Accepted Offer, but Bank doesn't have clear title.

7 Replies

I have an accepted offer on a REO, but now the bank is claiming they can't sell because they don't have clear title--yet they foreclosed, and supposedly during the process received the title. They offered to refund my earnest money, but I'm reluctant to walk away so easily, since the profit in this was about $40-50k. I don't know exactly what's preventing the bank from getting clear title, but it may be fixable. Wondering if anyone has experience with this, and what you did to solve it? Or maybe it is better to just walk away? Yes, it has occurred to me that the bank may be "fabricating" a phony title problem so they can try to resell it for a higher price.

This kind of thing happens because bank REO departments are not always competent. That said, sometimes it is beyond their control. I would move on to the next deal. Good luck.

thanks for the info. But rather than cancel the escrow, wouldn't I be better to just leave it alone, be patient, even if it takes several months for them to clear the title? That way, I'll be first in line to buy it when it's ready to sell

You guys have been watching and reading too many conspiracy programs.

The ability to pass marketable (insurable) title is typically restricted by one or more of several issues: 

Defective title at point of origination. When loan was made and property offered as collateral, it is possible that title or escrow, then lender, missed something;

Blown sale or defect in foreclosure, occasionally procedural but usually concerns noticing;

Or, Secured creditor or entitled claimant challenging bank's foreclosure.

There may be other reasons. I started my career working foreclosure in 1978 and, somewhat ironically, became owner of a mortgage banking company some years later. 

Sometimes, there are problems that are discovered and must be resolved now, not later. 

You're impatient, presumably because inventory is low and you cannot find deals. The profit you refer to is "future potential profit" not money earned yet. Keep that in mind.

Why not just hang in there (if you are a real investor, not a wholesaler)?

This happened a lot in SW Florida a few years back. In 2009 they foreclosed on 44,000 homes in Lee County alone! All the t's didn't get crossed and i's didn't get dotted. I went to the closing table on one house 3 different times before the bank finally had clear title. Well worth the wait - buying houses for .25 on the dollar. If it is a great deal hang in there and wait for the bank to get it straightened out.

Agreed.  They likely found some procedural problem with the foreclosure during the title exam/review.  Probably happens 100 times a day.   Offer any extensions they want if you want the deal.  They may, or may not, keep you under contract while they resolve it.

thanks for the info, Rick!  Yes, I'm impatient, because deals like this are not easy to find. I'm not a wholesaler, and don't mind waiting several months for the bank to fix the title.  What have I got to lose?  Only have $3k earnest money sitting on it.