Over the last year I have represented a lot of clients who purchased homes at the foreclosure auction only to find out that someone else held a claim on the title. Sometimes the claim (or cloud on title) can be resolved with a quick phone call to a bank who forgot to file certain documents.
Other times, it can get really tricky. Condo and homeowner associations are some of the toughest to deal with because not only is the auction buyer on the hook for the overdue payments, but the associations’ attorneys can pile on thousands of dollars in questionable fees. Other times, code enforcement violations, judgments against the previous owners, and other liens need to be stripped or paid before the title can be clean.
Most of time these liens can be negotiated. The new owner may have a reason to sue for the cloud on title or the ability to force the claiming party to prove what exactly their claim is.
I once had to sue a bank that went bankrupt before they recorded a satisfaction of mortgage. That took six weeks and we thought we were lucky. Another time, I decided to see if Bank of America would just research their file to prove to themselves that they had no record of being owed the $100,000 they claimed were owed to them by way of buying another bank with the claim. After about six months they finally agreed. In retrospect I should have just sued them and it would have probably gone faster.
Banks are so big anymore that one hand doesn’t know what the other is doing. If you buy a home from the auction, find a lawyer to help you research the title first, then decide if clearing the problems are worth the trouble. Most of the tricky problems that cloud the title can be negotiated with the right help.