car purchase you get a regular title that has the bank’s name shown as “Lien Holder”.  When you pay off the loan, the bank sends you a Lien Release Letter which you attach to the title.

Neat.  In PA the bank kept ahold of the title.  In CT as well, but I'm still banking with that PA bank, so maybe that's either a state thing or a bank-per-bank thing?

You're not being overly paranoid, but this type of transaction happens all the time.  I've sold vehicles with leins on them, and I just met the buyer up at the bank and arranged for the bank to send the title directly to the buyer instead of having the title come to me then having to send it to the buyer.  

The other nice thing about meeting up at the bank is that usually there's a notary there, so anything that needs to be notarized can be notarized.  

It seems to vary a lot depending on the state.  When I sold a car with a loan years ago, the buyer wrote two checks that added up to the agreed price, one made out to the bank that held the loan, the other made out to me.  The bank amount was a bit more than it needed to be so the bank refunded the difference to me. 

In PA it's an "electronic title" during the duration of the loan - basically, the title doesn't exist until a private person owns the car. Banks don't really want to deal with the paperwork of receiving, storing and then transferring the title to the next person.  Saves the bank money and it saves the state money since they don't have to needlessly print out a title that nobody will ever see.

In the OP case, the VIN should be on the seller's registration/owner's card for the car.

It's easy.  You pay the bank.  Bank sends you the title and gives old couple the difference.  A 3 way phone call to bank, wire transfer and viola.  They may not have done this too many times either.  

Have a 3 way call with the owners and the bank. What will end up happening is you pay the bank, they send you the title. If the loan is underwater, the couple will have to pay the difference; if they are above water, the bank sends the couple a check. 

Not complicated, not sketchy, but make sure that you're dealing with the bank and not relying on the couples word. Not that I'd think they're sketchy either, just gotta make sure that they're on the up and up.

EDIT: Did not see Anthony's post. Yeah, what he said.

I just went through this with an out of state car.  I ended up financing the car just to give me peace of mind, the banks handled the paperwork between themselves.

Thank you all for the feedback. As the bank is not local (3+ hours away), it sounds like the safest route would be a three way call with the bank and the seller involving a wire transfer from the seller to the bank  (to cover the loan amount due over the selling price) and a wire transfer from me to the same bank (to cover the agreed upon price).

I think this works from a risk perspective. I will have to see if the seller aligns to this approach. If not, the search continues.

Revived by spammer

AngryCorvair said:

That’s weird.  In MI when you finance a car purchase you get a regular title that has the bank’s name shown as “Lien Holder”.  When you pay off the loan, the bank sends you a Lien Release Letter which you attach to the title.

I am not sure it's a Michigan thing as I also live in Michigan and I have used banks that send me the title with a lien holder listed on the title and banks that hold the title until the loan is paid off. Maybe where the bank is based? I don't know.  Having said that when you pay off the loan my experience is that it usually take anywhere from 10 days to 3 weeks to actually have all the paper work go through and to receive the title. It's a big time consuming hassle especially if you are in the OP's situation. For me, I would say always err on the side of caution when buying a vehicle. Anything a little questionable, I walk.

Walk away.  

Another spammer.

Since this was revived by a spammer I figured I would at least close it out. I ended up walking away as I did not have a good reason to assume risk or go through extra work as it wasn't a steal, just a good deal.

I looked off and on over the next several months and even though it was far from my intended direction initially I ended up with another Fusion, just 10 years newer and 160K miles less than my old one. It is the basic 2.5l SE and I have hopes that it can provide trouble free operation up to 200k.

Thanks to the many that commented and provided advice. Such a great resource!