Investing in a new home is an exciting time for any new homeowner. In our recent real estate market, foreclosures are fast becoming a more budget-friendly way to afford your new home. Most foreclosures become bank-owned properties so before you make that offer on that bargain, it’s a good idea to ask, “Do you need Minnesota title insurance on a foreclosure?”
What is a foreclosure?
When purchasing a foreclosure, it’s best to proceed cautiously. Foreclosed homes are homes that have been turned back over to the bank because the previous owner was unable to afford his/her payments. While banks try to sell these properties at foreclosure auctions, many times they become bank-owned properties. Once the bank owns the property they are generally free of liens and other encumbrances. However, the bank may not catch all potential title problems which makes title insurance important.
Title insurance and foreclosures
There are two types of title insurance policies. A lender’s policy protects your lender for the amount of your mortgage in case you default on your loan and can be required by your lender to close on your home. An owner’s policy will protect you from any defects found with the title after closing. Issues like old and unnoticed liens on the title from the previous owners, ownership claims for other heirs, unpaid property taxes and bills from contractors can all be costly to you, the current owner, after closing.
There are risks associated with foreclosed homes that every potential buyer should know about. Foreclosed home are typically in greater need of repair as owners who were unable to pay their mortgage are typically unable to pay for repairs. In addition, there could be unpaid taxes or other unknown liens that could cost you after closing.
Your Next Step
The best step for any home buyer seeking to make an offer on a foreclosed home is do a thorough search of public records. A title search will ensure there are no outstanding liens or unpaid property taxes that could affect your title after closing.
Here at Twin City Title, we provide thorough title searches to put your mind at ease when it comes to ensuring a clean title when purchasing a foreclosed home. If you are ready to confidently make an offer on a foreclosed home, then we’re here to help!