Title Insurance Helps a Home Haunted by a Short Sale Past

When you buy a new home, it is wise to purchase title insurance in order to confirm clear ownership in the new property and to protect the bundle of rights associated with ownership against claims of another. In today's market, with its short sales and bank foreclosures, a title insurance policy may prove even more valuable.

After the chaos of 2008 and by the beginning of 2011, many banks have worked to better organize themselves around the short sale process. For others, the right hand still doesn't know what the left hand is doing. In some instances, home sellers have been told by a representative of the bank that their short sale is going to be approved, only to discover that another department of the same bank has finalized their foreclosure-- eliminating their ownership thus canceling the sale.

In one extreme circumstance, a privately sold home made an unexpected appearance at a public sale on the court house steps. First, the home's new owner noticed a card in the mail warning of actions the bank can take after a default, including public auction. Having just purchased the house, his first payment was not yet due much less delinquent. He promptly disregarded the notice. Soon after, a buyer standing at his doorstep (with information about the house on a smart phone) informed the unsuspecting homeowner that the sale of his property was taking place that day!

Luckily, the homeowner had a title insurance policy and the title company was able to confirm his rights. The back story at the bank; the completed short sale was not posted to the proper bank personnel and another department kept the foreclosure process moving toward the trustee's sale despite the fact that the property had already in fact been sold.

Not all short sales are disrupted by the foreclosure process. In fact, a property can still be considered a short sale even if the seller has never missed a payment. "Short sale" means only that the property will sell for less than the amount owed, not that the property is delinquent in its payments on that loan.

Even if foreclosure is not a factor, time is a consideration. Short sales, regardless of the level of hardship, still take longer than a traditional sale. The process is driven by how the bank is set up to make its decisions and this varies bank by bank. Aware of continued difficulties with short sales, the Treasury Department recently released a new directive offering revamped short sale incentives to lenders. The directive also includes stricter time lines for approving or rejecting a short sales.

Tips for Homebuyers:

• If you are pursuing the purchased of a distressed property, make sure you get as much information, the best advice and the best representation possible as you move through the transaction. We can help http://berkhills.com
  
• If pursuing a short sale, know that a foreclosure could still disrupt your sale. Ask if the seller has received a Notice of Default.
  
• In most cases, be prepared for a long "short" sale process.
  
• Remember that your title insurance policy offers essential after-sale protection.