Buying a Property in Massachusetts that has a foreclosure in the Chain of Title--Make sure your Buyer gets a Policy of Owner's Title Insurance

By
Real Estate Services with Topkins & Bevans-etopkins@topbev.com

Massachusetts foreclosures have experienced a "turn-around" since the seminal Land Court decision in the IBANEZ case. Among other things, that case held that if the entity foreclosing had not received all appropriate assignments of the mortgage prior to commencing the foreclosure, the foreclosure was ineffective, and must be started again. The hitherto acceptable process of obtaining the appropriate assignment(s), post petition, would no longer be permissible.

The immediate effect of this decision was to require all foreclosures to "stop in their tracks" and start the process again after all the correct assigments were in hand. That slowed foreclosures and REO sales down considerably, but they are now getting back on track on a case by case basis.

The lurking problem, howvever, are those foreclsoures which took place before IBANEZ where title attorney and title insurance agencies closed using the old rules. The IBANEZ rules applay just as forcefully to these situations, and title examiners and title insurance companies are rightly concerned that some Borrower may come out of the woodwork and claim that his or her foreclosure was not done properly and demand the property back. That all being said, my advice to any and all Buyers of property that have foreclsoures in their title is OBTAIN AN OWNER'S POLICY OF TITLE INSURANCE!!!!! Many current REO Owners received an Owner's Policy when they purchased the REO. Have your attorney arrange to have that title insurance policy re-issued. In the long run, it will cost your customer much less than the expense of an action to quiet title. If no policy of Owner's Title Insurance is available, seek a price discount!!

Believe me, we have not heard the end of this problem. Do whatever you can at the time of purchase to make sure it does not harm your Buyer more than the cost of the Owner's Policy of Title Insurance.

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  1. Tean Wong 11/23/2009 04:34 PM
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foreclosed properties reo purchases
owners policy of title insurance

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Rainmaker
231,805
Elliott S. Topkins
Massachusetts Real Estate and Title Atty
Topkins & Bevans-etopkins@topbev.com

Judy--Your are so correct. it is amazing how some Buyers will be penny-wise and pund foolish in this area. There are so many holes to fall in; you need a safety net.

 

Elliott

 

www.topkinsandbevans.com

November 14, 2009 01:29 PM
Rainmaker
231,805
Elliott S. Topkins
Massachusetts Real Estate and Title Atty
Topkins & Bevans-etopkins@topbev.com

Judy--Your are so correct. it is amazing how some Buyers will be penny-wise and pund foolish in this area. There are so many holes to fall in; you need a safety net.

 

Elliott

 

www.topkinsandbevans.com

November 14, 2009 01:30 PM
Rainmaker
231,805
Elliott S. Topkins
Massachusetts Real Estate and Title Atty
Topkins & Bevans-etopkins@topbev.com

Judy--Your are so correct. it is amazing how some Buyers will be penny-wise and pund foolish in this area. There are so many holes to fall in; you need a safety net.

 

Elliott

 

www.topkinsandbevans.com

November 14, 2009 01:30 PM
Rainmaker
104,851
Lynda Longmire
Virtual Homes Real Estate

I realize in the days of tight money for first time buyers, title insurance is one expenses that is not required by the lender.  It is up to the buyer's agent and the attorney to  inform their client of the pitfalls of not obtaining this insurance.  A good agent will always do that, but like everything else in life, some agents just are not as informed or careful enough with their client.

Another question - if a buyer purchased a home  from an investor (flipper) who did not have title insurance, and this owner did not take an owners policy -   what option does this owner now have? - any way to clear the title after it has transferred a couple of times? 

 

What advise can you give a buyer's agent when working with their client.   The title is not usually completed until just prior to  closing   -  after the home inspection, mortgage application and appraisal fees are paid.  Is it now advisable to have someone (either the buyer or seller) have a title search done before additional works is done? 

November 14, 2009 01:43 PM
Rainmaker
231,805
Elliott S. Topkins
Massachusetts Real Estate and Title Atty
Topkins & Bevans-etopkins@topbev.com

Lynda--Those are excellent comments, as usual. A few years ago, I never would have suggested a title review prior to P & S. Now, with the problems of foreclsoures, it might not be a bad idea. A simple search will only cost $150 or so. It might be worth the price.

My parners and I have decided the only way to get through the bad fopreclsoure problem is to get the former owener to sign a confirmatory deed. This might be the best $500 or so investment the aseller can ever make.

Elliott Topkins

www.topkinsandbevans.com

November 14, 2009 03:40 PM
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Rainmaker
231,805

Elliott S. Topkins

Massachusetts Real Estate and Title Atty
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Additional Information

Realtor's Resource Blog is dedicated to furnishing current strategy and information to the Massachusetts real estate community of professionals and to out of state realtors and REO and relocation companies who need excellent representation in Massachusetts. My law firm, Topkins & Bevans, can cover the entire state of Massachusetts. I hope to use my 40 years of hands-on real estate experience to assist you and your Massachusetts Buyers and Sellers.