Insist on an owner’s title policy in your offer. If the lender will not pay for it, insist on it anyway and offer to pay for it (along with your lender’s title policy (if you have one) if you still want the property. Make your offer contingent upon your approval of a preliminary title report and order it right away after your offer is accepted. If you do not approve of it, timely cancel the transaction and walk away.
The seller/lender is simply stating to you that the extent of your ownership in the property will represent only the extent of their ownership … whatever that is. I’d be leary that this “REO seller” is “subject to” other liens.
I’ve seen this done in probate sales but never REOs. Is your REO lender a “private lender?”
