"Title issues" on an REO

16 Replies

Hello,

I put an offer in on a Chase bank owned foreclosure 2 weeks ago (the first day that they would accept offers). We were supposed to hear back within 48-72 hours, but we didn't. We kept our offer in and our realtor has been talking to the listing realtor and found out that they're "checking title issues."

Does anyone have any experience with this and have any idea how long this can take? They said we are the only offer right now. Also, the realtor said that this won't affect the asking price of the house.

The bank "bought" the house back in 2015. Shouldn't the liens have been cleared when they bought it back?

@Lauren Rose
That is true it will not affect the price. Although title issue may take sometime to clear you should get the property clear of any encumbrances. This will test your patience because of banks take their time as well.

@Lauren Rose good thing they discovered this NOW, and not in the 11th hour of your escrow!  So, count your blessings.

You'd think they would've cleared any issues while they have had the property since 2015. However, the truth of the matter is many of these homes sit until the bank is ready to deal with them. They never seem to have much urgency, even though they are paying for it every day they hold it. And there are many options the bank has with these properties. If it is an FHA backed property, they have the option of giving it to HUD, VA to the VA, etc. They can sell it as an REO, either online through an auction, or listed with a local Realtor. They can enter it into an owner occupied homebuying assistance program, and get whatever tax break.

In terms of the title issue, it could be just about anything.  It could be anything from a previous owner who is protesting through bankruptcy to a fence that was built on the lot line.  It really doesn't help to speculate.  However, there is no way to guess how long it will take for it to be resolved.  My guess is that if they have your offer in hand, they will (in theory) work diligently to resolve it quickly.

Best of luck to you!

@Cara Lonsdale , thanks for your response, that's very helpful! So you mentioned that "if it is an FHA backed property, they have the option of giving it to HUD, VA to the VA, etc. They can sell it as an REO, either online through an auction, or listed with a local Realtor. They can enter it into an owner occupied homebuying assistance program, and get whatever tax break."

So since it is an REO listed with a local realty agency, is it likely that they can take it off and sell it as one of the options that you listed?

Originally posted by @Lauren Rose :

@Cara Lonsdale, thanks for your response, that's very helpful! So you mentioned that "if it is an FHA backed property, they have the option of giving it to HUD, VA to the VA, etc. They can sell it as an REO, either online through an auction, or listed with a local Realtor. They can enter it into an owner occupied homebuying assistance program, and get whatever tax break."

So since it is an REO listed with a local realty agency, is it likely that they can take it off and sell it as one of the options that you listed?

 That would be total speculation.  However, my guess is that they have already chosen their course of action for selling the house, so it probably isn't that.  

If Chase owns it, Chase owns it, not "FHA" or "VA" and no, the "Option of giving a property back to FHA or VA" is not an accurate statement. FHA is insurance. They aren't a lender. FHA insured loans that are foreclosed on become HUD homes and are sold through HUD and their vendor(s).

https://www.hud.gov/program_offices/housing/sfh/re...

VA takes the property that doesn't sell third party at foreclosure and then sells it through VRM.

https://listings.vrmco.com/.

A "Previous owner" is just that, a previous owner, and whatever "protesting through bankruptcy" means has nothing to do with title and foreclosure. If a borrower is in bankruptcy, the foreclosure sale isn't going to happen until/unless the trustee approves the sale of the home or abandons the home as an asset of the bankruptcy court. If on the other hand a borrower was in bankruptcy and the lender went and held a foreclosure sale while the borrower had stay protection, without seeking and being issued relief to proceed to sale, that's another issue. I doubt that would be an issue because while Chase has their problems, they don't typically hold a faulty foreclosure sale and then put an REO on the open market to sell, until its resolved.

The one accurate statement is that yes, in terms of title issues, it could be anything, or, it could be nothing.

