Friday, October 8, 2010

Foreclosures and Sheriff's Sales

We've talked about concerns in buying a home through a sheriff's sale in the past.

The new issues with some foreclosures being handled incorrectly by lenders like GMAC, Chase and Bank of America are creating worries for some purchasers of homes at sheriff sale. With so many notes being sold and resold these days, proper documentation regarding the current lien holder is not always in place. If a bank cannot document that they own the lien to a home, they cannot legally foreclose.

This is an issue right now because it has come to light that some home that were already foreclosed upon or that are currently on the market might have defective documentation. If a court determines that a foreclosure was not valid, the judgment could result in a sheriff sale being voided. If a court rules a sheriff sale void, the buyer can be required to relinquish the property.

The ramifications of this are huge. Unless a purchaser at a sheriff's sale lines up title insurance, and not all title insurance companies will cover this, there is nothing to guarantee title and protect a purchaser's investment. This can impact not only the person who bought a house at sheriff's sale, but also future buyers.

We've said it before, but it bears repeating:

Please proceed with caution and with guidance if you are purchasing a home through sheriff's sale. It is possible to find a wonderful home or investment through these sales, but someone navigating these waters for the first time should take the time to become fully educated on the process.

The Wisconsin Realtor Association advises "No one should ever purchase a property at a sheriff’s sale without a title commitment and the advice of their attorney." Realtors don't give this advice like this because we only want people to purchase homes with the help of a realtor, but rather because we are a little more aware of potential pit-falls and want to help people avoid these situations.

No comments: