Home Buying in Tampa>Question Details

Labrujaana, Home Buyer in Tampa, FL

Do ROE and Bank owned properties have bad property deeds/ownership paperwork?

Asked by Labrujaana, Tampa, FL Sat Oct 1, 2011

Hey guys. So we are still looking around for a home but no lucks so far. In the mean time I've been doing extra research on my own. One of the things I keep hearing from some people, blogs and some internet articles is that there is risk in purchasing a property with a bad deeds on homes that are ROE or Bank owned due to the robosiging issue we had for the past few years. So here are my questions:
1) Is this a true major issues? If so what should we watch out for? I know having an experience Realtor will help with this but Realtors are human too.
2) How can you make sure that there is proper paper work for that home? Is there a site or an office you can go to check for proper ownership of the land that is being sold.

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Answers

11
Labrujaana, Your question really pertaining to the difference between Marketable and Insurable title. A simple explanation is that marketable titles are insurable, but, not all insurable titles are marketable. When a buyer buys property and receives title to that property, the buyer’s expectation is that the title is good, that
he or she has a legal right to use the property any way he or she wants under the law, and that there will be no questions as to who owns the property. A buyer assumes these things because the purchase and sale contract states that the seller is to convey a good and sufficient warranty deed, conveying good, insurable, marketable title, free from all encumbrances, except as may be acceptable to buyer and buyer’s lender.

A purchase and sale contract also generally specifies encumbrances the seller knows are against his or her title and which usually existed when the seller bought the property. Such encumbrances typically include zoning ordinances, subdivision map notes, building restrictions, use restrictions and easements of record.
The buyer’s assumption when he or she receives title, then, is that the property’s title is clear and there are no encumbrances. What most buyers don’t understand, though, is that marketable title is not the same thing as a title with no encumbrances.

Marketable title is title to property that is not subject to a claim or defect that would present a real and substantial probability of litigation or loss that would prevent the property from being sold at a fair price to a reasonable purchaser or mortgaged to a reasonably prudent party as security for a loan. In layman’s terms, this means that buyers of property expect to receive a title free from reasonable doubt, allowing that buyer to hold and use the land in peace, free from the likelihood of litigation, and that the title to the property is clear enough to be sold at fair market value or pledged as security for a loan without hassle.

What, then, are encumbrances? Encumbrances are anything that affect or limit the fee simple title to a property. Fee simple title is the maximum and best possible right of ownership of real property, as contrasted with a life estate or a leasehold interest. Examples of encumbrances include mortgages, unpaid tax liens, mechanic’s liens, judgments, zoning ordinances, subdivision map notes, building restrictions, use restrictions and easements. All of these are usually recorded on the land records except for the zoning ordinances and building restrictions as they are usually part of the municipality’s regulations.
Encumbrances can be separated into two groups. The first group includes those encumbrances that a seller is powerless to remove and that can restrict the use of the land, but normally do not render title unmarketable.

These would commonly include building restrictions such as setbacks, zoning ordinances, subdivision map notes, and easements for such things as ingress and egress, a pedestrian walkway to access a beach, or even parking, and are the kind that a buyer agrees to accept. While such rights or interests may not prevent the transfer of fee simple title, they could diminish the value of a property.ttention to detail, we
Furthermore, while building restrictions, zoning ordinances, subdivision map notes and eaements can restrict the use of one’s land, their existence normally does not render title unmarketable; however, substantial, existing violations of zoning ordinances do render title unmarketable.

The second group includes those encumbrances a seller has the power to remove or cure and includes
mortgages, unpaid tax liens, mechanic’s liens and judgments. How does a seller cure these or have them
removed as encumbrances? The seller satisfies them by coming to an agreement with the person or entity that filed the lien or judgment or by paying the monies owed and then recording a satisfaction or a release of the obligation on the land records.

