YOU ASK:

Do you need a title search and insurance on a REO (bank owned) property?

WE ANSWER:

Yes, you do.

For a Real Estate Owned property (or a property that was not successfully auctioned off after a foreclosure and which goes back to the mortgage company), you need title insurance more than ever. The bank will usually provide you with a clear title, backed up with a title opinion.

The bank, in an effort to sell the property will make some repairs, as well as clear the mortgage loan. It will also make sure that the present occupants are evicted, if necessary. They will also work with the Internal Revenue Service (IRS) so that the property is clear of any tax liens.

The same goes for any outstanding homeowner's association dues. They will also allow the potential buyer to inspect the property. And, as mentioned, the bank may also provide you with the title insurance for your own peace of mind.

Thus, in general, properties owned by the bank are free of liens.

But still, you need to be covered with title insurance to protect you from title defects that are not readily seen, even after a thorough title check. Title defects is more likely with a repossessed, foreclosed or REO property. It is also helpful to remember that REOs are sometimes exempt from disclosure requirements you may expect with real estate transactions.

For example, in California, the banks are not obligated to tell you of any defects that the property may have with regards to its title.

Please note that REO properties are different from properties bought at a foreclosure auction. When you buy a foreclosed property, you should be prepared to pay for fees and interest that have accumulated and were left unpaid. Foreclosures are also sold on an "as is" basis, which means that these may come with liens and the need to evict the current occupants.

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