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Estate Resources
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Courtesy
of:
O'Donnell,
Lee, McCowan & Phillips, LLC
Attorneys at Law
112 Silver Street
POB 559
Waterville, ME 04903
(207)872-0112
 |
Purchasing Foreclosure And Short-Sale Properties
"Patience is a
virtue."
We are seeing a steady increase in the number of
transactions where buyers are buying property from banks that have
foreclosed on the prior owners. Also increasing are short-sale
transactions. Complications and delays in these transactions have become so
frequent, that we feel compelled to share a few observations.
You can get some good bargains in these situations, but you
must have a lot of patience and expect a certain number of problems.
Foreclosure purchases and short-sales often take three times longer than
the normal contract period to close, and may require several extensions of
the purchase and sale agreement if you remain committed to purchasing the
property. You may wish to reconsider attempting one of these transactions
if you have specific important deadlines for closing the transaction (such
as moving from out of state without alternative housing plans while waiting
for completion of the purchase; or a purchasing with a loan with a short
rate-lock period).
Listed here are a few kinds of problems we have
consistently seen delay closings:
- The seller bank actually has not completed the
court case for the foreclosure before listing the property for
sale.
- Defective foreclosure documents, deeds, or powers
of attorney requiring correction.
- Failure of the foreclosure to include all the
land the buyer thinks they are buying, or all the land needed
for the parcel to be complete.
- Damage to the property resulting from the neglect
or inaction of the foreclosing bank to maintain the property
and keep it heated during the winter months.
- Lengthy delay in correction of title defects
by seller or in review and execution of necessary documents.
- Slow or ineffective communication channels for
the selling bank.
- Lengthy delay in correction of title defects
by seller or in review and execution of necessary documents.
The last of these issues is perhaps the most aggravating.
In one instance, the transaction was delayed for a month simply waiting for
a representative of the selling bank to sign the deed, which had already been
drafted and approved. There was no explanation for the delay, but the
seller's own lawyer was not able to motivate them to act more quickly.
In another instance, 1½ months elapsed
waiting for the production of a necessary Power of Attorney and corrective
affidavit from a selling bank. These delays were in addition to the normal
escrow period.
Usually, there is little rational explanation for these
delays, except that many large, national lenders are extremely overloaded
with such transactions. Little individualized attention is given to each
transaction. The seller's representatives are remotely located in other
states with little knowledge of local land, parties, and practices. The
representatives frequently have little authority to negotiate or to authorize
solutions to problems without referral to other departments within the
seller's hierarchy.
Often, your real estate agent will have little to no
ability to speed things up. Frequently, even the listing agent and the
seller's attorney will have no ability spur action. In a nutshell, if you
are a bargain shopper, hang in there. You can get a good deal, but you must
be very, very patient. It may also be wise to have a back-up plan.
Additionally, the foreclosure process is very technical and
complicated in a way that increases the possibility of title problems. The
selling banks usually convey the property by a Quitclaim Release Deed or,
at best, a Quitclaim With Covenant Deed - which essentially is like buying
property "AS IS, BUYER BEWARE." In these transactions, we
especially recommend that a Survey Inspection be
ordered and the purchase of an Owner's Title
Insurance Policy. See our sections on those topics for further
explanation.
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