The real story!
Investor purchases a HUD Foreclosed property and the Title co. discovered a lien of over $7000 from the HOA Company.
HUD refused to pay the lien.
It was assumed that if HUD can not give good insurable title then they must give you your deposit back.
So many investors assume a title is clear just because It’s a HUD, VA or any other REO’s.
All learn from this, the devil is in the details, if you do not do a title search your self before you place a property under contract you will assume HOA and tax lines unless your contract calls for a clear title clause.
Please read and understand what you are signing and understand what you are buying!
You have two options in this case to purchase the property or loose your earnest money and possible other cost as the lender can sue you for breach of contract.
As the purchaser, it is your responsibility to be clear on your purchase and what you are purchasing.
A title search is the true method to be sure you really have a great deal.
HUD has no obligation to clear all liens and they have no obligation to disclose and defect on title or the property.
This is what the term “as is” means in the business.
HUD Single Family Foreclosure Act
The statutory language providing for notice of default and foreclosure sale says nothing about payment of prior liens. It does state that the notice can provide “any other appropriate terms of sale or information, as the Secretary may determine.” Title is transferred subject to any prior liens, and the sale proceeds are not used to pay them. The statute is unclear as to whether it envisions some other method of application of payment. Perforce, the statute is also unclear as to whether the term “prior liens” would include judgment liens, statutory liens, equitable liens, or mortgage liens (accelerated or unaccelerated).
Research HUD Single Family Foreclosure Act and the Federal Foreclosure Act and you will be on your game a little better as an investor.
Read HUD property disposition contract you will find no promises good and or clear title
AS IS is actually what it means AS IS! In title and structure!