Tip 43-2010: REO & Free Settlement Services

Last week’s Tucker’s Tip (41-2010) recommended that the Purchaser of a REO property (Real Estate Owned by banks) not use the “free” title insurance offered by the REO Seller.  Additionally, do not let the same settlement agent who represents the REO Seller also represent the Purchaser.  Sometimes the REO Seller will offer an incentive to use their settlement agent, but any incentive is not worth it.  In fact, sometimes the ”free” items costs more than simply using our local real estate settlement attorneys and paying their normal fees.

It is always preferable to have the REO Purchaser represented by their own settlement attorney.  With REO Sellers there may be legal issues which need to be resolved and/or clarified.  By having their own legal representation, the Purchaser is protected from any conflicts of interest, especially by a settlement agent who normally represents the REO Seller.  For example, with REO transactions, there can be issues regarding unpaid HOA or condo dues and with unreleased Deeds of Trust, which an REO Seller may not want to resolve.  By using local attorneys, these kind of problems can be resolved and our local procedures of promptly recording the deed and disbursing all fees can occur quickly. Many out-of-town REO settlement agents may take several additional days to complete the transaction.

With all the recent news about potential foreclosure problems, it is more important than ever for the Purchaser to have their own settlement attorney.  Do not be afraid of an REO purchase, just be sure that the Purchaser’s own settlement attorney carefully reviews the foreclosure transaction to be certain it was performed correctly.

Please contact us if you have questions or need legal advice.

Senior Partner

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, VA
434-973-7474
Tucker@TGBLaw.com

www.TGBLaw.com

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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

434-973-7474

Tucker@TGBLaw.com

www.TGBLaw.com

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Tip 42-2009: REO Closings Delays with HUD Approval

As the REO Banks own more foreclosure properties, there will eventually be more delays with their out sales. One recent delay was due to the requirement that the REO Bank needs to approve the final HUD (which review usually requires 48-72 hours). Because the REO insists on both sides of the HUD being completed, this means that the final HUD can not be submitted to the REO until the Purchaser’s lender has approve the HUD (usually this does not occur until the day before closing). As a result, although the loan is approved and funded, the recording of the deed and delivery of the keys to the Buyer may be delayed several days until REO HUD approval. Please warn the Buyer that these delays may occur!!

PS—One strategy we have used is asking for the lender’s package as early as possible and pushing the REO representative for a quick HUD approval.

Please contact me if you have any questions.

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/

Tip 41-2009: REO and "Free" Title Insurance

“If it sounds too good to be true it probably is”. “You get what you pay for”. Two sayings to keep in mind when buying property from an REO Seller that offers in the contract to provide “for free” the owner’s title insurance binder for the purchaser. We have discovered that closings are delayed due to the fact that the Seller’s title company does not produce the title binder in time, sometimes not providing the binder until the day of closing. Also the REO provided policies are short form title insurance binders which do not list the exceptions such as easements, restrictions, etc on the property. Sometimes, the REO policy is just wrong (unpaid real estate taxes). Finally, the buyer may not actually save money as he is still responsible for payment of the search fee and lender’s policy. These payments to the REO title company sometimes exceed the cost of obtaining title insurance from the local title companies.

Please contact me if you have any questions.

William D. Tucker, III
Tucker Griffin Barnes P.C.
Charlottesville, Virginia
434-973-7474
Tucker@TGBlaw.com
http://www.tgblaw.com/
http://www.tgblaw.blogspot.com/