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Buying A Home Before Foreclosure

Ask the Real Estate Lawyer: Real Estate Law Q&A

REM #LAW 664

By Ilyce R. Glink and Samuel J. Tamkin

Summary: The reader almost purchased a home but the deal fell through due to fraud. The buyer is still interested in the home but is worried that the home will now go into foreclosure. Sam and Ilyce try to help the buyer find the best route to purchasing this home.

Q: I was buying a house but unable to get ownership of it at the time of settlement because the rightful owners never signed a deed to transfer title to me.
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The deed at settlement had been forged. The perpetrator that forged the deed has been indicted.

The problem is that the name of the owner on title hasn’t changed and still shows the old owners and not me. The lender that has a mortgage on the home from the prior owners and I are trying to come to an agreement so that I can buy the house.

I've been told that the house must be foreclosed upon for this to happen. I don’t understand why they need to foreclose on the home if the prior owners quitclaimed the house to that lender. Is there some way other than foreclosure that this matter can be and should be settled?

I've filed a suit against the owners of record and the lender who approved my assumption but had to stop the application when the fraud was revealed. The case against the owners of record is being dismissed because they could not be found and served. The lender has been served and a pretrial date has been set. The lender and I are trying to come to an agreement before the pretrial.

I don't want to lose the house if I allow a foreclosure. How should I proceed?

A: If I understand you correctly, you were trying to buy a house, but the seller of the home didn’t own it. The fraudulent seller’s scam was revealed at or about the time of your closing and you still want to buy the home.

There are probably other details in your story that you haven’t included in your letter that are critical to making a determination as to how to proceed. It seems that if you can’t find the true owners of the home, but that one of the true owners quitclaimed title to the lender, the person that purported to sell you the home didn’t own it, the only parties left are you and the lender that probably hasn’t been paid in quite some time.

The lender can’t transfer title of the home to you unless it has good title to the home. That quitclaim deed you made reference to may not have been enough to convey title to the lender. If there were more than one owner, all owners had to have signed the quitclaim deed.

If the lender does not have good title to convey to you, the only way the lender can obtain title to the home if the lender now can’t find the borrowers is to foreclose on the home.

Upon foreclosing on the home, the lender has the option to sell the home to you or the highest bidder for the home.

From your perspective, you need to make sure that any deposit you made for the purchase of the home is protected or has been returned to you. Second, you have to make sure you have a good relationship with the lender to work with you towards your goal of purchasing the home.

It is also possible that the original owners of the home were scammed by the person attempting to sell you the home. In a scam that is becoming more prevalent, an owner rents his home to the scam artist. The scam artist then proceeds to sell the home. The scam artist forges documents to assist him in selling the home and upon a successful sale, takes the money and runs.

If you were the buyer, you’re lucky not to have lost anything in the scheme.

If you are able to purchase this property, even if it has to go through foreclosure, be sure you obtain an owner’s policy of title insurance. The title company will reimburse you for your loss in this sort of scenario.

Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your Home Faster and For More Money In Any Market. If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce’s website www.thinkglink.com