Foreclosures – Clean Title or Buyer Beware?
Wondering if that Foreclosed home is a good deal or not? Be sure to reach out for a referral on a good attorney to do your title search and closing! Not all closings are created equal and there are settlement shops out there that are not attorney owned/operated. This means they may not be reviewing the foreclosure file. If there is a defect the bank may not actually own the property or not all of the property you may think you are buying. A lender can only sell what they have, so if the property includes multiple lots or parcels and the deed of trust secured only Lot 1 instead of Lots 1 and 2, the lender can only convey their interest to Lot 1. I’ve witnessed instances where the lender’s deed of trust has the entirely wrong property so the deed of trust was defective and so was the foreclosure.
The good news is that most foreclosures wipes the title clean of any junior liens (mortgages or judgments that were recorded after the foreclosing mortgage) so in this aspect buying a foreclosure can be a good thing, but an attorney needs to search the title to make sure there were no judgments, liens or mortgages that were put on record prior to the foreclosing deed of trust, because if that happened then the buyer takes “subject to” those senior judgments/liens.
The bottom line with purchasing property is always Caveat Emptor but even more important in real estate is to have a good realtors and attorneys assisting you with the most expensive and important purchase of your life!