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Forewarned In Foreclosures
June 8th, 2011 10:12 AM

There are many legal issues buyers must consider before purchasing a foreclosure property.  Inspections and research are extremely important because in most cases, the property is being sold "as is."

The number one concern is the title to the property.  A title company is used in Florida to close real estate transactions and rarely is there a problem with clear title to a deed.  They do not, however, understand the complexity of legal matters involved in a foreclosure suit.  In a normal sale, it is not necessary to hire an attorney to research the deed, but in the case of foreclosures or distressed property, it is a different story.  There are so many legal issues that can impact the title to property that is in foreclosure.   Listed below are just a few:

IRS LIEN:  The Internal Revenue Service has 120 days from the date on which the final judgment in foreclosure is entered to redeem a property on which it has a lien.  This would prevent buyers from doing any major improvements or selling before the expiration of this period.

QUITCLAIM DEEDS:  A lender will often convey forclosed property using a quitclaim deed.  Such a deed in the chain of title can make it difficult for owners to obtain title insurance, which will then prevent future buyers from obtaining financing to purchase.

JUNIOR LIEN HOLDER:  If a junior lien holder is not included in the foreclosure lawsuit, the property buyers will be faced with attorneys' fees and costs to correct the title problem, which may include re-foreclosing on the property.

IMPROPER LENDER NAMED:  If the foreclosure suit named the improper lender as the plaintiff, title to the property will not be insurable.  This happens often due to the large volume of loans sold and resold.

UNPAID MUNICIPAL LIENS:  Some foreclosed properties have unpaid   municipal liens for such things as water, electricity, sewer or gas. Some of these liens are not required to be recorded in the county's official records, so the previous owner may be delinquent in payment for these services even though no lien has been recorded.  When the buyers attempt to obtain utility services, they must pay the past-due amounts before the municipality will provide the services to them.  A search for unrecorded municipal liens is separate from a title search and is up to the buyer.

These are just a few of the situations that buyers may encounter if proper due diligence is not performed before purchasing a foreclosed property.  Evaluating the status of the title is essential to avoiding costly mistakes that can result in large legal fees and expenditure of a lot of time. 

Buyers beware . . . . . . . especially with foreclosed homes!

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Posted by Barbara Doeringer on June 8th, 2011 10:12 AMPost a Comment

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