If the homeowner has not paid their property taxes and has liens against the property (such as unpaid HOA's), who pays? Does the bank take the loss.
The bank will transfer a clean and marketable title at closing.
Correction: The bank SHOULD transfer a clean title at closing. It is your responsibility to verify (or hire competent professionals to verify) that all liens, taxes, dues etc have been resolved.
Get an owner's title insurance policy.
Jane, I just went through a foreclosure. I had held the mortgage and the people hadn't paid me anything for two years. I did try hard to work with them.
I hired a lawyer and all the liens were taken off of the house by a process of writing letters etc. I now have a clean title again.
Thank you all. We were looking at homes and condos in Florida and New York. Many (Florida) have HOA's or maintenance fee's (condo's) monthly charges which hadn't been paid for a few years. They total quite a bit.
We wondered who is responsible for those fees. In most cases, liens were placed against the property.
We didn't want to be involved in that. We also wondered if the HOA's ever get paid. Some condo's have shortage of funds to cover the maintenance of the buildings, due to delinquencies. We wonder if the banks pay the delinquent charges or the condos must raise the fees by charging the current owners. So many homes in Florida are run by HOA's, we are finding it hard to find properties without them.
In NY, we are looking at condo's which all have monthly maintenance charges. Some are foreclosures where the owners haven't paid anything for over 2 years. We are afraid how that affects the current owners.
House shopping has gotten very complicated and a bit scary!
If you will only purchase a property where no liens exist, you may be out of luck. The mortgage is usually not the only bill the past owners have skipped out on.
Let the bank pay off the liens, have your attorney do a title search and purchase Title Insurance and you will be fine.
I always try to get the settlement company to send me the HUD-1 prior to closing (knowing there will probably be updates).
As many times I have purchased/sold houses, I am still a little nervous at the closing. I like to look at the HUD-1 before so I can check the numbers. I have caught mistakes several times.
"I hired a lawyer and all the liens were taken off of the house by a process of writing letters etc. I now have a clean title again."
This depends on who owns the liens.
Some are easier to get removed than others.
IRS liens are going to stay till paid.
Others can be easier to have removed.
In FL, if the bank forecloses, they only have to pay past 12 months of HOA/condo assn liens to HOA or condo assn, or 1% of mortgage balance of 1st mortgage, whichever is lower.
The above only applies when the bank forecloses.
Yes, Yes, get a title insurance policy! DH and I bought a cottage on the Susquehanna River from the owner in 2000 and about three months after we bought it, we came down to the cottage and saw a notice on the door, "House Being Sold for Unpaid Back Taxes"! HUH! This was a Sunday and DH rushed to the title insurance office on Monday and told them about the problem. They promptly paid the back taxes and that took care of it. Whew!
The problem was that the previous owner had to purchase both the land and the cottage from two different owners. (A utility company had owned the land and rented out the cottages. There was a class action suit to permit the renters to buy the cottages and the land which was why the seller had to buy both.) The title insurance company only searched the title for the cottage, not the land. It was an honest mistake and the seller had no idea about the unpaid taxes because they kept sending the notices to the previous owner and she never notified the current owner.
Anyway, I'm darn glad we purchased title insurance!