So you have bought a foreclosure and now there is all the ruckus in the news about robo-signers and a new a moratorium on foreclosures and some banks stopping them and on and on. You bought a foreclosure before all this occurred. Should you be worried? Well it may depend on how you went about making the purchase.
If you are a buyer who decided you did not need the services of a Realtor and went by yourself to an auction or the court house steps and bought a foreclosure, bypassing getting title insurance along the way, you might have a worry.
But if you are someone who used a Realtor and went through the “traditional” way of buying, where in Arizona a title/escrow company was used to close the home and you have title insurance then you are most likely ok and have nothing to worry about.
One of the key things is if you got title insurance with your purchase. If you worked with a Realtor, it is automatic that you went through a “traditional” process and got title insurance as part of the transaction.
- According to a quote in a recent news article from Diane Thompson, an attorney with the National Consumer Law Center – “If you’re a bona fide purchaser with title insurance and no knowledge of any irregularities in the transaction, courts are going to be extremely loath to set aside the sale.”
According to experts — A homeowner with title insurance shouldn’t have to worry if the previous owner stakes a claim to the home. Even a successful claim, experts say, would almost certainly end up with the title company settling with the evicted homeowner – not putting the new buyer out on the curb.
If the former owner failed to make payments repeatedly, evicted homeowners might not be able to afford their old homes anyway, something a judge would consider. They’re more likely to seek a large check than a return to a house with an out sized debt.
The situation is murkier for people who bought their homes with cash and didn’t bother with title insurance. The issue of who has proper title in that situation could be uncertain.
What will be the outcome of the new foreclosure issues facing in the market? No one really knows. The Association of Realtors is posting a clip from a recent Wall Street News article that covers a guess of what might be a “best, medium, or worst case” scenario.
If a title insurance company is willing to continue to write title insurance, then it is currently being considered reasonable for buyers to continue to buy a foreclosure. But it seems not so wise for a buyer to take the risk of going it on their own and side-stepping getting title insurance.
Only time will tell how this all plays out and how the new foreclosure issues affects both the foreclosure and “traditional” home sale market.