The Florida Times Union recently ran a story on the problems of Bank-Owned Properties-unkempt, dilapidating properties that stand vacant for months driving down real estate value around them. They’re not just eyesores-they’re title traumas as well!
Bank-Owned Properties (also known as Real Estate Owned or REO’s) occur when a homeowner goes into default on their loan and the bank forecloses on the home. Unfortunately this process often brings problems for subsequent buyers of the property, problems including: No Accountability, Over-Charging, “Bad” Title Product, and No Survey.
No Accountability – The attorney who did the foreclosure normally owns the title company. They play a game of “catch me if you can,” leaving accountability as the “monkey in the middle”.
Over-Charging – The banks’ attorneys charge a “cheap” fee for the foreclosure, then make up for it by over-charging the buyer in closing fees. Their loss is their gain, and the buyer gets the bill. Over-charging shows up on Settlement Statements on items that customarily not as high or charged to the seller.
“Bad” Title Product – Ever heard of David Stern? Banks’ attorneys and and Bank-Owned Title Companies are notorious for throwing caution into a hurricane. In their velocity and volume, they don’t do the careful documentation to support a clear, clean foreclosure, thereby opening not a front door, but an airplane hangar door of liability.
Survey – Bank-Owned Properties come “As-Is”-they don’t come with a little gift basket and they don’t come with a survey. Without a survey there are title exceptions. How do you know that your neighbor won’t dispute the boundary lines? Remember it’s expensive to be right.
Bank-Owned Properties are popular for their cheap price, despite steep problems. However, they can be worth the risk if you get Title Insurance. Cheap real estate can cost you a fortune in legal fees if you don’t have your ownership title insured. What was a good investment can become a financial black hole if someone else makes a claim to the title, especially when it involves bad foreclosing.
There are financial risks inherent to the process in purchasing an REO. Insulate yourself from those risks with Title Insurance, which covers all the problems of the past.
Title Insurance is trauma treatment for title problems.