internet auctions and clear title - Posted by Marle

Posted by Marle on December 13, 2010 at 21:31:39:

Neither friend nor relative. I’ve been looking in that neighborhood for years, and looked sort of) at that house in 2006 before it was sold to the person it was foreclosed on. It was way out of my price range, so I didn’t go inside.
I met the new owner after she bought it, and haven’t seen or had contact with her since 2006. I know it had money put into it because I saw it several months ago and before I bid on it. The pool had been cleaned, as had the interior of the house. The neighbor told me the pool was green, she wished the county would do something about it.
Thanks for your response. I will be getting title insurance.

internet auctions and clear title - Posted by Marle

Posted by Marle on December 13, 2010 at 12:02:09:

I want to bid on an internet auction property being sold by Freddie Mac
This is part of the contract:

  1. TITLE AND CLOSING adjustments:

A: Title: The consummation of this transaction is subject to and contingent upon the Seller?s ability to deliver fee simple title which may include, but not be limited to, Seller?s ability to obtain releases from the existing encumbrances or clouds on title, if any. Fee simple title shall be delivered to Buyer by Special Warranty Deed on a form acceptable to Sellere in Seller?s sole and absolute discretion.

B: Encumbrances: Any encumbrances or defects in title must be removed and Seller must convey title free and clear of any encumbrances and title defects with the exception of restrictions and easements of record which will not materially interfere with the Buyer?s intended use of the property. Should Seller elect not to clear any and all title defects, Seller?s sole responsibility to Buyer will be refund Buyer?s deposit thereby releasing both parties from the contract.

I think that means that if there are(were) any other mortgages or liens, that Freddie Mac would eliminate them and I would not have to worry about any, that the title would be clear, and the property would be mine. Is that correct, or am I mistaken?

Several months ago I did ask an agent at my title company if there were any mortgages other than the first, or any liens on it. She said at a quick look there was only the original mortgage. I don’t want to find out after buying there is another mortgage or liens against it that I have to pay off.

Understanding Special Warranty Deed - Posted by JT-IN

Posted by JT-IN on December 13, 2010 at 13:04:34:

In theory, you are correct… Freddie would transfer property free of liens of encumbrances, aka clear title. However, you must educate yourself on what a Special Warranty Deed entails.

Essentially this type of deed means that the seller is not responsible for any liens which existed before their brief ownership period, they are only responsible for the time period of which the owned the property. FMac isn’t going to knowingly pass along an unreleased lien to you but their SWD is limitied in its scope. So what could go wrong…>? A few things. The solution for you is to buy title insurance at the same time you buy the property, just in case there is an ommission or fraud involved by a prior owner.

Let me give you an example… lets say that a former owner in the chain of title didn’t actually execute a signature on a deed, but their signature was forged on a deed. It happens. Suddenly they come out of the woodwork and want to stake a claim to the property. They would still technically and legally have an interest, and in this instance FMac wouldn’t have any responsibility to expunge the lien or claimant, as would be the case in a General Warranty Deed transaction. So the only way for you to be totally certain that there is no claim to the title is to insure the transaction.

Now if you didn’t the odds of any problem would be remote, but sometimes remote things happen. Just understand the ins and outs of all sides and what the responsibilities of FMac are under the terms of their Special Warranty Deed.

Re: Understanding Special Warranty Deed - Posted by Marle

Posted by Marle on December 13, 2010 at 20:30:04:

I guess my other response got lost.
So, another attempt: Does that mean if there is a recorded lien against the property now, made prior to the Freddie Mac getting it, that I have it to pay, or will the title insurance take care of that? Is this why there’s few bidders on internet auctions?

Re: Understanding Special Warranty Deed - Posted by Marle

Posted by Marle on December 13, 2010 at 20:32:48:

And thanks for your response.

Re: Understanding Special Warranty Deed - Posted by Marle

Posted by Marle on December 13, 2010 at 21:11:32:

This house was sold in fall of 2006 and walked away from in 2008 or 9. It?s been on the market off and on, for the amount of the mortgage which was pretty high, considering the falling economy. It was foreclosed on in Feb 2010, auctioned on the courthouse steps in May, and unbought, reverted to the Mortgage CO.
AFAIK, it was cleaned up some, with at least 5K or more put into it and back on the mls, for 5-6 months, then onto the internet auction site. In May, I did ask at the title co if there were other liens on in. (I had recently completed a sale through them.) The agent said that after a casual look (not search) she didn?t see any liens other than the first mortgage.
But the pool has been cleaned up, and I?m sure that was at least 5K, and there was other work, mostly minor, I believe, besides cleaning.
I haven?t been to the county records, and wouldn?t know what to do there.
The company which was auctioning it off at the courthouse in May is the one who will sign the contract on it now. They are representatives of Freddie Mac.
I THINK they did the repairs and maintenance in order to sell, as it was listed for those months on the mls, and the pool was cleaned and operational during at least part of that time.
I?m getting scared now, thinking that I bought a big bill, on top of the cost of the house and closing. I did send an email to the closer asking for a preliminary property search, but I haven?t heard from them.
What do you think?will I be paying for those repairs or not?
Too late smart, I should have bought a title search before bidding?
The only item the assessor?s office shows is the purchase warranty deed in 2006 and the trustee deed in June of 2010. Maybe that?s when FM took over? I?m relatively sure thay haven?t been updating everything in that occurred on many properties over the last several years.

Re: Understanding Special Warranty Deed - Posted by michaela-CA

Posted by michaela-CA on December 13, 2010 at 21:21:11:


since you know that there was money put into the house were you friends/relative of the previous owner?

Since these repairs were supposedly done during the ownership by the mortgage company, those repairs would have been done on their order. That would mean that they knew about them and are responsible for them.

Get title insurance (I would suggest to always get it) and you shouldn’t have anything to worry about.