Unfortunately, it is not uncommon for bidders to lose deposits when utilizing online auction sites before ever gaining the title to the property. Even more frustrating is when eager-bidding buyers sink dollars into a property they can't rent.
Innovative Property Solutions is looking out for auction attendees in hopes of warning against three common mistakes made when purchasing auctioned rental property:
An insurable title is typically loaded with certain exclusions. For example, title clouds are normally exempt which means the property can be insured. Unfortunately, the property may not be marketed due to a myriad of unresolved legal issues. Perhaps a death certificate went unrecorded or the mortgage was not appropriately discharged. The problem is that you, as the buyer, are responsible to clean up any title issues prior to selling and the bank which sold it to you is no longer interested in helping out. They already have your cash.
Never ever trust auctions to do appropriate title work. The goal of an auction is to UNLOAD as quickly as possible, as easily as possible. There is no such thing as "free title work" and you would be wise to employ your own title company to do the job right.
Lenders don't close on titles which are insurable, yet they are not marketable. Don't make the mistake of sending off your deposit before you have secured adequate financing. You risk losing the deposit if financing falls through.
Try to secure a title company who can do the title search within two days, preferably a company with an in-house title abstractor. Before sending off your hard-earned earnest money, perform a title search in order to determine if there are any clouds or issues that can be fixed before you kiss your cash good-bye. If all checks out, you can rest easy in moving forward as long as you know that your lender may not use your title company. You'll have to pay a title company again, but it will be cheaper than losing a deposit on something that doesn't pan out.
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