Send In The Clouds - Buying A Bank Owned Property In Massachusetts

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Real Estate Agent with 508-209-5000
Buying a Bank Owned Home in Massachusetts - Buyer Beware!

Westport River - Massachusetts by Judy Jennings


The clouds first started gathering back in March when Justice Keith C. Long invalidated the sale of two foreclosed properties in Springfield Massachusetts. He ruled them invalid as a result of the banks not having filed the appropriate paperwork in accordance with Massachusetts state foreclosure law. The original ruling was just upheld by a state Land Court judge.

What will this do to pending and future sales of foreclosed properties? In Plymouth County alone, there are 106 pending sales of bank owned properties currently listed in multiple listings service. I wonder how many of those will not make it to closing due to a cloud on the title.

What does this mean to you if you already purchased a foreclosed home in Massachusetts? It could mean nothing, but I hope you purchased individual title insurance, just in case.

Did you know that state law allows people two decades to dispute land ownership?

Click on the following link to read the complete story posted in the Boston Herald -
Ruling could undo thousands of foreclosures - by Jerry Kronenberg

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Rainmaker
860,109
Steve Loynd
Alpine Lakes Real Estate Inc., - Lincoln, NH
800-926-5653, White Mountains NH

Judy...that one for the records, I was at a recent closing and heard a buyers agent tell his client it was a waste of money to buy additional title insurance beyond the lender required amount. I held my tongue and told him later you better hope there is never a problem with that title....your client will be out any equity they may have had if it comes down to a claim.

Oct 16, 2009 06:50 PM #1
Rainmaker
330,804
Judy Jennings
508-209-5000 - Plymouth, MA
Sales Director

Steve - It is ultimately the buyers choice, but I always recommend purchasing individual title insurance to my clients. I personally would NOT purchase real estate without purchasing title insurance. 

Oct 16, 2009 07:19 PM #2
Rainmaker
1,054,056
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

I am betting that the Banks will be appealing this decision.  I don't think buying title insurance is going to solve this issue.  We will have to stay posted.

Oct 18, 2009 07:32 PM #3
Rainmaker
330,804
Judy Jennings
508-209-5000 - Plymouth, MA
Sales Director

Joan - I agree with you, I think the banks will appeal the decision. However, by passing title without recording change in ownership, they weaved their own tangled web so to speak. Now those banks that did not comply with the law might be holding onto properties that the title insurance companies will not insure because the title is clouded.

I don't think you would have to look far to find a bank owned property with this problem. I can think of one immediately that has gone under contract at least four times in the past two years. The title companies will NOT insure this property. The only way it will sell is if someone pays cash, as no lender will provide financing. It used to be a very nice home, in a decent location. What a shame.

Oct 18, 2009 08:19 PM #4
Rainmaker
1,015,959
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

Judy, what a clever title...I love it!  and an awesome photo! 

Oct 20, 2009 08:05 AM #5
Rainmaker
472,271
Trey Thurmond
BCR Realtors - College Station, TX
College Station , Texas Homes

Judy

I wonder what the clouds could all be. Here..... the only thing that could transfer to a buyer after forclosure by the mortgagee would be delinquent property taxes   ( which the bank would know they owed at closing)....otherwise why would banks lend on homes if they aren't first in line??

Oct 20, 2009 11:14 AM #6
Rainmaker
330,804
Judy Jennings
508-209-5000 - Plymouth, MA
Sales Director

Sharon - Thank you. That photo was taken moments before I was trapped in a severe thunderstorm on my boat. It was so frightening.

Oct 20, 2009 12:59 PM #7
Rainmaker
330,804
Judy Jennings
508-209-5000 - Plymouth, MA
Sales Director

Trey - The problem is that a lender will NOT finance these homes, and even some title companies are refusing to provide title insurance for these properties. Once that happens the property will sit vacant and be unsaleable for an indefinite amount of time. If it is in an area where there are numerous properties with the same problem then it impacts the whole area making it further depressed.

This ruling appears to be an attempt to get the lenders to abide by the state foreclosure laws and record the appropriate documentation when transferring ownership of the properties. Some of these lenders were not recording these documents for several months after a transaction and even worse, some documents were (gasp) getting lost. How do you reproduce an original document after the fact, especially if several months have passed?

It will be interesting to see whether or not this ruling will be appealed. The case involved two very large lenders.

Oct 20, 2009 02:06 PM #8
Rainmaker
1,108,139
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

Twenty years to dispute land ownership?!!! Wow. Title insurance sounds like a necessity there, not that it's not a necessity everywhere else, too.

Oct 21, 2009 11:27 PM #9
Rainmaker
330,804
Judy Jennings
508-209-5000 - Plymouth, MA
Sales Director

Jim - The twenty years was an eye opener for me too. Title insurance is a smart choice and is a one time expense for the individual property owner.

Oct 22, 2009 06:51 AM #10
Ambassador
2,033,553
Todd Clark
Keller Williams Realty - Beaverton, OR
Broker - Beaverton, Oregon Real Estate Expert - (503) 524-9494

I just had clients walk away from a foreclosure because of title issues, it just wasn't worth it. There were so many legal battles over this home it wasn't even funny. The original person bought the home with funds he stole from a trust and there was lawsuits from 4 different family members.

 Todd Clark - www.LivingBeaverton.com

Nov 06, 2009 08:19 PM #11
Rainmaker
330,804
Judy Jennings
508-209-5000 - Plymouth, MA
Sales Director

Todd - That sounds ugly. Smart move for the clients to walk away from that nightmare.

Nov 07, 2009 08:35 AM #12
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Judy Jennings

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