Title Insurance for foreclosures

[Al Costner]

Hey, y'all. So we are planning to buy a foreclosure within the next week from auction.com, and I have been extremely confused regarding title insurance. We plan to purchase title insurance and use our own title company--as has been recommended on bp. 

Here's where I'm confused: I've seen people saying they perform a title search and even pay a title company PRIOR to bidding. I don't get why this helps--if you get title insurance AFTER bidding, won't the title insurance still cover all the leans/unpaid taxes? So why would you want to get insurance beforehand?

Thanks so much! We are nervous right now--first foreclosure 

[Chad U.]

Originally posted by @Al Costner:

Hey, y'all. So we are planning to buy a foreclosure within the next week from auction.com, and I have been extremely confused regarding title insurance. We plan to purchase title insurance and use our own title company--as has been recommended on bp. 

Here's where I'm confused: I've seen people saying they perform a title search and even pay a title company PRIOR to bidding. I don't get why this helps--if you get title insurance AFTER bidding, won't the title insurance still cover all the leans/unpaid taxes? So why would you want to get insurance beforehand?

Thanks so much! We are nervous right now--first foreclosure 

It depends on what kind of sale it is on Auction.com, as there are 2 types. Is it an REO sale (already been foreclosed and being sold by the lender); or a courthouse/sheriff foreclosure auction? If the former then you needn't worry about title as the foreclosure would have wiped any junior liens and the lender SHOULD have disbursed any remaining clouds on title. However if it is the latter, many people get a title co to run a check before the auction to ensure 1) it's a 1st lien being bid on 2) whether any superior liens will remain after foreclosure.

You should read the instructions on Auction.com listing to see which type of sale it is, and if an REO sale be sure it is specified that it will be conveyed with a Warranty Deed. If it's a Quit Claim Deed then you better run a title check to see what you will be inheriting.