Auction.com and title!! please advise

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Auction.com and title!! please advise

Sebby Vasalo
A, NY · Member since 2015 · 13 posts · 0 votes

Hello,

I won two properties on auction.com

Both have judgements on them as per the preliminary title report and doing my due diligence I found at clerks office.

Property 1) 8k lien from credit card

Property 2) 2k and another for 2k.

I am wondering if I really need title insurance from their suggested closing company or if I would be fine just having my lawyer do all of the work.

I really do not want to pay for a lawyer and also title insurance if one or the other is not needed, but I do want to be able to take a line of credit against the properties and sell later down the road with no hassles.

Please advise.

This is one of the responses I got when I asked them if the title would be cleared at time of transfer.

"If you buy title insurance, then your property will be conveyed with a Special Warranty Deed, which would guarantee your title against those two defects. In this situation, I could not see as to why they would be cleared without title insurance, unless cleared by the previous owner. Title insurance is something to bring up with the closing company- they will have more information regarding that."

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Chad U.
Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
10y

@Sebby Vasalo

All online auction sites, Auction.com, Hubzu, homesearch, etc, operate in the same manner.  If it is indicated that a Special Warranty Deed will be offered, this means that all liens will be cleared upon the transfer, otherwise you'll be given a quit claim deed.  So if the SWD cannot be conveyed due to clouded title from extraneous liens, they cannot sell the property to you and you will get your deposit back.  

But to answer your question, and as everyone else has suggested on here, YES, get the title insurance and use your own title closing agent/attorney.  Especially if this is your first purchase.  The title insurance will protect you for issues on title that may come up years later, which could have been missed on the title search at time of purchase (apart from any stated exclusions, that is).  The underwriting company who offers the insurance is responsible for remedying any defects that are found in the future.  

And only use their title agents if you are comfortable with reading title commitments, know how to navigate a closing and what to look for.  I've used the auction co's closing agents a few times, and they are very unorganized - they miss outstanding utilities, neglect to record deeds, forget to get power of attorney affidavits for signing deeds, etc,etc, etc.  It's like babysitting and telling them what needs to be done. 

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    First of all, title insurance does Not clear up any existing liens.  If they are indeed current liens, title insurance will exclude them.  But, if they are offering title insurance, this means they, the bank, would pay off the liens if they exist.  I suspect they were named served in the foreclosure action, and are wiped out "by operation of law" (you won't see any releases or satisfactions, even though they are gone).  I ALWAYS recommend you use Your title co./attorney, AND buy title insurance thru them.  This helps assure you of a more thorough search, and less "exceptions" from the title insurance.  Don't worry about a few hundred extra bucks now, to make sure you have clear title....that would be the most foolish thing you could do.

    1Reply
  • Sebby Vasalo
    OP
    A, NY · Member since 2015 · 13 posts · 0 votes
    10y

    So they would pay them off at the time of tranfer of title?

    I am definitely going to hire a lawyer and have him pull abstracts and so on.

    The terms in this contract have my head spinning.

    0Reply
  • Rick H.
    Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
    10y

    As @Wayne Brooks said.

    Title companies insure what you give them to work with.

    Settlement agents, such as escrow, hold money and docujents and settle-up at closing pursuant to instructions from counterparties.

    Auctions are often all-cash, no contingency sales; what you see us what you get.

    Every auction has a terms of sale policy which defines and discloses what the buyer may receive. 

    I am only guessing that the Special Warranty Deed is offered for passing title in FL due to knowledge that certain liens of are/were of record. 

    If you intend to borrow from a commercial lender or resell with title insurance anytime in the next several years, title insurance will probably save you a portion of your sanity now, lest you discover how the title industry works the hard way later.

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  • Rich Baer
    Real Estate Investment Attorney · Kingsville, MD · Member since 2016 · 643 posts · 408 votes
    10y

    @Sebby Vasalo

    First of all, never let the online auction companies do your title search or the closing. As I have advised repeatedly here, give your contract to a local Attorney along with your deposit. Let him do do the title search. If there is an issue, your Attorney will hold back the Bank's money to clear it up. If it can't be cleared up, the Bank can't convey merchantable title and you can get your deposit back from your Attorney. If it all clears up, definitely get title insurance. It's part of your cost of doing business. Also, if your worries are from your looking around at the Clerk's Office, leave it to the professionals. Once you win the property your only concern is paying for it at that point.

    2Reply
  • Charles Kao
    Specialist · Grand Rapids, MI · Member since 2016 · 1k+ posts · 611 votes
    10y
    Rich Baer My dealings with the online auction company is you have to pay a non refundable deposit on credit card in addition to another deposit if you win. I do not think it is possible to deposit with a lawyer because you are on their terms not yours.
    1Reply
  • Sebby Vasalo
    OP
    A, NY · Member since 2015 · 13 posts · 0 votes
    10y

    I won the property already.

