I was about to close on a Fannie Mae owned property, my attorney then called and told me that he could not recommend the title to be insured because the previous foreclosings by Fannie Mae were not filed correctly. He recommended I find another house or another attorney and title company willing to overlook the mistakes. My real estate agent, then calls me and tells me that we can use Fannie Mae's title company because it was their mistake and they can fix everything and get the ball back on track so we can close. Is this recommended or should I just walk away and look for another home?
John, consult with your attorney to see if he will work with Fannie Mae's title company as they correct their mistakes. It might take some time, but better to obtain good, marketable title than to have issues after the home closes. Good luck, and have your agent find a plan B house just in case!
Unless you have made changes to it the standard form Pa contract requires that the Seller provide good and marketable Title free of leins and encumbrances. It is the Sellers responsibility to clear Title not yours. As long as you are willing to wait for them to accomplish this then wait. If you are using a lender as opposed to a cash transaction your lender will not let you close until Title can be insured by a reputable Title Insurance Company.
If your attorney and Title Company will not insure you may want to have the "Seller" fix the title issues before closing. They will be willing to work on it. It might take longer than anticipated to clear the "cloud" on the title and delay your closing, but it can be done and should be before you close. Doing it now before the closing will be better for you in the long run. Later on if you decide to flip your purchase the cloud would have to be cleared, preventive at their expense too.
There is no "overlooking" what's called a cloudy chain of title. If all parties can wait for the fix to be made(and honestly they should be more than willing), I'd move forward with purchase but ONLY if the fixes can be made and clean title given. Have the attorneys discuss and if the attorney on the bank's side is not willing to work....walk.
They certainly can fix the problem, it may take a little time though. The key is if you close with a problem now, when you go to sell the problem will still be there and can affect you and the value when you do sell. I can not tell you what to do, but i can tell you i would want the deed clear if i was buying it.