title search on foreclosure - Posted by al

Posted by Tony Colella on April 11, 2006 at 09:58:51:


While I understand you are willing to accept this risk, I think it is terrible to advise others to do so.

The land/home foreclosures we have purchased almost always had errors in the foreclosure process. Our closing attorney was able to either fix them or have the title insurance identify them as not excluded from coverage.

The cost of a title search and insurance on these properties is extremely low because of the low purchase price.

Where most of the errors have occurred is not necessarily the foreclosure (although they were almost always botched) but in title searches conducted prior to that purchase. Many times we have found prior existing liens or deeds not signed off by spouses etc.

The cost to have a title search conducted and title insurance issued is too little to worry about but allows us investors to conduct a more in depth due diligence so as to enter into the deal with eyes wide open.

Not having title insurance when you buy could make a future sale a bit sticky, especially if your buyer is using FHA type funding. Typically their closing attorney will look at your title search and title insurance and depending upon the loan requirements may simply begin the search there but if FHA or the lender requires a longer search, skeletons in the title closet may come back to haunt the deal.

In addition, most often I have found that the foreclosing lender will only issue a special warranty deed which as Bob knows only covers the lenders ownership period (thus the reason he requires a warranty deed). When we buy these properties at wholesale prices we are often at the mercy of the foreclosing lender regarding the paperwork. If we want to get the property at the right price, we may have to agree with a special warranty deed.

If Bob is comfortable accepting the risk blindly then that is fine for him. But for others and new investors I do not recommend it.


title search on foreclosure - Posted by al

Posted by al on April 11, 2006 at 06:49:30:

I just had a offer accepted on a doublewide land home and had a title search done and there was a second lein on the property that I knew about because it was listed in the newspaper advertisement of the foreclosure.The attorney said that this could be a problem for me in the furture because he had know way of knowing if the foreclosure was done right.I always thought second leins were no longer a problem unless it was a tax lein. I asked him how I could find out if the foreclosure was done right and he said that it should have stated in the deed that a letter was sent to the second lein holder and that it was run in the paper the correct number of times. It was run in the paper the correct number of times.Has anyone ever seen a foreclosure deed that contained this type of information? Does anyone consider this a problem?

Re: title search on foreclosure - Posted by Tennessee Bob

Posted by Tennessee Bob on April 11, 2006 at 07:21:14:

I typically do not do a title search on foreclosed land/homes that I buy. If your purchase is from a major lender, their attorneys deal with this type of situation all the time. You however can request a title search to be done by them. I ALWAYS REQUIRE A WARRENTY DEED. No quit claim or special warranty deeds are accepted. If you know the name of the company that held the second, you could contact them and request proof from them that they no longer have any claim on the property --land or home.

Good luck
Tennessee Bob