In the state of California you are able to purchase title insurance that will protect you against title issues. There are two policies available but most purchase a California ALTA. If you are obtaining a loan in the purchase, your lender will require you purchase a title insurance policy to in fact protect their collateral (the house).
You can find out what liens are currently applied by reviewing the preliminary title report. Note the date in which this report was completed as many times a seller will also end up defaulting on items like garbage. This should be updated the week prior to signing any loan docs and the seller/short sale lender should acknowledge pay off of all liens on the HUD-1.
The purchase of title insurance is very important. For more information on what it covers:
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Will the county records show liens other than taxes?
What other pitfalls should I watch for in considering short sales?
Thanks for some very helpful answers! Property I'm considering isn't actually in foreclosure yet, I misspoke. Owners are trying to do a short sale. I will get buyer's title insurance, & do want to gather as much background info as possible myself, as part of getting educated about the process.
If you are talking about buying a property at a Trustee sale, then you should stop into a local escrow company and ask them if they could please run a lien check on the property for you. Many will do this for you as a courtesy. If the property is already on the market as a foreclosure ( or REO), it should have a clear title.
When you purchase a foreclosure property, the bank should pay any outstanding liens on the property. In addition, as a home buyer you should purchase title insurance. Title insurance ensures that you are purchasing the property free and clear of any liens or encumberances.
If you want to do some checking on your own, you should visit the Prothonotary's office at the county court house for the home.
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