I'm considering purchasing a home, and given todays market I've been viewing a lot of foreclosures and short sales. That being said, I have a question on short sale VS foreclosure in terms of legal liability from purchasing a home which I'm having trouble finding an answer to.

It seems like the legality of many foreclosures is up in the air due to this robo-signing scandal and in a worse case scenario if I were to purchase a foreclosure the previous owner could one day have me kicked out due to a claim that they were illegally foreclosed on.

That being said, is it legally safer to purchase a short sale as opposed to a foreclosure? My logic here is that it is since a short sale involves the original owner actively participating in the sale as opposed to a foreclosure where the owner is forced to move out and loses ownership of the property.

1 Answer 1


I have to agree with you. On the short sale, it's clear the owner is gone.

But - On a great foreclosure deal, so long as you have a legitimate title company offering title insurance, the risk should be acceptable.

  • I'm not sure here, but it seems to me that even if you had title insurance, if a previous owner successfully contests the foreclosure then they get the house back. You may get your money back but that won't compensate you for everything you've done or spent. Feb 11, 2012 at 21:38
  • Well, DJ, that's interesting. I suppose then, I don't know all the repercussions of title insurance. Feb 12, 2012 at 0:57
  • Don't take what I said as accurate. Someone may know better than I. Feb 12, 2012 at 4:21
  • Understood. I took it a as follow up - "what exactly will the title co do in the case of a voided foreclosure?" good question for follow up. Feb 12, 2012 at 14:01
  • Boom...called it! This article was on cnn today (two weeks after I asked the question): money.cnn.com/2012/03/01/real_estate/foreclosure-sales/…
    – Dave
    Mar 1, 2012 at 16:12

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