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Legal tie-ups

Email|Link|Comments (3) Posted by Stacey Myers July 14, 2008 11:00 AM

Did you see the Real Estate section in the Globe yesterday? If not, you missed an interesting story on the legal pitfalls of buying a home that is in any stage of the foreclosure process. As correspondent Dave Copeland reports, buying a home that has been foreclosed, is in the process of being foreclosed, or being sold in a short sale involves exponentially more paperwork than a routine sale. And closing can take up to six months longer.

Obviously, it’s not the type of deal one should go into blindly.

Some agents interviewed for the story say they are avoiding certain types of listings because of red flags that could drag out a sale. One agent said he avoids short sales where there is more than one lender involved and he also avoids any foreclosure listing that has a clause giving buyers only 48 hours to decide on the lender’s offer.

But even home purchases involving non-foreclosure properties can turn into legal nightmares. I know of a case where a couple unwittingly agreed to purchase a house that was tied up in a very messy divorce – it took almost a year for them to get into the house.

What other possible legal hazards should buyers be on the lookout for? And what advice do you have for approaching a possible legal tie-up?

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3 comments so far...

We're property virgins and are currently considering a property that has a "48 hours" clause. Other than the hassle of getting an inspection completed in that short amount of time, what are the pitfalls?

Posted by HomeBuyer Newbie July 15, 08 09:35 AM

Hey Stacey,

The article was extremely timely. I have my eye on a property that is a bank owned property, and as luck would have it, my lender owns the property. Within less than 24 hours we have gotten pre-approved officially, lined up a real estate attorney, ran a crime report on the area, called the City offices to make sure there were no tax liens and confirm the yearly tax rate.

Being a first time homebuyer who was anticipating signing another rental lease this week, this property coming on the market a few days ago might make it the one. We've researched its mortgage history online, talked to a next-door neighbor...the home is currently priced at $350K while it sold in June 2005 for $510K. Its easily worth $450K as it has rental properties to help pay the mortgage.

We're going to see the inside tonight and provided there isn't something seriously wrong, we're likely to bid. Any other tips would be appreciated!

Posted by A.B-G. July 15, 08 01:33 PM

Actually reading the original article it says that the broker finds the 48 hour clause troubling but he didn't say he avoids them. If you avoid foreclosures with 48 hour clauses, you wouldn't buy any because there are very few that don't have them and when there's multiple bidders, there's plenty of other bidders who are willing to sign in 48 hours. Also you typically still have the home inspection contingency, it's just that it's in the P&S instead of just in the offer as it's normally done.

The real problem with foreclosures is as the article states, title problems. Sometimes the banks don't even officially own the property as they haven't filed the foreclosure deed yet and sometimes their paperwork isn't in order and that could as long as it takes as they're very busy and they'll get around to it when they get around to it. Just ask your agent to check on some foreclosed property and see how long it took before it finally closed. All the banks want to close in 30 days, but it typically takes months extra, weeks if you're lucky. Make it tough because rate locks expire in 30-60 days, then you need to start paying for extensions which sometimes the seller/bank will pay and sometimes not.

Posted by he262 July 19, 08 02:22 AM