HOW TO PEEL THE BIG ONION WITHOUT CRYING! Part 1

HOW TO PEEL THE BIG ONION WITHOUT CRYING! Part 2Lots of red tape

The banking industry already has alot to answer for. They have re-keyed owner occupied properties before the sheriff's sale, they have made their own rules in selling REO assets, and now it seems they have shot themselves in the foot, again. The Banks have cut corners in the foreclosure process, which is different in each state, and in some cases they have taken property illegally (according to Plaintiffs Attorneys). Now these former homeowners are bringing suit to reclaim their homes. If there is even a remote chance this could happen, why buy an REO? You could be ordered by the court to vacate the home, if a judge finds for the original homeowner, and then your recourse is with the bank. Reread all the REO sales addendum again, and tell me they didn't disclaim all responsibility for this (and the Lindbergh kidnapping)! It's like the Pinto gas tank. Instead of fixing the problem, they figured a way to live with it, so to speak.

Okay. Calm down. Buyers, if you want to buy a Bank Owned Property, or REO, you can still do it; but be advised there are risks involved, and the bank is all about putting all the risks on your plate. This newest aspect of the REO risk/benefit bundle may be resolved at the Title Insurance level. If your Title Insurance covers this, you may be made whole financially in the event the court takes your home and gives it back to the previous owners. But, one of the most common events in an REO transaction is, the bank tries hard to get the Buyer to use the banks Title Insurance Company, and all title policies have a list of exceptions, or things they will not cover. My observation is the banks title policy has a longer list than usual.

It also needs to be said, these actions are in their legal infancy, and may be in court for years. Even if more former homeowners win the case, the court may decide giving them back the house is not appropriate. Too injurious to another, innocent party; you the new owner. But this is new ground and it could go either way.

on TargetAgents there is no sugar coating this, if this happens to your clients, it is happening to you as well. The difference is the clients could be out in the cold! So, what do you do? Educate your clients about the issues involved, disclose and disclaim, in writing. If they decide an REO is not for them, you will have to find a non bank owned listing for them:) There are a few of those out there and they typically present less risk. Network this on AR and in your office until you are comfortable with your level of knowledge and can explain the issues to a client, so they can make an informed decision. Now is the time to plan for it, and protect your clients and yourselves.

Keep peeling the big onion. There's no reason to cry if you stay sharp and do the right thing for your clients and document it. Not sure what the right course of action is? Go to the next sales meeting and start a discussion, then listen to all of the experience and intelligence in the room! Some of it yours! and do the same here on ActiveRain. It's open 24/7!

 

 

Steve Baklaich RE/MAX Results  www.stcloudareahomesforsale.com 

Cell:320-260-3290 Saint Cloud Minnesota Real EstateQR code to Google Places Page

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If you are relocating to central Minnesota check out all the wonderful reasons to love St Cloud. It is a wonderful area full of things to do and lots of great houses. I would welcome the opportunity to help you find your perfect place here. Visit my St Cloud real estate website for more information about buying or selling a home, or property in the central Minnesota real estate market.

 

 
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10 Comments on HOW TO PEEL THE BIG ONION WITHOUT CRYING! Part 2

JAN
17
2011
117,913 Points 1 Featured Post Outside Blog Hit Router Attended Rain Camp Called Shot Master

Steve, part 2 was just as good as part 1.  Thanks for good information, so glad I purchased title insurance when I purchased a HUD home recently, am in the process for a VA home how and will definitely get the insurance.  Thanks for your post.
10:26pm • #1
174,695 Points 3 Featured Posts Outside Blog Called Shot Master

Suzanne: I would read schedule B of the title policy (Exceptions) and ask them to line out any that cause you concern. If the want to get off the hook for this type of liability, it will likely be listed there. There is of course more to come, and we will pass along whatever we find. Thanks for your nice comments.
11:48pm • #2
JAN
18
2011
117,913 Points 1 Featured Post Outside Blog Hit Router Attended Rain Camp Called Shot Master

Thanks for the advice, have to admit, have never actually read the title policy, going to this time.
12:17am • #3
1,445,982 Points 26 Featured Posts Outside Blog Called Shot Master

Very good advice for home buyers and their agents. Purchasers should fully understand the rules of the game in an REO transaction.

 The colors of winter in Maryland. Life is good in Montgomery County!
6:56am • #4
147,643 Points 9 Featured Posts Attended Rain Camp

Great follow-up article, Steve; I'm so sick of "the banks" I could scream
7:26am • #5
405,185 Points 15 Featured Posts Localism Sponsor Outside Blog Hit Router Called Shot Master

At some point it would be nice to see banks held to the same rules as other sellers. Seems like they do what they want and we agree or move on. I have approached our Board. If they are listed on our Board they should have to follow the same rules as the rest of us.
7:43am • #6
385,382 Points 8 Featured Posts Called Shot Master

Banks try too hard to get buyers to use their title company.  Many offer to pay for an owner's title policy if their comppany is used.  I think they are trying a little too hard, and strongly suggest to my clients that they use another company. 
10:02am • #7
174,695 Points 3 Featured Posts Outside Blog Called Shot Master

Roy: That's the point, to inform the Buyers, so they can make intelligent decisions.

Virginia: I am with you on that. Unfortunately we are stuck with them.

Randy: We may not be able to force compliance by the banks, but the REO Listing Agents may have to pony up some fines/fees. Some are making serious money and violating rules on the banks behalf.

Mike: I have speculated before they were cutting corners, and advised my buyers to not use the bank's title company, for this reason. Chicago Title (Tri County Abstract-St. Cloud) has stated they will cover this on owners title.
1:06pm • #8
387,483 Points 30 Featured Posts Outside Blog Hit Router Called Shot Master

Another issue that arises is if a buyer purchases an REO, then proceeds to renovate it, spending thousands of dollars in the process.

They need to go back after they have done this and increase the amount of title insurance coverage just in case something happens, otherwise, they will only be made whole in the amount of the original purchase, Ouch! 

Great series, by the way.
9:35pm • #9
JAN
19
2011
174,695 Points 3 Featured Posts Outside Blog Called Shot Master

Great advise Susan. That's why you are the go to person in Old Town Alexandria! Thanks for taking another layer off the old onion:)
3:41pm • #10


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