Oct 29, 2010

Tip 41-2010: REO & Free Title Insurance

A prior Tucker Tip (41-2009) recommended that the Purchaser of REO property (Real Estate Owned by bank) not use the “free” title insurance offered by the REO seller.  Let me reiterate, never accept it.  A free owners policy does  not mean “everything is free”.  Usually the REO title company charges for the title search, the lender’s policy and other incidental binder and/or endorsement charges.  The extra fees can sometimes greatly exceed the normal title insurance rates available from our local title insurance agencies.
More important, the REO title policy often contains incomplete information or is just plain wrong.  The policy may not recite any title exceptions (just a blanket short-form residential binder), thus the Purchaser is unaware of any restrictions, road maintenance agreements or set-back requirements.  Equally important is that the REO title policy  may only be a limited or one owner search.  Accordingly, if there are prior outstanding unreleased deed of trusts and/or judgements, the new Purchaser inherits the problem.  As discussed recently in the news, the REO title policy may overlook the fact that the foreclosure may have been conducted improperly. 
Even if the Purchaser still insists on the “free” title insurance, at the very least, have a local title insurance company perform a full title search to verify the information from the “free” REO title binder is correct and the foreclosure was performed correctly.
Please contact me if you have any questions or need legal advice.
William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, VA

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