Are you thinking about buying a foreclosure property? Well, if so, there are numerous legal concerns associated with this type of purchase which you, as a potential buyer, must consider before deciding to go down this path.
As with any purchase of real estate, you will need to perform your typical “due diligence.” However, there are legal issues beyond the normal which you, in connection with your Westchester Real Estate Attorney, MUST discuss before going to contract. Specifically, you must consider if the foreclosure was handled properly; whether there are any liens on the property which the lender as Seller is not willing to satisfy; if there are persons in possession of the property; and if you can abide by the extremely short deadlines required by the seller which could result in steep monetary penalties forced upon you in a one-sided contract of sale drafted by the seller?
Too often potential buyers will get caught up in the emotion of a “good deal” and are too eager and willing to sign a contract of sale which does not allow them time to perform a review of the foreclosure process in order to verify, in advance, that all was done in compliance with the law. In fact, after accepting the buyer’s offer, the seller presents the buyer with a contract that contains instructions stating that the contract MUST be signed immediately and that it MAY NOT be altered in any way.
Consequently, no time is allowed for the potential buyer to obtain a preliminary title report or for the buyer’s attorney to conduct a preliminary review to determine if the prior homeowner’s right to appeal has expired; whether the judgment of foreclosure is truly final; if all liens and second mortgages on the property have been extinguished; and/or whether there may have been any potential “robo-signing” problems. Of course, a title company can identify many of these issues before closing, but that’s not until after the buyer has signed the contract, put their down-payment monies in the hands of the seller’s attorneys and spent money on both a physical inspection and an appraisal.
Moreover, these foreclosure-sellers usually insist that a purchaser use their form sales agreement which often places restrictions on the buyer’s right to cancel the sales contract and which limits a buyer’s recourse (and the seller’s liability) in the event that things go wrong.
Often these types of contract will impose a daily monetary penalty on a buyer if he or she cannot meet the extremely short deadlines set down for obtaining a loan commitment and/or closing without placing similar time restrictions or penalties on the seller if they do not or cannot deliver title timely. I personally have had buyers who have waited many months to close because the seller had not properly completed the foreclosure process and could not deliver clear title in a timely manner.
Finally, and perhaps most troubling, is that these form contracts often require a buyer to use the seller’s title company, which can make it extremely difficult for the buyer to deal with title issues after closing. This is so because his or her attorney has no relationship with the seller’s title company and can’t simply pick up the phone to get immediate assistance.
Of course, this does not mean that you should never consider a foreclosure property but, before you do, remember the old adage; if something seems too good to be true, it often is!
Speak with an experienced Westchester Real Estate attorney before you decide to go looking at foreclosure properties and make sure you know the risks involved. Research the property BEFORE you make the offer and do not allow yourself to get swept away in the pursuit of the “good deal.” You may pay for it later.