If Chase owns it and has since 2015, chances are that they'll sell it when they are ready to sell it. If they have title issues, they'll more than likely get them cleared up, eventually. If you are in a hurry, might want to move on to the next deal. I've done thousands of foreclosures, literally. I can count on one hand the amount of foreclosures that I've done with actual title issues. Every foreclosure starts with a TSG (Trustee Sale Guarantee) once the NOD is filed. That should tell you any issues. The trustee will do a date down just before sale as well to make sure nothing else popped up just before sale. If the lender didn't do it, or didn't catch it or something else showed up to cloud title, they are more than likely working to resolve it. The last thing they want is to sell a property they can't ensure, has clear and marketable title. While they have motivation, other than property maintenance and taxes, they aren't "paying for it every day they hold it". Chase has over 800 billion in their servicing portfolio so, I'm sure they can manage the winterizing and property taxes on an REO for a couple of years if necessary.

Chase can do whatever they want with the property if they own it. They can sell it. They can give it away. They can keep it as an executive retreat. Sounds like from your post that they elected to sell it on the open market and you made an offer. The agent says there are title issues they are checking on? If that's actually a true statement, I'm sure as time goes by, you'll find out what those issues are if any. let us know how it goes.

@Ron S.

A property acquired through foreclosure by Chase can most definitely have been an FHA/VA loan.

When a lender(Chase in this case) forecloses on the property, they can collect on the insurance provided by FHA/VA or try to sell the property themselves. We are seeing many properties listed on Auction sites such as Auction.com, Xome and others. If the property does not sell, then it will be transferred to VA/HUD and become a VA property or a HUD home

A title issue could have prohibited the transfer from Chase collecting on the insurance and transferring to HUD/VA as they both get title insurance on the transfer

Originally posted by @Greg H.:

@Ron S.

A property acquired through foreclosure by Chase can most definitely have been an FHA/VA loan.

When a lender(Chase in this case) forecloses on the property, they can collect on the insurance provided by FHA/VA or try to sell the property themselves. We are seeing many properties listed on Auction sites such as Auction.com, Xome and others. If the property does not sell, then it will be transferred to VA/HUD and become a VA property or a HUD home

A title issue could have prohibited the transfer from Chase collecting on the insurance and transferring to HUD/VA as they both get title insurance on the transfer

No argument there but if they foreclosed, they foreclosed on behalf of FHA/VA (If it's an FHA/VA loan) and, if they are selling it post foreclosure, they didn't file a claim on the insurance (assuming it was an FHA loan to begin with) but regardless, even if it was, it's Chase's now by virtue of Chase being the seller. Chase doesn't portfolio HUD homes as REO. OP stated Chase is selling it. If they are selling it, it's not a VA loan either, and, if there was a title issue prohibiting transfer from Chase to HUD/VA, they would not have put the property on the open market.

Thanks for your responses, it is very helpful! I am almost certain that it wasn't an FHA or VA loan. The reason why I say that is because the woman who previously owned the house was foreclosed on owned many local businesses and got in trouble for taxes, so she handed the house over to the bank. She was divorced and I know this wasn't her first house. So that is why I am guessing that it couldn't be either of those types of loans (I don't have a lot of experience with this stuff so I may be wrong).

So, would it make a difference if it was a conventional loan?

@Ron S.

That is not how it works. The bank owns the loan. FHA/VA just insure the loan. The bank forecloses on their loan and chooses whether or not to collect on the insurance. If they choose to collect, the property is transferred to HUD or VA and at that point becomes a VA foreclosure or Hud home. Often times in today's hot market, they are choosing to keep the property and sell it themselves

@Lauren Rose

There are no income requirements on either fha/va loans nor the number of times you can do these types of loans. VA loans do require military service

Originally posted by @Greg H.:

@Ron S.

That is not how it works. The bank owns the loan. FHA/VA just insure the loan. The bank forecloses on their loan and chooses whether or not to collect on the insurance. If they choose to collect, the property is transferred to HUD or VA and at that point becomes a VA foreclosure or Hud home. Often times in today's hot market, they are choosing to keep the property and sell it themselves

@Lauren Rose

There are no income requirements on either fha/va loans nor the number of times you can do these types of loans. VA loans do require military service

If they collect on the insurance, the property goes to FHA/VA. I already stated that. If they sell it themselves. It's theirs. I also already stated that. You are just restating, what I already stated...and then telling me that's not how it works? Ok...

Originally posted by @Greg H.:

@Ron S.