REO or bank owned can not meet marketable title. Typically you are issued a Certificate of Title. Given your persistance and attention to detail I would welcome the opportunity to meet and speak with you. You can reach me directly at email@brockrealty-inc.com or call 941.313.1234.
3 votes Thank Flag Link Sun Oct 2, 2011
As long as you have a good title company working to obtain a clear title on the property with title insurance you will have no issues. The title insurance will cover any defects in the title that come about even after the sale, even due to "Robosigning". You will be covered, no matter what. Feel free to purchase the property, as long as you purchase the insurance along with it!

Here is link to what title insurance is and what it does for the title and ownership:
http://www.mtgprofessor.com/a%20-%20title%20insurance/questi…

Mercedes Ofalt
Century 21
http://mercedeso.c21weinert.com/
2 votes Thank Flag Link Sat Oct 1, 2011
A cash buyer at a courthouse foreclosure or tax lien auction will get a "Certificate of Title" - with all "surviving" liens attached. When buying an REO/Bank owned property "after" the courthouse auction when it is listed by a Realtor for sale, a buyer will typically get a title insurance policy and all outstanding liens will be satisfied on or before closing.

If paying CASH on any property I would highly recommend hiring an attorney to review the title committment before closing along with any closing paperwork. If getting a mortgage it is less crucial since the lender will do their own due diligence review of the title insurance policy comittment to protect their (and your) interests.

Here is a highly experienced Real Estate Attorney:

Larry Fuentes, Fuentes & Kreischer http://www.FKLaw.net

Hope this helps.

All the best,
Alma
Alma Rose Kee, PA
Future Hoe
0 votes Thank Flag Link Thu Sep 12, 2013
TITLE INSURANCE TITLE INSURANCE
If you are purchasing a property with a mortgage, you have little to worry about because your lender is not going to loan on a property with questionable title. The title insurance company will do a title search and will have exceptions or requirements in order to insure the title policy.. A title policy is a requirement for a mortgage. If making a cash purchase you can still hire your own title co to do a search. Good luck.
0 votes Thank Flag Link Wed Sep 11, 2013
I think one of the most important thing to note when asking Real Estate questions is the laws are different in each state. As I am a Real Estate Agent in Michigan, we have Non Judicial foreclosures, which are a major problem because the foreclosure in only done by advertisement and if the Deed is filed, the county records and the bank can evict based on redemption. However herein lies the problem if there is a valid deed that bank did not foreclosed on before the Bank records it's deed that is not a cloud it is The True Deed holder, that's why it is called a CHAIN of Title. Real Estate Deeds pass hand to hand in order of RECORD. The first recorded is the party with interest. Anytime there is any change of interest via lien, judgments,mortgage or assignments they must be recorded to prove valid. The Banks don't want to go to court because the so called assignments were never recorded or improperly handled so they a passing it on to the next guy.If the Bank cannot clear the title the next buyer definitely won't either. If the bank sells a you a deed to a property that I deeded to someone else 10 years ago, who do you think has Rightful Title? There are no colors in real estate it's all black and white sometimes blue. People are so worried about the Mortgage Crisis, They Don't see the TITLE WAVE coming. All of the things listed above applies to NORMAL real estate transactions which in most case are written on a standard Purchase Agreement approval and drafted by a Board of Realtors designed to protect the consumer. Bank Own properties have there own addendums which in most cases nullifies the original Purchase Agreement. The agents don't even know what these addendums state as they are about 20 pages long on average. What they say is we make no guarantees to ownership and or tile a, if there is a problem later down the line you cannot hold us responsible. The should say BUYER BEWARE!!!
0 votes Thank Flag Link Sun Jul 21, 2013
Great Question.

I must say, Lynn and Alma did an exceptional job at giving you detailed answers.. I would just like to add that the only way to properly make sure you are being protected with a bank owned property would be to hire a Real Estate Attorney.

Unfortunately, with bank owned properties, the buyer typically does not have any say in the title company and most title companies working with REO properties are turning out so many, that errors are inevitable. In Real Estate, many times, it also comes down to a timing issue....there is a chance something will slip through the cracks.... Although I have closed quite a few bank owned properties without a hitch, I did have one where there was a problem with the title and problems continued for 6 weeks until we could get full resolution on the home.

