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Friday, October 15, 2010

So you bought a foreclosed home. Now what?

For homeowners, there are several questions to ask. But first, experts say, they should check to make sure they have title insurance, which protects the homebuyer from any claim on the property that surfaces after the deal has closed.
Those claims can arise from unpaid taxes or legal glitches in the ownership documents. Most people who take out mortgages are required by their lenders to buy a policy. For those paying cash, it's optional but highly advisable, especially now.
"If you're a bona fide purchaser with title insurance and no knowledge of any irregularities in the transaction, courts are going to be extremely loath to set aside the sale," says Diane Thompson, an attorney with the National Consumer Law Center.
Title insurance might be paying out of claims and then probaby sue banks.
A homeowner with title insurance shouldn't have to worry if the previous owner stakes a claim to the home. Even a successful claim, experts say, would almost certainly end up with the title company settling with the evicted homeowner -- not the new buyer out on the curb.
If they failed to make payments repeatedly, evicted homeowners might not be able to afford their old homes anyway, something a judge would consider. They're more likely to seek a large check than a return to a house with an outsized debt.
The situation is murkier for people who bought their homes with cash and didn't bother with title insurance. The issue of who has proper title in that situation could be uncertain.

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