Courthouse Auction -> Bank REO -> Auction.com

4 Replies

Hi neighbors!

I have purchased properties exclusively at courthouse auctions, and had good success with them. Recently flipped one of them for a nice profit and began looking for the next. There was a favorable property a month ago at courthouse auction that I was interested in, but couldn't make a play on it until this recent house closed. I missed the auction date, but realized it is listed on a live auction on Auction.com. I am not a fan of that site and it's manufactured ghost bids, but I have done so much research on this property and it is a great deal. I want to go for it, even on the site it is listed on.

That being said, it has always been my understanding that a property that goes through the court system and does not sell to a third-party bidder at the courthouse is then taken back by the bank which MUST clear title of liens and encumbrances. However, it is concerning that just over one month from the courthouse date here it is listed on auction.com. 

So, can a bank not sell at courthouse and then immediately list on auction.com BEFORE clearing title? I have seen a lot of REO go to auction sites, but never so quick. I want to bid on this house but I do enjoy the comfort of knowing bank should have cleared title on it.

There are no back property taxes on it, and no other defendants listed on the court case other than the homeowner. Would I have an opportunity if I win the bid (due diligence period?) to do a title search or will any liens be disclosed to me?

Thanks for the help everyone. The speed that this one was listed on an auction site after courthouse has me confused as they normally are pretty slow to do that.

DC

@Derriel Cribbs Most banks will clear title because it's part of the process that they follow but it's not a "MUST" for every lender. Some private lenders will sell REOs with title issues, knowing that they'll take a hit on their selling price. Smaller city and muni liens can be paid off in escrow when the lender sells the REO. The best thing you can do to protect yourself is to get title insurance. (Who pays for it is up to you and the seller and most people follow what's normal practice for their area.) You should get a preliminary title report when you're in escrow and that'll give you an opportunity to ask the lender to clear outstanding title issues.

Junior liens got cleared by process of the foreclosure auction. HOA and back property taxes will be paid prior to or at closing when they resell it.....no need for a delay to resell it.

My recent experience is that the so called jr liens are not cleared if they were not notified.  So you should check that they were notified if you are not guaranteed a clear title with insurance.

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