***Good Luck in your home search....by the way...be careful, not all BANK OWNED are a "smokin" deal. I've had 2 homes sell (I helped the sellers to sell the homes, I was not involved in their purchases) last month that were bank owned properties that were purchased ABOVE market value...it happens more often then you would imagine. Don't limit yourself to just Bank Owned/REO properties. Many times you will do better with "Joe Seller" who bought his home BEFORE the housing boom and is not upside down.

Regards,
Charlene Weston (Cobelo)
charlenetamparealtor@yahoo.com
Realtor
Smith and Associates
0 votes Thank Flag Link Mon Oct 24, 2011
If you're buying ALL CASH at the courthouse foreclosure auction then yes, you'll get a Certificate of Title.

On a bank owned property sold on the open market (and advertised in the MLS) you will normally get a title insurance policy paid by the seller to protect you in the event a prior owner tries to claim there was a robosigner or other reason why they have the right to reclaim the property.

I'm not an attorney but I believe the Title Insurance policy would protect your interest. Your lender will also require a title insurance policy.

If you're paying ALL CASH then absolutely hire an attorney to review your Title Insurance Committment and all of your contracts and closing documents.

If you're getting a mortgage you have some protection because the lender's underwriter will also review your Title Insurance.

All the best,
Alma
http://www.SoldOnTampa.com
0 votes Thank Flag Link Sun Oct 2, 2011
Hello Labrujaana,
It's not urban myth. Titles have been lost. How many? I haven't seen research on this question. But no matter, you're concerned about securing a clear title. As a matter of course, title insurance companies are paid to research and discover any problems in this regard before the closing on a home. You should discuss this with your agent, or a lawyer, if you're not using an agent.

It is true questions have arisen amid the foreclosure crisis. But the problems with title the banks are experiencing come from the securitization of mortgages. In theory title was to be passed along with the securities as they were traded. No surprise: theory and fact are two different things here. If you want to research this topic more, Google MERS or Mortgage Electronic Registration Systems. Essentially, homeowners have challenged lenders to produce title and in some cases have won in court. The upshot is banks, which in recent years have gained a reputation for sloppy work, can have trouble locating title. How did they end up with a home without a title search? That in part is what the foreclosure crisis is about. These questions will continue to arise as long as homeowners facing foreclosure keep successfully challenging the lender's right to sue. The instances may be the exception, but they don't exactly inspire confidence.

Your best bet is to make sure a title insurance company does a title search. The title company also reports any liens against a property.

BTW: Registering titles with local governments ended in 1995.

Best to you,
SuZ
PML
of Longmont, CO
0 votes Thank Flag Link Sat Oct 1, 2011
Follow Mercedes advice.

Make sure you choose an experienced title company and with any purchase, but particularly with an REO you should always get Title insurance.

Compared to the cost of the home and other closing costs the price is very reasonable and well worth the piece of mind it affords.

Anthony
0 votes Thank Flag Link Sat Oct 1, 2011
Yes, there can be problems with REO's and an owners title policy will certainly help, but is not a guarantee. The same is true of short sales, if the "lender" approving the short sale is not the true owner of the note then there can be problems at a later date.
0 votes Thank Flag Link Sat Oct 1, 2011
A title company runs a lien search and insures the title. Aside from having a lien search completed there is no place to go and check if there are title issues. Bank owned properties can certainly have title issues. Title problems in reference to what you're asking about typically occur long before the home is sold/transferred as a foreclosure....usually during chain of title on the note. By that I mean the note on the mortgage and who owns all the pieces.

The best guarantee you will receive on a foreclosure is title insurance to protect you financially should something happen. My advice to buyers is to always pay a few hundred dollars extra and have a title company of your choosing process your closing if you do purchase a foreclosed property.
Web Reference: http://www.mysharphomes.com
0 votes Thank Flag Link Sat Oct 1, 2011
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