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Buyer Beware - Banks Are Attempting to Sell Foreclosed Homes They Don't Yet Own!!!

By Stephen Howell

Real Estate Agent with Coldwell Banker Residential Brokerage

July 07, 2010 03:07 AM

Buyer Beware - Banks Are Attempting to Sell Foreclosed Homes They Don't Yet Own!!!

Yesterday I received a call from my buyer's title attorney and the call went something like this ...

Title Attorney: We won't be able to close the on the sale of the property at NNN ABC STREET in Baltimore, Maryland tomorrow.

Agent (that's me): Why not?

Title Attorney: Because Bank of America doesn't have clear title to the property.

Agent (that's me): Why not?

Title Attorney: Because the court in Baltimore hasn't yet ratified the sale of the foreclosed property.

Agent (that's me): Hmmm ... sounds like the seller could be held in breach of contract because they don't have marketable title to the property. BOA Home Loan Servicing is trying to sell a property they don't own, doesn't that violate Maryland law?

Title Attorney: Yes, they are probably in breach of contract.

Agent (that's me): The plot thickens ... Bank of America was also trying to force the buyer to use their title company. In Maryland title company selection is always "buyer's choice". I wonder if there wasn't something else going on there that they didn't want the buyer to know about this property?

Title Attorney: Yes, it's usually buyer's choice of title company. Since we were looking out for the buyer's best interest, selecting an independent title attorney and company not affiliated with BOA was a good move on the part of the buyer.

Click here for more information foreclosure proceeding in the State of Maryland

Agent (that's me): Now what is the buyer to do?

Title Attorney: Well, the buyer can wait an indefinite period of time for the courts to ratify the sale of this foreclosure, but, there's no way to know whether its fourth or 40,000th on some judges docket.

Agent (that's me): I'll have to discuss this with the buyer, but, I think I'll advise them to void the contract. The buyer could show up at settlement at your office with money in hand and the seller would NOT be able to settle, then the buyer could seek redress under the terms of the contract, which could take a while and tie the buyer and the property and Bank of America up in court for a long time. It might be better to void contact. I'll have to see what the buyer wants to do.

Summary

In summary, in any real estate transaction, Maryland law provides for the buyer's choice in title company, title lawyer, settlement company, escrow company, mortgage lender, and/or financial institution as defined in the Annotated Code of Maryland. In this case the buyer's due diligence and selection of an independent title company has protected the buyer from purchasing home they could loose were the court to fail to ratify the contract of sale of the foreclosed home to the bank.

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Karen Fiddler, Broker/Owner

Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA

Orange County & Lake Arrowhead, CA (949)510-2395

Wow....this is scary! I'm going to "suggest" and reblog. I'm wondering if this is because you have mortgages and this is during the redemption period? I'd love to know? I am not sure this could happen in California where there is no redemption period after the trustee sale.

Jul 07, 2010 03:10 AM

Cynthia Larsen

Cotati, CA

Independent Broker In Sonoma County, CA

Steven - here is California we receive a preliminary title report within three business days of opening escrow. With the prelim, we can see immediately who is on title. This isn't the case in Maryland?

Jul 07, 2010 10:15 AM

Lewis Poretz

Apex Home Loans - Annapolis, MD

Business Development Manager

Big banks strong arming you to use their "approved" title company?

No way..... that couldn't happen with the current administration could it?

...............................There ought to be a law

Jul 07, 2010 03:41 PM

Stephen Howell

Coldwell Banker Residential Brokerage - Annapolis, MD

Annapolis MD Homes For Sale 443-994-8043

In Maryland, a lender must accept from the homeowner payment of the funds due to cure the default up to one business day before the sale. After the sale has taken place, but before the court has ratified the sale, a homeowner could file an objection to the sale. After the court ratifies the sale, the new owner petition the court to evicte occupants (the prior owners) from the property. It's a slam-dunk at that point.

Also in Maryland, title work is "just in time" and firms wait until a few days or a week or so to review title. These issues often come up at the last minute rather than at the beginning of the escrow period.

While banks have always tried to force buyers to use their preferred title company, I always thought that this was a result of affiliate "kick backs" (i.e., volume discounts) between title companies and banks. There may be other hidden reasons while a bank might "their" title company to do the work. It remains in the best interest for buyers to always retain their own title company to protect them against any biased acts by bank or title company.

Jul 08, 2010 02:43 AM

Stephen - I have sold quite a few homes with just one bank (Indymac, now OneWest). When they assign an asset to me, I don't think the property is officially owned by the bank yet, but they ask me to do an occupancy check then a BPO. By the time I get the listing agreement, usually 30 or so days after vacancy, the property has been transferred to the banks name. So I'm pretty sure I'm not selling a property that hasn't officially foreclosed yet. All of the buyers so far have used the banks Title company because the bank pays for the owner's title insurance if they do.

On another note, I used to race sailboats from Oakland CA to Catalina Island, about 400 miles. What a blast!

Jul 08, 2010 12:54 PM

Buyer Beware - Banks Are Attempting to Sell Foreclosed Homes They Don't Yet Own!!!

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