Buying A Home Before Foreclosure
Ask the Real Estate Lawyer: Real Estate Law Q&A
REM #LAW 664
By Ilyce R. Glink and Samuel J. Tamkin
Summary: The reader almost purchased a home
but the deal fell through due to fraud. The buyer is still interested in the
home but is worried that the home will now go into foreclosure. Sam and Ilyce
try to help the buyer find the best route to purchasing this home.
Q: I was buying a house but unable to get ownership of it at the time of settlement
because the rightful owners never signed a deed to transfer title to me.
(article continues below useful links)
The deed at settlement had been forged. The perpetrator that forged the deed
has been indicted.
The problem is that the name of the owner on title hasn’t changed and
still shows the old owners and not me. The lender that has a mortgage on the
home from the prior owners and I are trying to come to an agreement so that
I can buy the house.
I've been told that the house must be foreclosed upon for this to happen. I
don’t understand why they need to foreclose on the home if the prior owners
quitclaimed the house to that lender. Is there some way other than foreclosure
that this matter can be and should be settled?
I've filed a suit against the owners of record and the lender who approved
my assumption but had to stop the application when the fraud was revealed. The
case against the owners of record is being dismissed because they could not
be found and served. The lender has been served and a pretrial date has been
set. The lender and I are trying to come to an agreement before the pretrial.
I don't want to lose the house if I allow a foreclosure. How should I proceed?
A: If I understand you correctly, you were trying to buy a house, but the seller
of the home didn’t own it. The fraudulent seller’s scam was revealed
at or about the time of your closing and you still want to buy the home.
There are probably other details in your story that you haven’t included
in your letter that are critical to making a determination as to how to proceed.
It seems that if you can’t find the true owners of the home, but that
one of the true owners quitclaimed title to the lender, the person that purported
to sell you the home didn’t own it, the only parties left are you and
the lender that probably hasn’t been paid in quite some time.
The lender can’t transfer title of the home to you unless it has good
title to the home. That quitclaim deed you made reference to may not have been
enough to convey title to the lender. If there were more than one owner, all
owners had to have signed the quitclaim deed.
If the lender does not have good title to convey to you, the only way the lender
can obtain title to the home if the lender now can’t find the borrowers
is to foreclose on the home.
Upon foreclosing on the home, the lender has the option to sell the home to
you or the highest bidder for the home.
From your perspective, you need to make sure that any deposit you made for
the purchase of the home is protected or has been returned to you. Second, you
have to make sure you have a good relationship with the lender to work with
you towards your goal of purchasing the home.
It is also possible that the original owners of the home were scammed by the
person attempting to sell you the home. In a scam that is becoming more prevalent,
an owner rents his home to the scam artist. The scam artist then proceeds to
sell the home. The scam artist forges documents to assist him in selling the
home and upon a successful sale, takes the money and runs.
If you were the buyer, you’re lucky not to have lost anything in the
If you are able to purchase this property, even if it has to go through foreclosure,
be sure you obtain an owner’s policy of title insurance. The title company
will reimburse you for your loss in this sort of scenario.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce
R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your
Home Faster and For More Money In Any Market. If you have questions for
them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022
or contact them through Ilyce’s website www.thinkglink.com