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Overview of the Foreclosure Process
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Determine the condition of the title
In addition to the condition of the property, you also need to determine the title condition.

  1. Title defined: Just like an automobile, all real property has title. Title is the condition of ownership of real estate. In most house purchases, you want to end up with a fee simple title, free and clear of all encumbrances.
  2. Fee simple title: This means that you own the complete property estate. In most cases, this is what you want, and what you will receive, at a foreclosure auction.
  3. Free and clear title: This means that there are no liens on or undesired encumbrances against the property. Most liens occur when someone borrows against property, or has a judgment recorded against them. A nice feature of buying foreclosed property is that liens junior to the foreclosing lien are typically removed by the foreclosure.
    • Junior liens: These are liens more recent than the foreclosing lien. Once the foreclosure auction is over, these liens are typically extinguished, so they usually won’t be a factor in your evaluation.
    • Senior liens: These are liens older than the foreclosing lien. In some residential foreclosures there are no senior liens because the foreclosing lien is the oldest lien. In others a junior lien is being foreclosed, resulting in one or more surviving senior liens. If that is the case, then you will need to factor in the value of any surviving lien when you formulate your bidding strategy.
  4. Determining title condition:
    • Free sources. There are several tools to determine condition of title. Title companies will often provide you, free of charge, a “property profile” that gives you an indication of the title condition. Often at USA-Foreclosure.com for a fee you can obtain a copy of the title report that the foreclosing lender has used to give notice of the foreclosure. Remember that with these reports, there is no guarantee and no insurance!
    • Fee sources. You can also purchase a title policy from a title insurance agency. This will guarantee you the condition of title.
    Our recommendation: Establish a relationship with a title insurance agency. Most will be very willing to help you understand title, and they keep records of title that will be helpful in your analysis.