We are considering bidding on a home being auctioned on Homesearch.com. We've had a realtor walk us through the house, and we are pretty familiar with the neighborhood, so we feel okay about that part.
I've been reading lots of BP posts about special warranty deeds, but I'm still not clear on the title search and title insurance. If I understand correctly, the special warranty deed does not mean that there aren't liens against the property. Is that true?
If we are the winning bidders, will the title company perform the title search before closing? If anything is amiss, will we be able to back out of closing? If so, I presume we would lose the $3,000 earnest money and $2,500 auction fee.
Even though I've done lots of reading here about title searches, it sounds pretty tricky to me. The auction closes tomorrow, so I don't believe there would be time for one of those title search companies to search it for us. Or would there be time?
We do know that the home was built in 1971 and a loan was issued on the home in 2004. The male owner passed away in about 2012, and his wife passed away in 2013. About $60K was owed on the loan. That would lead me to believe that the property taxes also may not have been paid in a couple of years at least, and at $3,000/yr, that's significant.
I'd appreciate any advice!
A deed is vehicle that transfer title to real property from one party to the other. Just because a deed (of any kind) is present does not mean title is clear and marketable.
A SWD is a deed where the current owner only warrants title for the duration of their ownership interest. This is pretty common for REO type property. The Seller/Bank will defend any claims made which infringe on title during the time they have held title but limit that claim defense to that time frame.
A title company will pull the history of the title and will offer to insure that title to you. This can extend to before the SWD owner had title. Just talk to your title agent who is going issue said insurance about it. They will have pulled an abstract report of title to review and they will issue any exclusions to coverage if there are any or they will identify items clouding title which need to be cleared to be insured. All this is common stuff.
I am not familiar with this auction company but most of the time auctions require the Buyer to review title and taxes along with property condition on their own. If you win the auction and deposit money it will be at risk if you back out typically.
It is possible to call a local title company and see if they can do a report today for you. Should cost you around a $100 or so.
Often times taxes are paid up to the day of sale by the Seller. All of those details should be available from the auction company.
Get a copy of the contract you'll be signing so you'll know in advance if you're allowed to object to certain title issues, including outstanding liens. If you're planning to use a lender (institutional or otherwise), the lender should require all Sch. C items be resolved prior to closing...this would include mandatory releases of existing liens. If you're paying cash, you will be charged with objecting to all Sch. C items on the commitment, if allowed under the contract. If you don't understand the contract, I recommend you have an attorney review it in advance so you know what you can and cannot do per the contract.
The type of deed has no bearing on what the exceptions/reservations will be included, which is why it's all the more important to review the deed it thoroughly. Since the advent of title insurance, the type of deed is less important to a seller than it is to the title company, who is really the beneficiary of a general warranty deed over a special warranty deed.
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