Foreclosure Sales: Don't Be So Sure About Your Closing Date
There is a problem brewing with foreclosure sales that has become evident at many of the closing tables across the US.
In fact, Lawrence Yun, Chief Economist for the National Association of REALTORS, pointed to closing delays in foreclosure sales as one of the reasons that existing home sales fell in June.
But why do simple closing delays matter?
Imagine that you are starting a new job on October 1st, and you want to buy a home in Tallahassee and close on it near the end of September.
You really do not want to be burdened with housing and moving issues while trying to learn a new job, so your closing date is important to you. Additionally, the best loan deal requires you to lock into your expected closing date.
Due to the urgency of closing within the next 60 days, you choose to forgo short sales as you understand the low likelihood of closing one sixty days after the date of contract. But certainly foreclosure sales are known to be quick to close, right?
So you find some great foreclosure sales on the list of distressed properties in Tallahassee, and you immediately put one under contract with a healthy 60 day period for closing. Your lender locks you in to an incredibly low rate, and you proceed forward happily knowing you have solved your housing problems.
Imagine your horror when you are told, usually just days (or hours) prior to closing, that there is a problem and the closing date will not be met.
How does this affect some important things like:
- Your family's move schedule
- The moving van with your possessions arriving from your previous home
- The lock-in period and the money you spent on it
- The WDO inspections and their validity dates
- Your ability to focus on your new job
These are just some of the irritating and costly problems that you will likely encounter when the new foreclosure sales bomb hits you days before closing.
New Delays Seen In Closing Foreclosure Sales
According to Lawrence Yun, the problem is that closing attorneys and title companies are just making sure to "dot the i's and cross the t's," but I find it remarkable he doesn't see the real issue.
First of all, closing attorneys and title companies have always been concerned about correctness, and they always will be. This is not what is causing the delays.
The real culprit here stems from the law firms that became foreclosure factories several years ago and have been doing a high volume of shoddy work. Included among them are the ones that were responsible for the robo-signing scandal that put the brakes on foreclosure sales in the past.
The current problem that title companies and law firms are dealing with is the poor chain of title and/or mistakes in the mortgage assignments that were produced by these foreclosure factory law firms.
If they missed something along the way, then the chain of title is in question when it arrives to your closing agent/attorney. A prudent attorney is not going to overlook these uncovered issues with the title, and thus it will take additional time to resolve the problems.
Unfortunately, the only way to resolve most of these problems requires involvement from the previous law firm (think foreclosure factory). Unfortunately, these firms are running on thin margins and they no longer care about past transactions. It is like pulling teeth to get simple title defects resolved.
This is a problem that will be growing as foreclosure sales take over the Tallahassee real estate market.
Safely Buying Foreclosure Sales
So how do you go about buying foreclosure sales and avoid closing delays that can cost you tens of thousands of dollars?
First of all, work with an expert real estate agent. They will be problem solving even before you put a home under contract, doing everything possible to help you avoid the problems and pitfalls of buying a property with title defects.
Secondly, through the guidance of your real estate agent, give yourself enough time to close on the property. If you absolutely have to be in a home in a short period of time, then property selection needs to consider the capabilities of the current owner.
If you are planning to buy a home and want expert guidance, simply drop me a note and we can schedule a time for an initial consultation that will ensure that you get started off in the best manner possible when pursuing foreclosure sales, short sales, or even arms length home sales.