The ownership paper trail on thousands of properties across the country is more important than ever, now that a national investigation is questioning the paperwork behind thousands of foreclosed homes.
Regulators and attorneys general in all 50 states and the District of Columbia are investigating whether mortgage companies cut corners on their own procedures when they foreclosed on people's homes.
Some worry that the investigation, and confusion over who owns title to the properties, could discourage buyers from considering foreclosed homes and delay the housing market's recovery.
So far, allegations that banks rushed foreclosures without properly reviewing documents haven't scared Minneapolis renter Tony Webster, 23.
Webster, who is shopping for a bank-owned home in north Minneapolis, recently met his Realtor after work to see a few foreclosures. After undoing the padlock on the front door, they stepped inside to have a look around.
Listed for less than$44,000, the large beige house has been on the market for five days. Webster quickly noticed things he didn't like.
"My first thing would probably be the wallpaper or the floors or the sink," he said. "What isn't there to take out?"
No matter which bank-owned home Webster buys, he may eventually have to prove he has title to it. A previous owner could challenge the foreclosure.
So, is he worried?
It can't get in the way," he said. "If I want to buy something I'm happy with, I shouldn't let a worry about what is happening all over the country affect that."
Besides, Webster said, that's the purpose of title insurance, which he plans to obtain when he closes on a house.
Title insurance assures home buyers that they have rightful ownership to a house. Title companies look for outstanding claims or other past problems that could cloud the ownership. Lenders require buyers to have title insurance, but people who buy a home without a mortgage can forgo having a policy.
Webster's Realtor, Connie Nompelis, recommends that her clients use a reputable title insurance company -- one of their own choosing.
"It does get dicey when sellers try to require that you use their people because you don't know who they are," she said.
Nompelis said the best ones usually do an extensive document search going back at least 40 years.
Lenders will often push buyers to use a lender's preferred title company.
"I have had that experience on a number of occasions," she said. "And it's been unpleasant almost every one of them because often times, these are title companies and closers that are out of state. They are unfamiliar with Minnesota law and you can definitely get into trouble with those types of situations."
Title insurance could be even more important as investigators sort out whether banks foreclosed on homes using faulty procedures.
That means title companies should research properties thoroughly, said Sue Lentner, C.O.O. of Tri-County Abstract and Title Guaranty in St. Cloud.
"Some title companies only do a one-deed search or a two-deed search and as quickly as properties are turning, you can see that maybe there have been two deeds in the last five years, and that is all the further back that they search," she said.
According to foreclosure research firm RealtyTrac, nearly one third of all homes sold nationally in September were in some stage of foreclosure. Lender-mediated homes accounted for about 41 percent of September sales in the Twin Cities.
If the ongoing investigations into the foreclosure process reveal more problems, Lentner said underwriters could put the brakes on lender-mediated sales.
Augsburg College economics professor Jeanne Boeh said homebuyers on the fence should think hard about whether now is the best time to buy.
"It might be worth your while to wait until everybody finishes their investigations and they make the changes they need to make and determine exactly who owns what and for how much before you buy," she said.
In Minneapolis, Webster said he's not waiting for the foreclosure mess to be resolved. He's ready to buy now.
"You would hope that banks and governments would want to protect home ownership and protect the stability of neighborhoods, that they wouldn't let something bad happen," he said.
Webster said he's doing his homework to try and protect himself in case the system fails.