More Newbie Questions

Foreclosures, Short Sales, Tax Foreclosures
1

I’ve been reading the foreclosure discussion board and articles to immerse myself in this subject.

  1. Buying title insurance serves what purpose?

  2. Getting a Warranty Deed over a Quit Claim Deed benefits me how?

Steve in Los Angeles

2

Buying title insurance insures you against faults in the title…for instance: Say that you are in a community property state and buy a piece of property. This property, even though it may be bought and title in your name only, actually belongs to you and your spouse. A few years later, you and your wife have a falling out and you sell the house. It is you name only so you go ahead and sell, not disclosing that you are, in fact, still married. So I buy hte house and move in…your wife comes back home to roost and wonders why I’m living in “her” house. This will go to court and, because you have title insurance, you’ll be covered.

There are hundreds of variations on this…including rights of ways, zoning variances, etc. It can be extremely complicated.

Keith

3

In answer to your second question.

The warranty deed says I have title to the property and I’m giving it to you. The Quit Claim deed says I may or may NOT have interest in the property, but if I do, I’m giving it to you. A warranty deed is better to have then a Quit Claim deed.

4

  1. Title insurance isn’t a guarantee that the title is clear. What it does is force the title company to attempt to fix any title problems should they occur. This comes with the assumption that they did an exhaustive title search to find any and all possible problems and set the insurance accordingly. In the foreclosure business, because of time pressures, we don’t always have the luxury of title insurance. If you buy at a trustee’s sale, it can be very hard to get title insurance. If you buy the property at the Trustee’s sale of an HOA lien, you can’t get title insurance for 1 year. Know the practices of your state by calling a title insurance company and asking questions.

  2. Warranty or Grant deed = good. Quit claim deed = almost worthless to an investor. I would modify the previous post by saying that using a Quit claim deed transfers any “interest” the grantor has in the subject property. It doesn’t have to be title.