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
Services for Real Estate Pros 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.

close

Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Tean Wong 11/23/2009 04:34 PM
Topic:
ActiveRain Community
Groups:
Boston Area Real Estate
Boston South East Agents ZIPREALTY Rockin 2008!
Cape Cod Real Estate
Real Estate Law
Tags:
foreclosed properties reo purchases
owners policy of title insurance

Anonymous
Post a Comment
Spam prevention
Spam prevention
Show All Comments
Ambassador
2,402,344
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Few homes close without title insurance.  However, if buyers realized the risk, even fewer would. 

Nov 14, 2009 07:32 AM #1
Rainmaker
232,537
Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

Lenn--I could not agree more. I have a really ticklish title now, where the problem would avnish is the owner has spent $452 for an Owner's policy.

 

Be well.

 

Elliott Toploms

www.topkinsandbevans.com

Nov 14, 2009 07:36 AM #2
Rainmaker
332,180
Judy Jennings
508-209-5000 - Plymouth, MA
Sales Director

Elliott - I strongly recommend that all of my Buyer clients purchase an Owner's Policy of Title Insurance when buying real estate. I was surprised to learn that state law allows people two decades to dispute land ownership. Much can change in the course of 20 years, and you only have to purchase the policy once to cover you for as long as you own the property. The cost is minimal as compared to the risk of not protecting your investment.

Nov 14, 2009 12:15 PM #3
Rainmaker
232,537
Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

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

Nov 14, 2009 01:29 PM #4
Rainmaker
232,537
Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

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

Nov 14, 2009 01:30 PM #5
Rainmaker
232,537
Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

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

Nov 14, 2009 01:30 PM #6
Rainmaker
104,851
Lynda Longmire
Virtual Homes Real Estate - Stoneham, MA

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? 

Nov 14, 2009 01:43 PM #7
Rainmaker
232,537
Elliott S. Topkins
Topkins & Bevans-etopkins@topbev.com - Boston, MA
Massachusetts Real Estate and Title Atty

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

Nov 14, 2009 03:40 PM #8
Anonymous
Post a Comment
Spam prevention
Show All Comments
Rainmaker
232,537

Elliott S. Topkins

Massachusetts Real Estate and Title Atty
I need a Massachusetts real estate attorney
*
*
*
Spam prevention

Additional Information