    I have contracts in my mailbox, but as everyone knows they are "as is - where is".

    I can't get to a attorney until Wednesday unfortunately, so i have all weekend to worry about this.

    Auction.com wants the deposit within 24-48 hrs... so this leaved me no time.

    They want the money wired to them along with the contracts signed.

    Ultimately I want the property, but I am worried about the liens.

    So basically you guys are recommending I hire a attorney (obviously), and also pay for title insurance?

    0Reply
  • Rich Baer
    Real Estate Investment Attorney · Kingsville, MD · Member since 2016 · 643 posts · 408 votes
    10y

    @Charles Kao

    The credit card thing is not your deposit. It is merely a hold on your credit card to make sure you are serious. Once you give your deposit to your Lawyer to put in escrow the hold comes off. I have purchased 11 properties this way. As the Buyer, you have the legal right to choose any one to close the property for you. They make you think they control everything but they only control the timing of it all.

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    10y
    Sebby Vasalo Next time do not bid if you are not sure. You could get yourself in a real bind.
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  • Rich Baer
    Real Estate Investment Attorney · Kingsville, MD · Member since 2016 · 643 posts · 408 votes
    10y

    @Sebby Vasalo

    You have 48 hours to give your deposit to your Attorney AFTER you sign the contract. Fill in the contract with your Attorney's info. String them along until then. Tell your Attorney to email them that he will be doing the settlement and he will confirm the deposit with them on Wednesday. As long as they hear from your Attorney it will be fine.

    0Reply
  • Sebby Vasalo
    OP
    A, NY · Member since 2015 · 13 posts · 0 votes
    10y
    Originally posted by @Chris Seveney:

    Sebby Vasalo

    Next time do not bid if you are not sure. You could get yourself in a real bind.

     Chris, thanks for the great advise.

    I don't think anyone really knows how the many many pages of contract works at auction.com other then those who have purchased properties from them.

    The terms on the main auction page for the property property say

    • Buyer may receive a Special Warranty Deed or equivalent if Buyer is able to purchase title insurance without delaying the closing (title fees typically cost between $500 and $1500 and are based on the purchase price of the property). If buyer does not purchase title insurance, buyer will receive a Quitclaim Deed or equivalent, with no express or implied warranties of title.
    • Buyer is responsible for all escrow fees typically ranging from $850 to $1,375.
    • While this property is reported to be vacant, buyer is responsible for obtaining possession.
    • Property to be free and clear of all delinquent HOA/COA fees at closing.
    • Property is being offered as is, where is.

    So basically they are going to force you to buy title insuance from them so you can get a special warranty deed?

    All I am trying to do is secure this property and not have to worry about selling it / borrowing some money against the place if need be. 

    I came here looking for some advise on if title insurance is really needed or not. Obviously I am going to hire a attorney.

    And Just to note.. i just spoke wit auction.com and they said I really do not even need a lawyer, that is why you get title insuance and the contract is what it is. No amendments to it.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    10y

    @Sebby Vasalo

    How was speaking with them. I have stayed away from buying their properties because I am not familiar enough with the whole aspect of understanding which liens are or are not wiped out and I am not at a point to take the time to self educate myself. 

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    @Sebby Vasalo Somewhere in your documents you have the choice to choose, and pay for, your own title co./closing attorney, as opposed to Their title co., and title insurance.  I Strongly urge you to do this.  You do Not have the option of placing the deposit with your attorney, it goes to auction.com.

    0Reply
  • Charles Kao
    Specialist · Grand Rapids, MI · Member since 2016 · 1k+ posts · 611 votes
    10y
    Wayne Brooks That was the impression I was under as well. I also recalled that reading the disclosure of the 2500 being s nonrefundable deposit but will have to read through it again.
    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    The $2500 is a hold in case you default on signing the contract and depositing EM....then they charge you.

    0Reply
  • Sebby Vasalo
    OP
    A, NY · Member since 2015 · 13 posts · 0 votes
    10y

    I have gone through the entire EMD and so on with them about a year ago. They had a issue with title and could not close. So they refunded my 2500 immediately and I got it in a check a day later. They are good on that aspect. I think they are starting to reluse customer service is required or you get a bad rep.

    As far as the lienes, i have no clue.

    I'm going to find out soon !

    0Reply
  • Jonathan David
    Attorney · Portage, MI · Member since 2016 · 38 posts · 16 votes
    10y
    I am in the same boat, but they told me on some auctions the liens and back taxes get paid and on some options they do not. They advised me to call and check on every property I am interested in. As an attorney myself, I am not sure what good hiring an attorney will do for you other than to perhaps explain to you all the ways you can get screwed. They have an airtight 50 page waiver that basically says you can lose your shirt. But you were buying the house as an investor so you know there can be problems with the property, that is why you were buying at a discount. On the title end A warranty deed and title insurance should cover you so long as you make sure there are no outstanding liens
    0Reply
  • Sebby Vasalo
    OP
    A, NY · Member since 2015 · 13 posts · 0 votes
    10y

    verbally they told me the liens will be cleared at closing but keep recommending title insurance.

