Legal Issues Involved in Purchasing a Foreclosed Property
Provided by HG.org
There are often complications with a foreclosed property and the owner that could not make the mortgage payments. However, these issues may extend to the house or land once they’ve been transferred to the new owner. These problems may include deed or title situations or previous interests.
If the owner that had the mortgage becomes involved, there may be legal issues that need to be resolved. However, the person that buys a foreclosed property through auction may have few protections after the lending agency that sold the property is out of the picture. It may be important to seek the assistance of a real estate lawyer.
Many find in the economically difficult times that purchasing foreclosed property to be a cheap and easier manner of obtaining affordable housing. This may occur before the foreclosure is completed or after all paperwork has finalized and the auction commences. Other instances include difficulties in paying property taxes, homeowners’’ association expenses and bills to contractors. There are often many stages that occur with foreclosure, and these usually take time. However, there are several opportunities in buying a property at certain points in these stages. Even though this is possible, it is still vital to look over all documentation and contact a real estate lawyer to ensure everything is valid, legal and legitimate.
Purchase before Foreclosure
Because foreclosure is a complicated procedure that takes time, it is often better to purchase the home before any third-part entities are involved so that complications are reduced or eliminated. This would mean that the sale of the property is completed with the homeowner, and this may complete with a cash out that is less than the value of the building. This then provides the person with money without any need to deal with the lending agency that supplied the mortgage. The new owner is able to take over the mortgage or start a new one with the same or different financial institution.
When this is possible, the new owner must ensure everything is researched thoroughly such as liens, debts, mortgages and other issues against the property. Then he or she knows what to expect and how to handle the issues discovered. There could be a mechanic’s lien on the property that must be satisfied if the house was purchased privately, contractors that were not paid for renovations, liens that provided additional sources of funds or even multiple mortgages that have additional payments or payment schedules. Some of these must be paid immediately after the sale and transfer to the new owner, but it may be possible to negotiate a settlement, discount or another structured payment plan to resolve the matter.
The Foreclosure Auction
For any amateur, buying through an auction may be complicated, risky and difficult to pull off. While the price may be enormously less than what a house usually goes for, there are often many others thinking the same thing and attempting to buy the property no matter what. The highest bidder with cash is awarded the property as is, and this may be a fully decked out house, or it may be a disaster. A serious disadvantage to these purchases is that there is usually on possible inspection or survey before the buyout. The process is rushed so that payment is met immediately, and any flaws are not generally disclosed unless they may be observed from the outside.
If the foreclosed house has been empty for some time, there could be various problems such as crumbling foundation, walls ready to fall apart and deterioration. Additionally, other issues such as unpaid taxes, certain liens and other debts may be attached to the house or land. Many of these were attached after the house was placed in foreclosure status. One specific complication may arise through the previous owner acquiring the cash to exercise his or her right of redemption that is available in some states. This is possible during a certain period of time from the point of foreclosure, and it is governed entirely by state law.
The Internal Revenue Service has the ability to redeem the property within 120 days when back taxes are owed and have not been paid. There are other possible redemption laws applicable in the state where the property resides, and it is vital that a real estate lawyer is contacted to protect against seizure of a purchased house or land. This legal professional will attempt to protect the new owner from losing the home.
Read more on this legal issueCan a Lawyer Help Me Defend Against Foreclosure?
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.