Can I Get Title Insurance on a Foreclosure?
Yes! You can obtain title insurance on a foreclosure property. A foreclosure is a home that has been seized by the bank because the owner could no longer pay the mortgage. When this event happens, the title is taken over by the bank. Buying foreclosures isn’t a stroll in the park. A foreclosure needs more due diligence than other homes. That’s why we’re going to show you why you should get foreclosure title insurance and how we can help you get it.
Buying Foreclosures Involves Higher RisksYou especially need title insurance when you’re looking to buy a foreclosed home. There are more title issues with foreclosed properties. For instance:
- Title warranties that work when you a buy a new home won’t work with a foreclosed home.
- Problems sometimes arise even after you’ve searched the title and studied it carefully.
- Outstanding debts like real estate taxes and old tax liens may need to be cleared.
- You may need to settle with lienholders and other creditors during the foreclosure process.
- After the sale, you may discover that the property is occupied by previous tenants, requiring an eviction process.
Title Insurance Can Be Obtained Easily for REO ForeclosuresYou can either buy a foreclosed home from the court or through a bank. Buying through the bank is called Real Estate Owned (REO). It’s very similar to the conventional home buying process. An REO sale has fewer risks than a courthouse sale, so it’s easier to get a title policy for the property. For a courthouse foreclosure, you may be able to do a title search. However, until you take ownership of the property, you won’t enjoy the full rights to title insurance. That’s why it’s better to buy the insurance through an REO sale rather than the courthouse process. Would-be home buyers frequently ask if they’ll be able to obtain title insurance for their foreclosure. Yes, you can get title insurance on a foreclosure. However, we offer this policy to clients who are buying the foreclosed property directly from a bank. We do so because the bank will provide indemnification to us if there’s a legal dispute or discrepancy due to:
- Falsification of title documents
- Unknown successors
- Errors made during the title search
- Mistakes in any legal aspects of the title
How to Buy Title Insurance on a Foreclosure PropertyYou need to meet specific requirements before you obtain title insurance for a foreclosed property, including to:
- Take ownership of the home first
- Become the owner of a foreclosed home when the redemption period for the home has expired
- Get the Sheriff deed for the property
- Buy the owner’s title insurance policy after you’ve secured ownership of the property