Just had an interesting situation with one of my clients who was purchasing a Fannie Mae REO. Property is under contract and everything was moving fine towards closing until two days before closing, when the attorney calls and says that there is a large federal tax lien that was filed before the foreclosure but the title company missed that lien and did not notify the foreclosing lender.
What is even more interesting is that the title company wants to play hardball and not cooperate even though they issued a title policy insuring clean, marketable title. I know many people try to save a few bucks and not purchase owner's title insurance but this scenario provides a good case study of why I always advise my clients to purchase a title insurance policy.
At this time, it looks like the attorney representing the lender is working to get the lien released while also pursuing legal action against the title company because the whole situation is putting the prospective buyers, who are my clients, in a very precarious situation.
Stay tuned...will update with outcome soon..
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