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Can a bank sell a foreclosure with previous open loans?

Warner Robins, GA |

I bought a house from bank of america in Feb 2012. Bank of america gave me a warranty deed in my name. A year later I tried selling my home and the buyers closing attorney found out the property had 2 open loans on it from a previous owner back in 2007. The county told me the loans were never canceled out. The two companies where the previous owner got the loans are out of business. How can I get this cleared up so I can sell my home?

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Attorney answers 4

Posted

Hopefully you knew what you were doing and did the two things that you MUST do in every home purchase to protect yourself: (1) get a title search and (2) buy OWNERS (not lenders) title insurance. If you did the answer is easy. You call the title insurer and they either fix the problem, pay off the loans, or pay you. Problem solved with a phone call.

If you made a huge mistake and bought a home without title insurance you made a huge mistake. You like can sue the bank, and you will need a lawyer, and you may run up expensive legal fees.

Hopefully you got the insurance.

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Posted

The bank used their title company called LandSafe Default. They only insured me what I paid for the house but I put alot of more money into the home. I didn't get any owners insurance. Can the bank sell a property with open previous loans? Are they required to pay back all open loans that was on the property before they sold it to me? Thanks

Glen Edward Ashman

Glen Edward Ashman

Posted

I hate to tell you but in trying to save a few hundred dollars you made a huge mistake. HUGE. Do NOT uy foreclosures when you do not know what you're doing! No one should buy ANY property in any sale without owner's insurance. Had you done that you would have made one call and the problem would have been solved for you. Now you will need a few thousand dollars to retauin a lawyer to sue the bank and it could take months or years to resolve. You may win someday, but it will be at a huge coast in time and money. For years lawyers have been teling every buyer that a short consultation with their own lawyer before starting any real estate transaction is necessary. Unfortunatelty you have found out why (yes, it appears the bank and their title company probably messed up, but the bank protected ITSELF with insurance, and it is inconceivabkle that you failed to do so. As I noted, it's a costly mistake. Hire your lawyer and expect a long and unnecessarily expensive effort to try and recoup your losses. Good luck.

Posted

While having an owners title insurance policy probably is better than not having one, just because you have an "Owner's policy" won't magically put humpty dumpty back together again.

An owner's title policy is a policy of "indemnity" not insurance and therefore most times the title ins co will try to "resolve" the issue, and can tell you that's "good enough"

IF THE FACTS ARE AS YOU STATE, YOU ABOSULETLY HAVE AN AFFIRMATIVE ACTION AS AGAINST BofA for selling property without marketable title. You may even find an attorney willing to take the matter on "contingency"

I wish you the best of luck

Glenn

Posted

I agree that having title insurance would have made things a lot easier.

With regard to your chance of succeeding in getting the bank to fix the problem (or succeeding in a lawsuit), it depends on what kind of deed you have. If it is truly a GENERAL warranty deed (where the grantor warrants clear title as to himself and as to all grantors before him), then you could probably succeed in litigation against the bank. In fact, they'll probably settle with you rather quickly and/or put their title attorneys to work to get the issue cleaned up.

However, it's rare for a bank to issue a general warranty deed in a post-foreclosure sale. They normally issue LIMITED warranty deeds (also called "special" warranty deeds) in which the grantor warrants that neither HE nor anyone claiming UNDER HIM has encumbered the property. If this is the kind of deed you have, you'll have a VERY tough time winning against the bank. Rather, you'll probably need to sue the title company and the closing attorney if this is the case.

Normally the deed will say either "Warranty Deed" or "Limited Warranty Deed"/"Special Warranty Deed" at the top, but it's the language in the body of the deed that probably would be deemed controlling by a judge.

You should definitely speak with an attorney. Feel free to call me for a free consultation.

--
William J. Smith
SMITH LAW, LLC
P.O. Box 468328
Atlanta, GA 31146
T: 678.691.5676
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Business. Consumer Protection. Employment. False Claims. Landlord-Tenant. Wrongful Foreclosure.

Nothing herein should be relied upon as legal advice.

William Julian Smith

William Julian Smith

Posted

Additionally, see Mr. Debranski's comment to the other post you submitted. Provided the liens were juniors, they're probably extinguished.

Posted

If Bank of America foreclosed on the property and then sold it to you, the foreclosure would have foreclosed the other loans if they were inferior to theirs. Therefore, it does not matter if they security deeds are marked cancelled or not. You have posted a number of times. I think it is high time for you to sit down with a local real estate lawyer for a free consultation. As one of the other attorneys stated, her or she may find a way to make some money off this and help you at the same time.

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