Hello BP members,
I just bought a condo in Colorado at a US Treasury Auction. I would be interested in any feedback on any personal experience regarding closing with the US government. Is title insurance necessary?
The terms of sale state that the government is responsible for any liens and encumbrances on the property. We are assuming a government deed will be issued and recorded. In this case, why consider title insurance?
We are free to select our own title company. In this case, it would be $800 to split if no title insurance is purchased. The government's title contractor (out of state) said they would do the closing for $1500 to me with insurance. When asked what if we do not choose title insurance, the reply was that the government's agent CWSAMS in VA would do the closing presumably at no cost.
Thanks in advance. About me - I own 10 properties, mostly residential, mostly rentals, mostly foreclosures, only cash in Denver metro Colorado.
@Byrne McKenna I don't know the answer but that is a question for a real estate attorney. I would start by asking a title company the question as a means of free information. Start with the one that did your last closing.
I'm guessing there are other title defects besides liens and encumbrances.
Yes, you want title insurance. Does the gov't actually own it now? I doubt it, and if they do, they probably didn't own it back in 1823. Title insurance for problems you don't know about yet.
Thanks for the feedback!
Get the insurance for peace of mind. I use Canyon title for my deals, so let me know if you need some contact info.
Edit: Would you mind sharing your story on buying through the auction?
Thanks Matt. I will provide an update on this property after we close next week.
Matt: Sorry for the delays as this story unfolds. This $75k condo has $5M in liens. The govt has to clear this and it could be mid-January to close.
I don't know the answer to your original question but it sounds like getting the title insurance is the safer bet. I am interested in purchasing a house through a treasury auction. I will be long distance so I will have to send my bid in... Just wondering about your entire experience if you would be willing to share. I understand that it is still unfolding but surprisingly I haven't found much on this topic at BP.
Thanks and good luck with everything!
I have not completed this deal yet but I would encourage anyone to consider Treasury Auctions. My general impression is that they are less competitive than foreclosures on MLS. As you know, they are few and far apart. I just picked up on it in my local paper. My impression was that they will hold and bundle them in a region - ie, once a year in Colorado is an estimate. At "my" auction, there was around 15 registered bidders plus 5 employees of CWMS - the marketing arm of the Treasury to bid on the 3 condos in the same complex in a mountain town, 45 minutes out of Denver.
You can find details of the terms and conditions online. They are very fair in my opinion. The answer to the title question is that they will provide a title commitment as proof of a clear title. The buyer is responsible to purchase that title insurance. The government has their own designated title company locally. This will result in around $1500 in closing costs where we normally expect around $200 for a cash purchase in Colorado.
You are probably most curious about competitiveness of the pricing. All the properties and bid results are published on line. That data did not make that much sense to me since it is so regional. In our case, my research showed previous complex sales around $100 to 105 in the prior year and the current market pressures have pushed that up - maybe 10%. We won the better of the units for $75. All three condos went for the same +/- 2%. There were 4 or 5 serious bidders for the 3 units. Terms required bidders have a $5000 cashiers and written contracts were prepared on site. I is very hard to find a deal like this currently around Denver on the MLS.
One observation is that not everyone does their homework before bidding - HOA's, repairs required, needs a furnace, etc. etc. For that reason, I would say anyone who has done their market research and can do a good rehab takeoff can do well here.
Contracts require a 30 day close. Initially we were told it could be a week. In our case, the title commitment had a long list including $3 million in liens by the government, banks and the HOA. I am hopeful we close this month. Like any long term vacant unit, we are now dealing with a toilet flooding and proposed Seller's concession.
Hope that helps.
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