Title risks on Auction.com?

Question

I'm very tempted by a bank owned property being sold through auction.com. What risks am I taking on the title issue buying this way? Would you pay for a title search? Why or why not?

Todd Rasmussen · Answer

Hi Aram,

If you are buying the property with title insurance, I don't think you have anything you need to worry about. I'm sure there is some outlier exception to that statement, but what you are concerned about is why you are purchasing title insurance. We are 0/3 having issues without title insurance and 0/22 having issues with title insurance.

Aram Schwartz · Answer

@Todd Rasmussen Hi Todd, thank you so much for the advice, your reply provided a lot of perspective to the situation.

Todd Rasmussen · Answer

Before, you would want to know if a property was coming with liens against it.

Aram Schwartz · Answer

@Todd Rasmussen Hello Todd, if I could ask for one more advice from you. @Luis Cortazar Luis as well I was curious. The thing with auction.com is that it has that list, that they give to every buyer. liens exceptions list. I will include below. Now the difficult part is....even though I have a good relationship with the listing agent, the seller's lawyer, and the very reputable title company that they use, whom I also have an open line of communication with, they've all told me no liens it's clear...which not that I am distrustful and not that I am trustful, but I would like to make sure in the next 1-2 weeks before putting down the 5% deposit that the liens exceptions list from auction.com would be covered under the title insurance. I have already done a lot of this research myself HOA liens, IRS liens, there are other things, but the questions is, how do you make sure the title has coverage? Todd, I bid on the property without doing this because it was ok for me to take the risk of the $2500 cancellation fee, I was completely ok with that. but before the 5% deposit, how does one make sure the liens exceptions are covered, do I just ask them to cover those? give them the list without being annoying? I could see how I could come off as being annoying when they've very nicely and not in any deceiving way have told me "there are no liens" in a way to say implicitly dont worry...it's clean. I guess you cannot account for everything...there could be a $65 lawn mowing lien they didn't pay (well not really in my case it's a bank owned/special warranty/studio condo), but the imagination is not limited here. so coming away with a title at closing that is relatively clean that you won't feel like elephants will jump out. I dont know if it's over worrying as I do not know what goes behind the scenes at reputable title companies, they may have access to all these things...and if it is clean I should be able to walk away without being too high-strung about it.

Robert Collins · Answer

@Todd Rasmussen

Would someone do the title search before bidding or after you have won the bid ?

Luis Cortazar · Answer

no problem! I think your realtor should know if there are any liens if it is already owned by the bank. I would ask first before you pay for a title search.

Amanda G. · Answer

Thanks @Luis Cortazar and @Todd Rasmussen, this one is an REO. I'll do the title search, anyway.

Todd Rasmussen · Answer

@Amanda G.

You're risk is your time and money in the deal. As @Luis Cortazar said, you could end up owing a bunch of money for someone else's debts. A couple hundred dollars for a title search is well worth it.

Luis Cortazar · Answer

I was looking into foreclosures as well... for now I am staying away for any foreclosure home... I dont mind REOs.

If you dont pay for title search you run the risk of buying into a house that has a bunch of Liens. If you buy a house for 25k and that house has a 100k tax lien. With my understanding, That lien now becomes your responsibility. If you accounted for this then you're fine, but if you didnt know and now youre over budget, well that could create some big stress in your life and stall your wealth building journey.

In other words, foreclosures are great if you know and are willing to do extensive due diligence.

Title risks on Auction.com?

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