Lenders have frequently been using the appointment of a receiver for distressed properties in an effort to obtain control pending the resolution of a foreclosure action. The appointment of a receiver ensures that the property will be maintained pending the foreclosure sale. However, lenders have also utilized a receiver’s power of sale to expedite the sale of a distressed asset. This raises several issues for prospective purchasers in attempting to acquire “free and clear” title from a receiver’s sale.

When acquiring property from a receivership sale, a prospective purchaser should confirm that all statutory requirements with respect to the receiver sale have been complied with and that the contract of sale with the receiver should clearly state that the property is being sold “free and clear” of all existing liens and encumbrances. This is essential in order for a purchaser to obtain title insurance for the acquired property.

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