About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

22 comments:

  1. 1
    Basho says:

    I’m no lawyer, but I think the risks are fairly low. For you to be affected several things would have to happen:

    1) The person foreclosed on would have to sue.
    2) The person foreclosed on would have to win in court.
    3) The person foreclosed on would have to have the right to specific performance (they would have to have the right to the house, not a sum of money).
    4) You would have to find yourself unable to compel another party to reimburse you for your losses.

  2. 2
    David S says:

    I’ll do anything to find a home right now. If I found a nice or recoverable well priced home I even felt like making an offer on I wouldn’t let the foreclosure business stop me.

  3. 3
    ChrisM says:

    As long as I can get title insurance on the property!

  4. 4
    racket says:

    5) You would have to find someone that would do 1-4, and still want to be on the hook for the note plus pay all missed payments.

  5. 5
    EconE says:

    So if the foreclosure issue is that we don’t know who holds title…how are you gonna know who holds title on a non-foreclosed home? The mortgages have all been sliced and diced, haven’t they?

  6. 6
    David Losh says:

    RE: EconE @ 5

    That’s the canary in the coal mine. Foreclosures, the challenging of foreclosures, only opened the door. Now we see there is no documentation, and no one wants to identify the funds that have the non performing loans. We have the servicers, and trustees in the middle.

    It would be interesting to see which securities have the most non performing loans. In theory you could have a whole Mortgage Backed Security fund made up of loans in the process of foreclosure.

  7. 7

    By Basho @ 1:

    I’m no lawyer, but I think the risks are fairly low. For you to be affected several things would have to happen:

    1) The person foreclosed on would have to sue.
    2) The person foreclosed on would have to win in court.
    3) The person foreclosed on would have to have the right to specific performance (they would have to have the right to the house, not a sum of money).
    4) You would have to find yourself unable to compel another party to reimburse you for your losses.

    #2 would be rather tough in most instances because they most likely gave up their rights by not contesting the matter earlier. That’s true in both all judicial and most if not all non-judicial states.

    #3 isn’t specific performance, but you’re right that they’d have to have a claim to overturn the sale, as opposed to merely a claim against the bank. That’s really more related to #2.

    As to #4, if you’re buying from a bank, as opposed to at a foreclosure sale, you would typically have title insurance. I’ve heard conflicting things about being able to get title insurance if you buy direct at a foreclosure sale. Some companies may do that and others not.

  8. 8
    David Losh says:

    We would need, or we do need, more title insurance information in a foreclosure.

    It seems to me that Old Republic wrote a bunch of foreclosed property titile policies, but wouldn’t pay claims.

  9. 9
    Scotsman says:

    RE: David Losh @ 8

    Lots of folks can write a policy, but who are the ones who will be able to pay off if needed? And if a flood of claims comes in, can they pay off the first hundred? The first thousand? If they get hit with 5,000 claims in two years are they still in business, or is your money down the hole? Hmmm.

  10. 10

    By David Losh @ 8:

    We would need, or we do need, more title insurance information in a foreclosure.

    It seems to me that Old Republic wrote a bunch of foreclosed property titile policies, but wouldn’t pay claims.

    There’s a difference between writing a policy and doing a preliminary report. If you get the preliminary report done, but don’t buy the policy, they won’t pay squat.

  11. 11

    RE: Basho @ 1 – Thinking about this further, I think you’re going to need:

    5. A prior owner with a very aggressive or very hungry lawyer, that is willing to risk paying sanctions and bar sanctions.

    Absent facts that you can get from the public record (like the “bizarre” case I’ve mentioned where the sale was 161 days after the NTS), they simply are not going to have the information to challenge the sale. If they do so without any basis whatsoever, they’re going to have the court and the bar association down on them pretty hard. After the sale is completed, simply saying “they didn’t prove” isn’t going to fly.

  12. 12

    By Scotsman @ 9:

    Lots of folks can write a policy, but who are the ones who will be able to pay off if needed? And if a flood of claims comes in, can they pay off the first hundred? The first thousand? If they get hit with 5,000 claims in two years are they still in business, or is your money down the hole? Hmmm.

    I’d worry about that more with earthquake insurance than something like this.

  13. 13

    By EconE @ 5:

    So if the foreclosure issue is that we don’t know who holds title…how are you gonna know who holds title on a non-foreclosed home? The mortgages have all been sliced and diced, haven’t they?

    Precisely. And that is why this issue is not likely to be delved into the way it should. That would be opening a can of worms.

