Banks Take Advantage of Tax Foreclosure Property Listings

by Peter Vernon on Foreclosure Rates

Last month, about 80,775 homes were added on tax foreclosure property listings in California, a 5 percent increase from January and a 51 percent jump from a year ago. Tax foreclosure property listings auctions rose to almost 179 percent in the state.

According to data, six of every 10 houses in tax foreclosure property listings are bank-owned homes and this trend has created great buying opportunities for California homebuyers.

However, some Northern California homebuyers are complaining against the practice of banks requiring them to open escrow in Southern California before they would sell houses included in tax foreclosure property listings.

Brad L’engle, a loan consultant, said that banks are taking advantage of potential homebuyers’ interest to purchase homes in tax foreclosure property listings.

He explained that homebuyers pay double the amount of fees on Southern California title companies and escrow than what companies in Northern California would charge. These unnecessary fees include loan tie-in, sub escrow, notary and e-doc fees, according to L’engle.

He added that banks forced homebuyers to pay these fees if they want to buy foreclosed properties.
Banks requiring potential homebuyers to open escrow in Southern California may be violating the Real Estate Settlement Procedures Act (RESPA). The law prohibits any seller of properties to require buyers to acquire title insurance policies from a particular company.

Brokers claimed that most sellers of foreclosed homes are violating this law.

The California Housing and Urban Development has started investigating the issue following complaints from homeowners.

For the meantime, those who are interested in purchasing houses owned by banks should be aware that they do not have the option as they are entitled to under RESPA.

In line with this, California assemblywoman Cathleen Galgiani sponsored the measure, Buyer’s Choice Act last month to protect buyers of distressed properties.

The proposed law would prohibit owners of foreclosed properties, such as banks and mortgage lenders, from making it mandatory for potential homebuyers to use a particular escrow and title firm.

RealtyTrac’s monitoring of tax foreclosure property listings nationwide showed that six cities in California are among the 10 highest in foreclosure rates: One out of 67 houses in Stockton, one out of 68 in Modesto, one in 74 in Merced, one out of 80 in Riverside-San Bernardino, one out of 85 in Bakersfield and one in 111 in Vallejo-Fairfield.