Are You Hesitant About Buying a Foreclosured Property?

Are You Hesitant About Buying a Foreclosured Property?

Buying a foreclosure is a good way to get a great bargain on a home. And despite what anyone says, it is safe to buy a foreclosed property…as long as you follow the correct procedures.

With the recent “robo-signing” scandal, many home buyers are hesitant, if not downright worried, about buying a home that has been foreclosed on. The key to buying a foreclosed property is to make sure you have title insurance when you make the purchase.

If you don’t have title insurance on the foreclosure that you purchase, there is always a chance that the former owner can claim their rights to the property even though you have a contract that says the home belongs to you. During the robo-signing controversy, this happened to several people who purchased a home that was unlawfully foreclosed upon. The original owners came back to the property and since they were unlawfully evicted from the home, they retained ownership to it regardless of what happened since the foreclosure occurred.

To be clear, there is nothing “unsafe” about buying a foreclosed property. When you make your purchase, make sure that you and your lender purchase title insurance for the property to ensure that you have the legal right to occupy the home. If you have title insurance, the previous owner cannot reclaim ownership of the property regardless of whether it was illegally foreclosed upon. The previous owner may have a financial recourse against the mortgage lender that foreclosed on the property, but they will have no recourse against you. You are a “good faith purchaser” when you have title insurance which means you have nothing to worry about. Title insurance also protects the new buyer from liens against the house, forged documents and other defects in the title that often occur.

This is good news for people who were thinking of buying a foreclosed property but were nervous due to title issues. There are other issues with foreclosed properties. Often, the previous owners will have trashed the house before they left, or stipped it bare. You have to perform repairs to a foreclosed home in order to bring it up to code before you can live in it. You may have to clean it up, too. But that’s why many bank-seized homes are available at such a bargain price.

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