That is not how it works. The bank owns the loan. FHA/VA just insure the loan. The bank forecloses on their loan and chooses whether or not to collect on the insurance. If they choose to collect, the property is transferred to HUD or VA and at that point becomes a VA foreclosure or Hud home. Often times in today's hot market, they are choosing to keep the property and sell it themselves

@Lauren Rose

There are no income requirements on either fha/va loans nor the number of times you can do these types of loans. VA loans do require military service

@Greh H - to quote you...."That's not how it works". No income requirements for FHA and VA loans? I'm assuming you just did a typo and didn't actually mean that FHA/VA loans don't have income requirements, as they surely do have income requirements.

Okay that makes sense, thank you for clarifying! @Greg H.

@Ron S.

The OP implied the owner had money so she would not have an FHA/VA. There are no maximum income requirements to get an FHA/VA loan, meaning if you make over $XXX you are ineligible to obtain those types of loans. Other loan products such as USDA have those requirements. You are referring to qualification requirements which of course minimum income requirements are required

So back to your post.  This statement is incorrect "No argument there but if they foreclosed, they foreclosed on behalf of FHA/VA" Chase Bank foreclosed on behalf of Chase Bank on a loan in their portfolio.  They would not foreclose on behalf of FHA/VA as they are not the owners of the loan Chase is.  Say it was an FHA loan.  Chase is now the owner of the property.  They can:

Sell it- As I said, in today's market they often used Auction sites or the MLS

Collect on the insurance- I believe they have 180 days to file a claim but I could be off on that.  At that point, the property is transferred to HUD and becomes a HUD home

"If there was a known title issue they wouldn't put it on the market "?  Happens all the time.  Chase marketing and Chase legal don't communicate the way people would expect them to

so - the original question - how long can it take?

REO property is often times distressed. The term "distressed" is relevant to both the physical condition of the property, as well as the condition of the title.

I do primarily REO properties, usually I am directly with the financial institution that foreclosed, but sometimes I work through a processor or another agent, depending on the deal.

Offer responses will sometimes take 2-3 weeks. But sometimes next day - depends on the bank.

I personally have several in escrow right now. about 80% will close on time. 20% will get pushed out, sometimes a couple days, sometimes longer.

Closing can take a long, long, long time. The longest I've had an REO in escrow was started Dec 2012, stayed in throughout 2013, finally closed in January 2014 - but this is not normal and doesn't happen all the time.

It is common for title work to have some challenges. Nothing that can't be overcome, but REO's will usually take just a little bit longer - maybe 2 or 3 days more than a traditional search & underwrite.

Originally posted by @Greg H.:

@Ron S.

The OP implied the owner had money so she would not have an FHA/VA. There are no maximum income requirements to get an FHA/VA loan, meaning if you make over $XXX you are ineligible to obtain those types of loans. Other loan products such as USDA have those requirements. You are referring to qualification requirements which of course minimum income requirements are required

So back to your post.  This statement is incorrect "No argument there but if they foreclosed, they foreclosed on behalf of FHA/VA" Chase Bank foreclosed on behalf of Chase Bank on a loan in their portfolio.  They would not foreclose on behalf of FHA/VA as they are not the owners of the loan Chase is.  Say it was an FHA loan.  Chase is now the owner of the property.  They can:

Sell it- As I said, in today's market they often used Auction sites or the MLS

Collect on the insurance- I believe they have 180 days to file a claim but I could be off on that.  At that point, the property is transferred to HUD and becomes a HUD home

"If there was a known title issue they wouldn't put it on the market "?  Happens all the time.  Chase marketing and Chase legal don't communicate the way people would expect them to

Ok Greg... Your right. I've done thousands of foreclosures nationwide...and on behalf of FHA, Fannie, Freddie, USDA, VA. I'm wrong and have been for the last 25 years. Congrats.

A title issue can be anything, could be as simple as a minor easement up to and including additional lenders with liens on the property etc. You will not be able to know until you are in contract and can get a copy of the title report. There will be a specified timeframe in the contract so if the seller cannot perform due to the issue at hand you should be able to execute the notice to perform and put it on them. Unfortunately all most can do here is speculate because it really could be anything. My wife is an REO broker and she has not sold thousands (hundreds though :P) and I have seen all sorts of weird things, mechanic liens, 2nd and 3rd mortgages, multiple bankruptcies to re start the process. The list goes on and on!

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