1. What do I need to know before I buy a property at a Foreclosure Sale?
- The investor should find all liens that would be attached to the property and must be paid off by the new homeowner. Additionally, the investor should know who forecloses on the property: 1st lien, 2nd lien, Homeowner Association or any other judgment or lien holder. The title search
will show all of the required information to make a rational decision.2. Why do I need a title search company when I can do the search myself?
- Title documents, while filed in public records, in many cases are not free and are available through paid access. Additionally, if an untrained individual reviewed the documents, an important lien or mortgage related document may be missed and could cause a loss for the investor.3. Why would I need to run a Bankruptcy search if I am a note investor?
- As a note investor, you must know if the current owner is in active bankruptcy, especially if the note is non-performing, or you cannot proceed with any foreclosure. If there is a bankruptcy
found, all foreclosure actions or tax sales are on hold until the borrower is discharged from bankruptcy. If an active bankruptcy case is found, the investor should check if the mortgage had a cram down or was wiped off by the bankruptcy plan or motion.4. How important is the status of real estate taxes and how can that affect the property I buy?
-Taxes can wipe off any mortgages on the property. This is the most dangerous lien to review while buying a property at a mortgage foreclosure sale or mortgage / note purchase. Different states have different laws on when the tax delinquency can translate into a tax sale
and tax deed. Additionally, some states have a tax deed redemption timeline and most are tax deed non-redeemable.5. What liens will attach to the property in the case of foreclosure?
- Property taxes and tax liens, HOA liens in super lien states, municipal liens, code enforcement liens, permit violations, any senior mortgages to the foreclosing mortgage, water/sewer liens and sometimes balances.These liens cannot be overlooked as the new owner will be fully responsible to pay them off.6. What type of search do I need if I buy a property at Sheriff's Sale?
- A Current Owner (O&E)
search should be enough as this type of search will provide information such as the current owner, open mortgages, active judgements and tax status of the property. I would also recommend a search for unrecorded liens at the township or city of the property, this way the buyer of a new property is aware if there are any liens attached to the property that were filed at the township level and not found to be recorded in the county. Unrecorded liens (if they are found on the property) could significantly affect the investment and may result in a loss of investment.7. What liens survive a Tax Sale?
- All liens are wiped off including all mortgages and HOA liens, except for any municipal liens against the property, code enforcement liens and permit violations. Additionally, any prior tax liens should have to be paid off, as well. Most of the time, tax sales require a court filing in many states to clear the title from any prior interest holders8. What is a Quiet Title?
- Quiet Title is a federal court case filed to remove a defect on a lien, position or ownership by a court decision. For example, the borrower can remove a mortgage from the property if the judge signs an order in the quiet title case.9. What are unrecorded liens and how could it affect my investment?
- Unrecorded liens
are liens not recorded at the county and not shown on a regular title search performed at the county. Typically, these liens are code enforcement liens, permit violations on the property (something was built without a permit), municipal liens, demolition checks, unsafe property conditions, etc. If you are a note investor, knowing the amount of these liens will benefit you in negotiating the price with the note seller: the higher the debt, the higher discount you may get. If you are a real estate investor, you must be aware these liens will attach to the property you buy and you’ll be responsible for paying it off.10. What is a Title Exam and why do I need it?
- Title exam is a review of each title document for defects and exceptions. I recommend ordering title exam
for mortgage / note investors to make sure that the mortgage is enforceable and there are no known defects that will prevent the investor from foreclosing on the note, such as assignment breaks, vesting issues, origination issues and many more.