What Makes A Foreclosure Settlement Different?

When you purchase a foreclosed property from a lender the transfer process is largely the same as if the purchase involved property from a typical seller. Largely the same — but not the same.

A closing, settlement or escrow is merely an accounting of who owes what to whom. Among the interests represented at the closing table are not only the buyer and seller, but also the government (it wants taxes), brokers (they want commissions for their work), lawyers (they want to be paid for their services), title insurance companies (they need to collect their premiums) and everyone else with a claim for payment.

Closing Foreclosure

With a closing for a foreclosed property you still have various players and interests who need to be paid. However, there are some differences.

First, in some cases the seller is also providing the cash needed to finance the deal. Since the seller of a foreclosure is the lender, this can make sense for everyone if the mortgage terms are competitive.

Second, while buyers normally want good, marketable and insurable title, with a foreclosure they may get no more than a quitclaim deed. Such a deed merely says that whatever interest is held by the seller is now the property of the buyer. If the seller’s interest is bogus or nonexistent, then that’s what the purchaser has lawfully been sold.

Third, because the seller is a lender in general and maybe the source of financing for this transaction — and because the buyer may not be getting a general warranty deed or a special warranty deed — buyers should work with both real estate brokers and attorneys who specialize in real estate when purchasing foreclosure properties.

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Posted in: Foreclosures

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