Wednesday, November 3, 2010
Good Grief - there's so much about real estate in the news these days, it's hard to keep up. Lots of inventory to pick from, historically low interest rates, foreclosures, short sales, hanky-panky at the banks during foreclosure proceedings, and on and on and on.
So, why, you say, would Amy need to talk about something so boring as title insurance. Who even knows, really, what it is or does? I think I signed something the last time we closed on a loan, but there was a pile of papers 4" thick. Who knows what all was in those documents?
But these days my friends, you need to know. (you really needed to know every time you signed, but hey - we all trusted. And now look look at the pickle we're in!)
In Oregon, our sellers customarily provide the new buyer with a Warranty Deed. The long and the short of it is that this is the most common form of Deed. This deed conveys title, and covenants that the Seller has the right to sell and has good title free from encumbrances except as stated. Title insurance, that is purchased at the time of closing, is just that - an insurance that's there as a safety net for the buyer in case there is some sort of mistake and the title is transferred with an encumbrance discovered after closing. It's a great system.
So - what's the big deal? The big deal is that many of you are contemplating a purchase of some of this great priced foreclosure property. The price is right, the interest is good, and lets face it, not all of them are trashed. Sounds like an opportunity.....and it is. There's just one small catch.........
That small catch has to do with the lenders selling the foreclosed property. Many of them use their own Addendum to the real estate sales contract. Contained in those addendum's is language often expressing that the seller is conveying the title to the buyer by means of a Special or Limited Warranty Deed, Quit Claim Deed or Bargain and Sale Deed. So??????
Each of those deeds has their own limitations on how much the "seller/lender" is representing with respect to how clear the title is. As an example; the Special Warranty Deed promises that the Seller/Lender will defend the title to the property back to the acts of the Seller only! That means the Lender says "I know this title is clear for as long as I've held it since the foreclosure." WOW - there could have been a lot going on prior to that short period of time!
Does this mean you should be afraid to buy a foreclosed property? Not at all. But it does mean you need to take precautions.
Deal with a reputable Realtor who reads and understands the possible impact of the addendum's you might receive from a Lender/Seller. Insist on a reputable title company or escrow attorney to handle the search of title. Be sure that there is title insurance in place. If it's not paid for by the seller, then you as the buyer should buy it for yourself. And seek the advice of an attorney if there's any confusion on this issue, or any other issue in a real estate transaction.
Hope that gives you an idea about why title insurance certainly is not boring. In this crazy new real estate world we're in - we've all got to be better informed and more vigilant about protecting our interests as we proceed through any transaction.
Call/email/or Facebook me if you have questions. Now go make lemonaide out of all those lemons!
P.S.: Thanks Ted :)