Legal issues buying a foreclosure

8 Replies

I am a newbee and am looking to buy a single family home that is up for foreclosure next week.  In looking at the history of the property it appears the property was previously sold in an auction a couple of months ago and that sale was eventually reversed.

Can someone tell me why this would be the case?  Could you also please provide links/ education/ article references to the legal risks in buying foreclosure properties?  The property is in Texas.  Also, if someone could refer a good real estate attorney and a good title company to do a pretitle search, i would greatly appreciate it.

Thanks!

@Aditya Mehta There could be lots of reasons for the reversal (There could be a title issue that couldn't get cleared up, the buyer may not have enough funds, etc.). You definitely want to do your homework with a title company before you start bidding. It could save you lots of time. You also need to be aware of the equity redemption period. Its a 6 month period when the owner has 6 months to repay the amount owed and reclaim the house. It all depends on the exact status of the house.

Thanks for your response Jeremy.  I am in the process of getting a title company to pull a report on the property.  

Also, I thought that there was no general right of redemption by a borrower after a Texas foreclosure.  However, that's contradictory to what you have mentioned in your post.  If there is a 6 month period, how does an investor who has purchased the property only to rehab and flip the property, protect themselves for the costs associated with the rehab?

Also, do you know of a good title company that can quickly pull the title on this property?

@AdityaMehta What I'm seeing in my area is Pre-foreclosure and foreclosure. What I was told, when the property is in Pre-foreclosure is when the owner can redeem the property, and foreclosure he can't. But, if there is somebody who can clarify this, it would be greatly appreciated. 

Originally posted by @Jeremy Pakalka :

@Aditya Mehta There could be lots of reasons for the reversal (There could be a title issue that couldn't get cleared up, the buyer may not have enough funds, etc.). You definitely want to do your homework with a title company before you start bidding. It could save you lots of time. You also need to be aware of the equity redemption period. Its a 6 month period when the owner has 6 months to repay the amount owed and reclaim the house. It all depends on the exact status of the house.

 There is no redemption period on a foreclosure in Texas.  Maybe you were thinking about a tax sale?

Greg is correct.  There is a world of difference between a tax foreclosure sale and a mortgage foreclosure sale.  If you are talking about a tax foreclosure sale I will be happy to answer your questions.  Please clarify.

Arnie

This is a mortgage foreclosure sale.

If the prior foreclosure was foreclosure on a Deed of trust the the prior foreclosure could have been reversed due to improper notice or posting or last minute filing of bankruptcy. If this is the case, owner likely has legal counsel and perhaps that is who you should be dealing with.  A tax sale could have been reversed during the redemption period.  Buying pre-foreclosure directly from the owner might be the best option.  However if you do this, be on the lookout for  a lien from property tax lender.

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