Investment purchase... Warranty Deed... should I be worried???

Question

Hello,

I ask this question because I come from the school where 'if it's too good to be true...it is'. So allow me to explain. I have this property in another state that my fiance' found for a really phenomenal price considering the market area and recent comps. My issue is that I've looked at the records history and I've seen some history that causes me to pause. In 2019 the property sold for $175k, but the house is listed (not a pre-foreclosure or short sale) for around $20k. The market comps are around $60k and it's already occupied. My main question was and is, "If I purchase this property will I have issues down the line because it's a warranty deed?"

Please, I have plenty of experience fixing and rehabbing property, this is a adventure being a true investor!!! I'm extremely excited to finally venture into our first solo project, my fiance' and I, and I want to thank this community before hand... thank you!!! I've read the discussions and responses to many post and I must say, my money was well invested!!!

Thanks again,

Pat

Wayne Brooks · Answer

@Patrick Spearman Let me guess....this is an REO lusted on Xhome or other site?

The $20k “price” is not a “price”....it is the low ball, teaser “starting bid”.  It will never sell for this, there is an undisclosed reserve price set by the bank. You will receive a Soevial warranty deed (not General), whic is okay. Just pay for your Own title insurance, fo not choose the “free” title insurance by using their title company.

Patrick Spearman · Answer

Ok, thanks for the input on the warranty deed. I'm like you though, why so low a price??? Well, I'm going to see the property up close april 11th... I'll keep you posted.

Thanks again

Lynnette E. · Answer

Wayne,  How do you get title insurance on property bought through a foreclosure auction?  I bought my first 'on the county steps' property a few months back, but there was not anyway to have any conditions about anything for the auction.  Before the auction I checked the title with an online service and knew what the foreclosure situation was, and took the chance.  But there was not a method to actually get title insurance.  How do you do it?  I'd like to get it if that was possible...even now.

Wayne Brooks · Answer

@Patrick Spearman Being able to get title insurance is Much more important than the type of deed offered.

I’ve bought multiple properties by Wuit Claim (which assures me of nothing) and foreclosure auction properties (no guarantees whatsoever) and got title insurance on all of them. Besides, the Warranty part of a warranty deed simply says the seller will warrant the condition of title, and fix any problems later found.....for whatever that may be worth.

Patrick Spearman · Answer

Wayne, thank you for your perspective but no it's not a short sale, bank owned, auction property... I just got that info today. Like I said I'm going to by it cash and rent it out. My fiance' doesn't want to refi it so I guess we'll just hold onto it until whenever. The neighborhood is definitely changing for the best so everything looks good now to move forward...

Thanks everyone for your input...

Peter Walther · Answer

It is just as easy to forge a signature on a Warranty Deed as it is a Quit Claim Deed.  Is Wayne correct, is this property being auctioned rather than a traditional sale?  He's correct that if it is an auction and you win the bid you'll probably get a Special Warranty Deed from the Grantor.  That type of deed limits the Grantor's liability to any infirmities in the title created by the Grantor, much less protection than a WD.  In addition, even with a WD the indemnification is only as good as the party giving it.

Casey C. · Answer

A general warranty deed is the best deed to have.

Lynnette E. · Answer

I always considered warranty deeds the best deed.  The person guarantees that they are selling a property with a clear title.  I'd still get title insurance though...

I'd wonder why they are selling it for less than they paid and still below market rate.

Maybe the 2019 sell was a foreclosure and the neighborhood changed and now it is not worth as much.

Maybe the house was in a fire or mold infested, or a meth lab--something that has major rehab costs, so it is worth less than the neighboring properties.

Maybe the sell is just a scam.

I'd wonder though if there is some sort of issue with the occupant--lifetime estate--big bad boys with guns and not afraid of using them--the local Sherriff's kid--one that will burn the place before they move--unusual deaths in the house--something.

There is a reason for the low price.  I do not think it has anything to do with a warranty deed.

Investment purchase... Warranty Deed... should I be worried???

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