HUD Home under contract but title issues

[Beatriz Negrin]

We put a contract on a HUD owned home. We were suppose to close this coming Friday . Thursday I get an email from atty saying there is a problem with title. It was a deed in lieu of foreclosure signed by 7 heirs because the owner passed away . None of the deeds have marital status.

After spending the day calling around I finally found the title company who prepared title and Old Republic issued an owners title policy. However , a policy has an exception for future heirs or spouses having right of possession , but that policy was issued to HUD . The title processor said it took him a year to get the deeds signed and doubts they will cooperate in signing new deeds.

Spoke to my atty who said I can have insurable title but not marketable title and may never be able to sell the home. 

Anyone experience anything like this? Made a claim against title insurance? It really is a great deal , and an amazing home, but I don't know what to do or if HUD will grant an extension long enough to try to resolve this.

[Tom Gimer]

Sometimes insurable title is the best you are going to get... and HUD's contract likely uses "insurable by a national title insurer without additional risk premium" as the standard anyway.

And think about the likelihood of a prior “owner” coming forward to claim possession when the underlying facts gave rise to a deed in lieu. Pretty close to zero. Every day that passes closes the door on that further.