MERS issue

Tax, SDIRAs & Cost Segregation
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MERS issue

Josh Sterling
Property Manager · Wyandotte, MI · Member since 2011 · 123 posts · 26 votes

We have a REO property under contract that is supposed to close in less than 2 weeks. Last week we got a title commitment from the title company stating that the title was clear. Today we found out that there is a problem regarding MERS (Mortgage Electronis Registration System) and that the forclosure is invalid. They said that they would have to complete the forclosure again which could take 2-6 months.

Shouldn't the seller have known about this ahead of time? We now have quite a bit of money commited to this property due to inspections and the cost of transfering funds.

Even if the new re-forclosure process takes 2-6 months, can we get a long term contract extension so we can still purchase this property when it eventually comes back on the market, without having to re-submit offers and compete with other buyers?

Just doesn't seem right to me that we can have a property where they tell us we have a title commitment, we spend a bunch of money on due diligence, and then they can't go through with the deal and we are stuck with the loss.

Thanks in advance for any responses.
SR

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  • Mike G.
    Rehabber / Flipper · Simi Valley, CA · Member since 2010 · 597 posts · 259 votes
    15y

    Because they have to re-foreclose, they don't really actually own the property, so they can't sell it until the foreclosure goes through again. That means there won't be any contract extension - they simply don't own the property. Also, six months from now, you may not want the property at the price you agreed on. During that time, the prices might drop, the property might be vandalized, the roof might start leaking, etc.

    Yep, this situation sucks, but on the other hand, it's lucky the issue came up before the property was transferred to you and you began renovations in earnest. Then you could have suffered an even bigger loss and lots more stress.

    You can always try contacting a real estate attorney to see if anything can be done, but I'm guessing that will just be more money down the toilet.

    Maybe you can ask the bank to reimburse you for the cost of inspections because it was their mistake regarding the title?

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  • Edgar B.
    Residential Real Estate Broker · la mirada, CA · Member since 2011 · 66 posts · 12 votes
    15y

    I'am sure it whas not the sellers intention, they are more than likely being sued, you can be happy that you were not dragged into this mess and this is only the beginning and nobody knows how it's going to tern out, listen to this conference call by former attorney general Marc Dann it' the last one. [LINK REMOVED]

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  • Josh Sterling
    OP
    Property Manager · Wyandotte, MI · Member since 2011 · 123 posts · 26 votes
    15y

    Thanks for the replies.
    I have been looking into this and it appers that the MERS issue was more of a paperwork issue involving improper procedures used during the foreclosure process. Therefore the foreclosure process will have to be repeated, but it will come out to the same result (same bank will own the property in the end).

    Its not like they are going to go back to these people who stopped paying their mortgage 2 years ago and have long since moved and say "here is your house back because we screwed up the paperwork on the foreclosure."

    Has anyone else out there experienced this?

    Thanks

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