Frequently Asked Questions

Legal Hotline FAQ

A blog of the most frequently asked questions to the Maryland REALTORS Legal Hotline.

Cindy Sellers
Cindy Sellers
Cindy Sellers's Blog

I list REO properties.

First, I am aware that in many, if not most, of the bank owned properties listed for sale the purported seller/bank does not possess legal title to the property. When the lender/owner of REO property contacts a brokerage with a prospective listing, the listing agent should always request evidence that the seller is the actual owner of the property.  While this would be standard procedure if the seller were, for example, an individual selling an investment property owned by an LLC, it is more complicated in a foreclosure situation because there is no legal requirement in Maryland that the foreclosure attorney or the lender/owner of the REO property immediately or even promptly record the Trustees Deed.  In Maryland, information about the foreclosure purchaser is required to be recorded in a Foreclosure Registry.  As of the date of this response, REALTORS®, homeowners and condominium associations and the general public do NOT have access to the Foreclosure Registry, making it even more difficult to identify the actual owner of the property after a foreclosure.   If the foreclosure sale was held, but not yet ratified by the court, it is possible for the sale to be overturned, so putting that property on the market before ratification carries a risk.  If the sale is ratified, but no deed is recorded, the lender is at least owner of legal title, but not owner of record because the deed was not recorded.  The listing brokerage and agent should ask the REO Seller and/or asset manager for verification that the seller is in possession of the deed. Under long-established Maryland law, the purchaser at a foreclosure sale acquires both “equitable title” and “legal title” as of the foreclosure sale date because, while “legal title” does not pass until (i) the sale has been ratified and (ii) the deed conveyed, it is retroactive to the foreclosure sale date. 

So, that’s the legal background.  The practical explanation is that one cannot offer for sale what one does not own.  Additionally, no real estate licensee may place a misleading advertisement.  In my opinion, it is false and misleading to advertise for sale a property that the purported seller does not actually own, unless this fact is made perfectly clear to a buyer at the very beginning of the process.  Therefore, in the future, title to REO listings should either be in the bank when listed or a disclosure made in the listing that transfer of title is subject to ratification of the foreclosure sale and the seller obtaining the deed.

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