The situation is that we've won a bid on auction.com for a studio. Four walls pretty straight forward stuff, checked some stuff with the contact agent before hand, visited it twice, asked if there were liens, no liens, asked for property disclosures, no disclosures. As you know with auctions, they are intense. This is our first home with some help and knowledge from family who are real estate investors and friends who are real estate agents. So we are at the step where we will receive the standard purchasing contract for us to sign (with preliminary title insurance inside) to then be sent to the seller. Before we sign, since this is our first home, from lack of experience, I was wondering what you would advise to do for reviewing the contract (contained within it the preliminary title insurance)...should I set up a meeting with a real estate lawyer just pay to have him look it over, our family real estate agent friend reviewed the sample purchasing agreement/contract before we even bid, is it enough to have her look it over? As many eye-balls on this document as possible would be my first thought, but then again I don't know. The contact agent represents the seller, it is not likely that he would lie to me like that, but he does represent the lawyer, I want to make sure I do my due diligence. The contact agent said I could have a lawyer look over it, but may not be necessary. I contacted the seller's closing lawyer, he said you need to have a lawyer, then you will have a peace of mind. Obviously again he represented the seller,....this may be too long drawn-out...basically my mom said that because it is already bank-owned, it should have gone through many filters already.
In my experience contracts for purchase of auction property are heavily weighted in the seller's favor so having an attorney review it would be a good idea though the seller may not be open to many changes. I believe the time frame for acceptance is very limited so you probably need to move quickly.
In my experience contracts for purchase of auction property are heavily weighted in the seller's favor so having an attorney review it would be a good idea though the seller may not be open to many changes. I believe the time frame for acceptance is very limited so you probably need to move quickly.
Thank you so much, very informative. We will have people, whether agent and/or lawyer review it, we have until after the weekend to sign the contract. When you say in your experience contracts for purchase of auction property are heavily weighted in the seller's favor, what sort of things typically...the no protection sold "as is" on auction.com and being careful here...I am trying to think of what sort of things this could be that later on I won't be able to negotiate out of...two agents are reviewing it right now, will probably have a lawyer look it over too...we saw the place twice ourselves, it had four walls, checked the water, checked the stove, other things cosmetically we wouldn't be concerned about, what is between the walls would be the building's responsibility, the HOA a month is $209.
"Before we sign, since this is our first home, from lack of experience, I was wondering what you would advise to do for reviewing the contract (contained within it the preliminary title insurance)...should I set up a meeting with a real estate lawyer just pay to have him look it over"
Yes, yes and YES - Whoever drafts the sales agreement usually shades it in their favor, so you need to do double-duty in your own interest.
Also, you need to understand the PSA and what it obligates you to. On the PTR (prelim title report) same thing. Also are they giving you a standard warranty deed (whatever your jurisdiction calls it) or a "special" warranty deed? Have your lawyer and title explain to you what you're getting and what the title insurance covers.
In my experience contracts for purchase of auction property are heavily weighted in the seller's favor so having an attorney review it would be a good idea though the seller may not be open to many changes. I believe the time frame for acceptance is very limited so you probably need to move quickly.
Question for Steve, it’s a special warranty deed, listing agent said it’s a deed. Is there a concern for us whether this is a standard warranty deed or special warranty deed?
As long as you get a title policy without any strange exceptions from coverage it shouldn't make a difference whether its a WD or a WD. This isn't legal advice, just my opinion. Check with your attorney.
Thanks so much Peter. So far, at this step, we understand the title insurance will not cover HOA liens and mechanics liens (irs liens), so I've reached out to a title company to get a quote for running a prelim title report and a full report (because there wasn't a prelim in my contract) and I understand the prelim does not cover the mechanics liens anyways so maybe need a full title report...
Usually what a special warranty deed means (as in foreclosure) is that the seller is only warranting what happened while he owned it. So some dirt in the past before they took it back is not their issue.
Which is understandable since they didn't want the property and are probably selling at a deep discount.
I'd ask title about what they can offer for title insurance with that deed. You might be able to get better coverage for a little more.
*Note: no response needed, just was curious about the questions below.
As we are progressing with the studio condo bought on auction.com, we are also progressing on making an offer for a multi-family with 3 units. The cadence... it's a bit tense. If you would not mind me asking a few more questions.
1) The title insurance is important. From auction.com, so far it seems the title goes through the seller's escrow, I have had mixed information from auction.comrepresentatives. Initially an auction.com contract mentioned there being a preliminary title insurance in the contract (fyi, I still have a couple of days to sign the initial contract because of the labor day weekend delay), but I don't think there is a preliminary title insurance in the contract. No problem. I reached out to auction.com again a different representative said I will never receive a preliminary title insurance in the contract so it was misinformation from earlier. She also said that the title insurance will go through the seller's escrow, but that one does not include HOA liens and mechanics liens (or IRS liens). I've contacted a title company myself and will be getting the quote for a prelim and a full title report. There is a lot of info here I am not sure who is correct. a) does the full title report really not include HOA liens and mechanics liens??? b) are the title reports ordered by different title companies different??? c) I contacted the listing agent and we have a great relationship he told me there are no HOA liens because he's been paying and he gave me a direct contact to the HOA company d) for the IRS liens my partner found propertyshark that gave us a report of our building, and we found the previous owner prior to the bank who sold it to us, we looked her up on publicly available IRS liens website and couldn't find anything. Too long drawn out sorry haha! I guess it's something about title insurance and exactly what this title policy will cover...my loan agent for the multi-family said that it is best I do title insurance myself with my own title company...curious your experience
2) With the condo from auction, I just assumed that once I own it I can rent it out. An agent friend says it all depends on your particular HOA's policy. I will get a confirmation about this later today.
3) Also, do you know anything about this primary residence designation. We are in the process of moving forward with the condo from auction.com and another multifamily; if the multifamily goes through we'll most likely make that our primary residence, is this primary residence information something that can easily be changed later for the 2 years residing capital gains tax purposes. I know the mail has to correspond to that residence, you would have to live there. Originally we though we'd live in the condo 2 years and then the multifamily 2 years, but it'd be nice if the primary residence designation is easily changeable....if the multifamily does not close, then we would have the condo as our primary residence. not sure if that important of an issue...
4) The contract that has disclosures about lead and radon...we live in New Jersey, so for renting we sign disclosures about lead, since all the houses here are old and anything prior to 70's will have lead, so in the contract when they have radon....lead....naturally occurring substances in New Jersey, is this standard in the contract?
No response needed, just curious from your experience. I think I'll probably get the answers to most of these by the end of the day.
-Any lien recorded on title prior in time to the foreclosing mortgage.
-First Mortgage (if the foreclosing mortgage is a second or third mortgage)
-HOA or COA assessment liens (in certain states)
-Mechanic’s Liens (in some states)
-Government liens such as state and federal tax liens, city or county liens, US Government liens.
-IRS liens (IRS may buy the property within 120 days after sale at the price paid at foreclosure sale)
-Code Enforcement Liens, Environmental Liens, and Utility Liens
-Child Support Liens
These are the liens not included when the seller goes to pay for title insurance, most liens will be cleared except these. All I have to do is find my own title company and pay for a full title report that includes these liens right?