    So your a attorney and your basically telling me that another attorney won't be able to do much ugh this is confusing.

    I just want to make sure the transfer and everything else is done correctly, that is why i was going to hire a lawyer. To make sure i can sell the plave down the road if i need to.

    I have never purchased a home so I am not familiar with the entire process. This would be a home I occupy, and is not a investment. I disclosed that in the first part of the transaction where they asked

    Few more questions

    -how can I tell if there are outstanding liens besides getting a abstract?

    A preliminary title search on their website shows judgements, but say they will be cleared at time of transfer. 

    -Can I have my attorney work with the sellers attorney/title company to finish closing? Or van I just have my attorney handleball of it?

    How can I find out if lien holders were served at the time of forclosure?

    Thanks

    0Reply
  • Mike Hanneman
    Investor · Coeur d'Alene, ID · Member since 2016 · 551 posts · 218 votes
    10y

    Why would you not buy title insurance? It's a few hundred bucks that can save your ***. A drop in the bucket considering the purchase price, etc...

    0Reply
  • Sebby Vasalo
    OP
    A, NY · Member since 2015 · 13 posts · 0 votes
    10y

    I have heard people say not to buy it and that a abstract and lawyer is all I need?

    Do you recommend I get title insurance from local title company/lawyer or use the one auction.com recommends?

    0Reply
  • Chad U.
    Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
    10y

    @Sebby Vasalo

    All online auction sites, Auction.com, Hubzu, homesearch, etc, operate in the same manner.  If it is indicated that a Special Warranty Deed will be offered, this means that all liens will be cleared upon the transfer, otherwise you'll be given a quit claim deed.  So if the SWD cannot be conveyed due to clouded title from extraneous liens, they cannot sell the property to you and you will get your deposit back.  

    But to answer your question, and as everyone else has suggested on here, YES, get the title insurance and use your own title closing agent/attorney.  Especially if this is your first purchase.  The title insurance will protect you for issues on title that may come up years later, which could have been missed on the title search at time of purchase (apart from any stated exclusions, that is).  The underwriting company who offers the insurance is responsible for remedying any defects that are found in the future.  

    And only use their title agents if you are comfortable with reading title commitments, know how to navigate a closing and what to look for.  I've used the auction co's closing agents a few times, and they are very unorganized - they miss outstanding utilities, neglect to record deeds, forget to get power of attorney affidavits for signing deeds, etc,etc, etc.  It's like babysitting and telling them what needs to be done. 

    4Reply
  • Levi T.Pro Member
    Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Sebby Vasalo:

    I won the property already.

    I have contracts in my mailbox, but as everyone knows they are "as is - where is".

    I can't get to a attorney until Wednesday unfortunately, so i have all weekend to worry about this.

    Auction.com wants the deposit within 24-48 hrs... so this leaved me no time.

    They want the money wired to them along with the contracts signed.

    Ultimately I want the property, but I am worried about the liens.

    So basically you guys are recommending I hire a attorney (obviously), and also pay for title insurance?

     You should have already did the title work before your bid. Grab an attorney or call a few title companies and see if they can get someone to do the title work asap. Likely your going to have to bail or gamble and complete the closing.

    0Reply
  • Sebby Vasalo
    OP
    A, NY · Member since 2015 · 13 posts · 0 votes
    10y

    I am thinking I should have as well. The title work would show if the forclosure was done correctly and lien holders were notified?

    I am not rich, and that is why I am trying to get a good deal on a house. Overall, I would have 2 grand plus just in abstract and lawyer before even knowing I won the property.

    0Reply
  • Percy N.
    Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
    10y
    Sebby Vasalo don't rely on the title summary they provide. Have your title company do a FULL search ASAP. Rush order should take 24-48hrs and cost around $150-200. That will show all liens filed. Get title insurance. This will cover you for liens missed or not yet filed. You always want title insurance on foreclosed properties. Learn from my mistakes, I lost $11k on a foreclosed property due to a missed lien.
    0Reply
  • Joe Ebanks
    Kent, OH · Member since 2015 · 63 posts · 7 votes
    10y

    @ rich baer

    So hire your own attorney and title search. Would this be before you actually bid on a property? I am interested in bidding and wondering if I can worry about that after I've won. But I dont want to win an auction and then find out that the title is not clean, and lose money because of this...

    And if everythings clear we should get title insurance from a local company or if auction.com offers it that is ok?

    Thanks!

    1Reply
  • Joe Ebanks
    Kent, OH · Member since 2015 · 63 posts · 7 votes
    10y

    oops I guess I did that wrong.

    @rich baer

    and anyone else who can offer advice! the auction is ending today and I am very interested in a couple of properties!

    0Reply
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