The Most Important Thing to Do When Buying Property at Foreclosure Sale

By now, it is abundantly clear that lenders were at best careless when acquiring and transferring mortgages. Throughout the industry, they had a carefree attitude when it came to safekeeping of mortgages note and other mortgage documents. It appears that the documentation has not followed the electronic transfers of ownership. To remedy this, many lenders attempted to rectify these problems by affidavits of lost notes (when in fact the notes may still exist) and by "robo-signing" mortgage documents. The impact and how these system-wide practices will play out may have serious effects on the banks, the properties being sold in foreclosure, and those already purchased out of foreclosure.

A person who has bought a home out of foreclosure which was based upon misleading or fraudulent documents, may not have good title to the property. In a worse case scenario, that person who was foreclosed upon may be able to evict the new owner and claim the house back again. It seems that in dealing with the problem, it will have to be done on a case-by-case basis which means a prolonged period of uncertainty may lie ahead.

Most nationwide banks have suspended foreclosures. Along with the suspension, title insurance companies are now refusing to offer title insurance on properties whose mortgages were previously owned by certain banks.

HERE'S HOW TO PROTECT YOURSELF:
If you are considering purchasing a piece of property out of a foreclosure sale, make sure that you can back out of the purchase if you cannot get both clean title and title insurance. This added protection is not a luxury when buying homes out of foreclosure but has now become a necessity. The growing trend of title insurance companies refusing to provide title insurance raises red flags about many of the foreclosure sales. Make sure to get peace of mind by requiring your ability to get title insurance as a condition to the purchase.

Read more articles about consumer debt by Ted Connolly, co-author of The Road Out of Debt