  14. 14
    David Losh says:

    RE: Kary L. Krismer @ 10

    They wrote policies. As near as i can figure Old Republic will write policies on just about anything. In the case of the foreclosures they just didn’t pay claims, stalled, or waited for litigation. Insurance, actually, never has to pay. An insurance company can sit in court forever until they go bankrupt, and some other company buys the policies.

  15. 15

    RE: David Losh @ 14 – There’s another title company that I refuse to use because they once refused to honor a preliminary commitment, where they missed something, and where they agreed it wasn’t actually a lien due to homestead rights. It was only a $5,000 item. I’ve cost them much more than that every year in lost premiums, not to mention the fact that one of their best title reps left them in part over that incident. I figure though that if they won’t write a policy where they made a mistake on an item they agree is not a lien, what’s the chance of them paying a claim on a policy they write?

    That, btw, is a company I think will write a title policy on a foreclosure sale.

  16. 16
    Ahau says:

    By Ira Sacharoff @ 13:

    By EconE @ 5:

    So if the foreclosure issue is that we don’t know who holds title…how are you gonna know who holds title on a non-foreclosed home? The mortgages have all been sliced and diced, haven’t they?

    Precisely. And that is why this issue is not likely to be delved into the way it should. That would be opening a can of worms.

    I’m not sure I follow. Are we talking about short sales, regular sales, or both? If we’re not talking about short sales or foreclosures, the way you know who holds title to a deed of trust is by getting a full reconveyance for all of the seller’s deeds of trust before closing. Once the money is paid by the seller to their bank(s), any other banks who try to claim an interest in the deed of trust will go after the money, not your house. They don’t want to own real estate, they want to make money. Owning property has always and will always carry the risk of past claims coming out to haunt you. Buy title insurance, review it thoroughly, understand it, accept the inherent risks, get a warranty deed, and move on with your life.

  17. 17
    EconE says:

    By Ahau @ 16:

    By Ira Sacharoff @ 13:

    By EconE @ 5:

    So if the foreclosure issue is that we don’t know who holds title…how are you gonna know who holds title on a non-foreclosed home? The mortgages have all been sliced and diced, haven’t they?

    Precisely. And that is why this issue is not likely to be delved into the way it should. That would be opening a can of worms.

    I’m not sure I follow. Are we talking about short sales, regular sales, or both? If we’re not talking about short sales or foreclosures, the way you know who holds title to a deed of trust is by getting a full reconveyance for all of the seller’s deeds of trust before closing. Once the money is paid by the seller to their bank(s), any other banks who try to claim an interest in the deed of trust will go after the money, not your house. They don’t want to own real estate, they want to make money. Owning property has always and will always carry the risk of past claims coming out to haunt you. Buy title insurance, review it thoroughly, understand it, accept the inherent risks, get a warranty deed, and move on with your life.

    Well…the goons on wall street really screwed thing up so badly that frankly I just wouldn’t want the headache of even thinking about some Nigerian Prince that may show up asking for his cut.

    I guess buyers should really factor the potential future headaches (not to mention the countless phone calls and waiting on hold) into their offers.

    Makes it easier to move on with life eh?

  18. 18
    Ahau says:

    RE: EconE @ 17 – I bought six months ago. I’m still waiting for my first call from Nigeria.

  19. 19
    East Side Real Estate Agent says:

    This thread is kind of pointless. If you havent been following the news, the banks have canceled all Foreclosures. That means people can buy and sell freely which means prices are on the verge of going back up.

  20. 20
  21. 21
    Scotsman says:

    RE: East Side Real Estate Agent @ 19

    Then it’s a great time to buy! I’ll take two four-plexes and a side order of condos!

  22. 22
    Scott Weitz says:

    I am an attorney, and I’d feel very comforatable buying for the following reasons.

    1) Once a truste sale is complete, I have never seen a sale overturned – the bank and trustee could be on the hook for money damages, but the sale is a clean break for the purposes of potential liability from the past owner.

    2) Once the sale is complete, Washington is a race-notice statutues for title purposes. What the f does this mean you ask? Well, its a ‘race’ to see who gives ‘notice’ to the other parties first…thus, if you record with the county recorder, the pension fund in swedent that claims to have an ownership interest (but never recorded any interest because of the MERS system) is out of luck

    That said, I wouldn’t buy right now under any circumstances because it is my personal opinion that things are going to get worse before they get better.

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