Preliminary Title Search for REO Purchase

[John McLaughlin]

I'm considering bidding on a single family REO on an online auction. I did my own "title search" and found only one mortgage (foreclosed). In addition, I found that the prior owner has two or three IRS tax judgements (totaling around $10,000) and filed for bankruptcy prior to the foreclosure. Do these IRS tax judgements create liens on the property? Would these liens have to be cleared by the back prior to closing? Is it worth doing a Preliminary Title Search (by title company) prior to bidding? Has anyone done a Preliminary Title Search? How much do they typically cost?

[Peter Walther]

Originally posted by @John McLaughlin:

@Wayne Brooks Thanks. My concern is that the auction house usually guarantee an “insurable” title.

I believe the contract will provide the Seller will purchase a title policy for the Purchaser that insures against actual loss you may suffer as a result of you not having insurable title.  Neither the auctioneer, the Grantor nor the title insurer guarantees an insurable title.  The policy does not tell you you have good title, only that the insurer will reimburse you for you covered actual loss.

I believe the contract will also provide that if you accept a title policy issued by the title agent of the Seller's choosing, the Seller will pay for it, but if you select a different title agent you will have to pay for the policy yourself.  If you checked I think you might find that the title agent selected by the Seller is owned by the mortgage servicer for the Seller.  Some might see that as an inherent conflict of interest so it may be money well spent buying your own title policy.