I’m guessing you’ve read of the recent stoppage of foreclosures by some of the major players in mortgage lending. In 23 states, mortgage foreclosures are processed through the courts, causing mortgage companies to submit reams of paperwork for the process. It should come as no surprise that not all of that paperwork has been in proper order, nor has it been sufficiently reviewed. Think then about foreclosures that aren’t overseen by the, Oregon being a state that has non-judicial foreclosure… Do you really think that paperwork has somehow been better? Buying properties that have gone through foreclosure has never been for the faint of heart, and it certainly isn’t now.
Buyers have been attracted to buying houses that have been taken back in foreclosure as they percieve there is a deal to be had. But as with most deals, there are risks involved. Aside from questions about the validity of some foreclosures here are a few of the realities of buying a property that was obtained through foreclosure.
There is no title insurance when a house goes through foreclosure. While a foreclosure in essence can be seen as wiping a title clean, there can be title impurities that remain. We have a transaction in our office now where there were some easements given by the previous owners to a neighbor. So we have a neighbor who believes he has full use of the driveway. Yes, lawyers and some mediation or court time could sort this out, but our buyer client isn’t very excited about buying such a problem.
Once banks take back houses through foreclosure, they usually winterize them to prevent any mishaps while the house sits vacant; this means water and electricity are off. A prospective buyer is usually responsible for paying to have these utilities turned back in order to have the property inspected. Of course an inspection for a buyer is usually just to see if the buyer wants the property in as is condition as banks rarely do repairs on foreclosed properties.
And lastly, dealing with a bank is like doing busiess with a bully. Through a variety of transcations in our office we have seen banks requiring a buyer pay for an have inspections and the appraisal done before the bank has accepted the offer! Yes, a buyer could refuse and walk away but…they want the deal. Most banks use addenda to a transaction that functionally take away most basic rights a buyer has in a “normal” transaction. And while it can take banks days or even weeks to respond to offers and negotiations they institute financial penalties should a transaction close late.
Yes, there are some good deals to be had when buying houses that have been through foreclosure. As with most deals, there are trade offs. Those with thick skin who can approach the buying process with little emotion and lots of practical logic will do best.
Currently there is some discussion of a nationwide moratorium on foreclosures until the process is straightened out. this seems rash when the problems are unless than half of our states. The National Association of Realtors has put together a compilation of articles and opinions on the current foreclosure issue. In addition the National Association of Realtors has put together this letter to the Department of the Treasury. I expect this issue will be more about the integrity of the companies processing these foreclosures, than about the legal validity of the foreclosures themselves.