Confused about title problems on REOs

[Bienes Raices]

I used to believe that the title came clear with an REO, but after reading on here I see that's not the case...

My question is, is it safe to use the owner's policy & lien search that the bank's title company will pay for?

[J Scott]

Originally posted by Bienes Raices:

I used to believe that the title came clear with an REO, but after reading on here I see that's not the case...

In theory, it does. If any title defects arise before the close, the seller is required to remedy them (or return the buyer's earnest money), and the seller will typically pay for an owner's title insurance policy.

So, in theory, the buyer is protected from title defects when purchasing an REO.

That said, a title search is only as good as the person doing the search, and sometimes things are missed. This is why you have title insurance and hopefully any title issues that come up after the close will be covered.