Heard of a risk when buying foreclousures..

That the original owners have the right to buy them back from you? I am closing the properties through a title company with title insurance policy... Still I have the risk that the original owners could come back and claim something?
Thank you!
In Buying Property - Asked by JOSE G. - Feb 13, 2012
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Answer(s)

Charles P.
Corporate Investor
Tallahassee, FL

OMG! This actually happened to us . . . we bought a USDA foreclosure at an auction, put maybe $14,000 into repairing it and fixing it up. And then (after we sunk the money into it) were contacted by someone from the USDA who told us that there was language in the paperwork that included some kind of a "recission clause" or something that allowed them to, in effect, come back and take the house up to TWELVE months after we'd owned it (unless we paid them more money)!
We debated over whether or not to try and fight it and opted to pay them the additional $8,000 they were asking for . . . we still got a good deal on the house, but this just makes my blood boil even now four years later! I don't know. We owned the house. Probably should've fought it, but just decided it wasn't worth the headache.
As a practice, I think it rarely happens, but we don't do USDA foreclosures any more. Just check your contract carefully and see if there's something that allows for the owner to come back after the property is sold. (I would think it'd be EXTREMELY difficult to pull off from the bank's / GSE's perspective . . . but you just wouldn't want the hassle of having to fight it, and there's a chance (albeit slim) that they might be able to somehow cloud your title if you don't cooperate.

Feb 16, 2012
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Jeff T.
Broker/Agent
North Fort Myers, FL

always get a full title search to ensure that the foreclosure was done properly

Feb 16, 2012
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Peter M.
Broker/Agent
Lake Worth, FL

Most Foreclosures In Florida are sold with a Limited Warranty Deed as oppose to a General Warranty Deed which is the full bundle of ownership rights. In addition to the Limited Warranty Deed the Banks usually have Special Addendum that Limits their Post Closing liability. It is possible and happens in many cases that claims are made against properties purchased in foreclosure. You may have a title Policy But you do not have a general Warranty deed and could face Post closing issues that cloud title missed by the large Law mills that service Lenders.You are actually better off purchasing a Short sale than a foreclosure as you receive a General Warranty Deed from the Seller in default to the Buyer. All claims must be satisfied by the lender to provide clear title.

Feb 28, 2012
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