A property which has been mortgaged is intended to secure a loan obtained by the borrower. The property owner may be another person and not necessarily the borrower. Usually, the value of the property is much more than the loan itself. When borrower fails to pay the loan or a certain number of installments, the lender, after due demand, forecloses the property. This means, the loan becomes due in its entirety inclusive if interest and penalties, and as such, foreclosure proceedings will follow. After due notice and postings, the date of auction sale is set and the public is invited to submit their bids, in an amount not lower than that indicated in the notice of foreclosure or auction sale.
The highest bidder is issued a certificate of sale. Should the borrower or owner fails to redeem the property within one year from the date of registration or entry of sale with the Register of Deeds, the right to have ownership and title over the property in favor of the highest bidder becomes a matter if right. Consolidation has its costs and taxes which must be settled.
In the same light that a legal redemptioner is entitled to a declaration or certificate of redemption should the corresponding amount be paid, within the one-year period, to get back the property thus foreclosed and sold.
So a buyer may be confronted with three situations here:
1) buying the property under auction, wait for the redemption period to expire and thereafter have the ownership and title consolidated.
2) buying the property from the lender, if it be the highest bidder, after the redemption period and consolidation. Others take the risk of buying it even before the redemption period expires.
3) buying the property from the owner after it had been redeemed.
It would be a different story if the property was bought prior to the auction sale notwithstanding the commencement of foreclosure. In this case, the lender becomes a party in interest.
So, what is the bottomline?
When buying a foreclosed property, the following "precautionary measures" must be seriously and faithfully considered, notably:
1) make sure that the mortgage is valid and registered.
2) verify that the mortgage covers a property actually existing at its location as described in the certificate of title.
2) look at the mortgage contract and insure that all signatures are authentic by exercising due diligence and asking questions with answers to your full satisfaction as to its ownership, powers of attorney, and settlement of estate, if any.
3) check on the initial foreclosure procedures being followed particularly the notice of auction sale, it's issuance and posting.
4) be ready with your money that will not only pay for the amount of the secured loan but also the foreclosure cost and taxes.
5) secure certified documents from their respective sources and compare them with those submitting in the foreclosure proceedings.
6) get complete names and addresses of the borrower, owner and lender, and make sure they are verified by you, and if they are different from what was indicated in the mortgage contract, ask questions.
7) check on court records and make sure the property is not involved in any case.
8) just to reiterate, and emphasize, make an ocular inspection on the property, as the title should not only be clean but also the property itself.
Buying a foreclosed property may be cheaper and more often than not, it is a good choice. But by opting for one, it is prudent to be meticulous about it before handing over your hard earned money in exchange thereof. Many have made the mistake of being attracted to quick "ROI", only to end up being embroiled in a mess.
As in any kind of situation, the facts differ, so are the approaches to address legal issues and concerns. The opinion here is not conclusive. It is best to seek professional assistance by presenting fully the facts and whatever documents you may have.
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