Township level searches: how we take the extra step!
Most 1st Lien buyers are only running O&E reports to find out the status of the subject mortgage in question, the amount (and type) of liens, and any taxes attaching to the property. Investors that have been hurt by unrecorded liens or fines always go above and beyond to protect themselves at diligence and run Township searches, Demolition Checks, Utility balances and Tax Sale Redemption searches. Why? What is the benefit of the extra expense? Can I get a discount from the seller on Township liens, such as code enforcement liens, code violations, environmental liens, permit violations, dangerous building notes, etc...?
ProTitleUSA ran a break even analysis for the Township services on 3 pools with 2,000+ loans each, where our clients spent extra money in acquisition due diligence for township searches on top of the O&E reports. The results in all 3 cases were very similar. We wanted to show the ratio of discount(s) received from the seller based on township searches only versus the cost of the township search itself:
Sample Pool #1:
● 2.1:1 on verifiable township violations with print out proof for seller to cost
● 4.5:1 on total township violations to cost
● 1:1 Water/Sewer balance that attached to property
● 4 properties to be lost at Tax Sale
Sample Pool #2:
● 2.5:1 on verifiable township violations with print out proof for seller to cost
● 3.2:1 on total township violations to cost
● 0.5:1 Water/Sewer balance that attached to property
● 2 properties to be lost at Tax Sale
● 1 property already scheduled for demolition
Sample Pool #3:
● 4.1:1 on verifiable township violations with print out proof for seller to cost
● 5.3:1 on total township violations to cost
● 0.5:1 Water/Sewer balance that attached to property
● 4 properties to be lost at Tax Sale
As you can see from the analysis, if you are not ordering Township searches, you are not only paying off the Township search diligence effort but leaving money on the table as an additional discount request from the seller. This data was generated from NPL pool trades. We would assume that the RPL or Performing trades would be cleaner. But what about the reverse mortgage pools?
In Reverse mortgages, the borrower is responsible for paying taxes, HOA dues, Muni charges, and water/sewer balances. Additionally, when the borrower passes away the property becomes vacant, therefore it must be registered as vacant property (VPR) by the lender or last assignee of record (HUD or Reverse Mortgage servicer typically through property preservation firm). If the registration was not done correctly, in some states the penalties may be as high as $500.00 per day!!! (example: state of New York). As more and more Reverse Mortgage Pools are sold by HUD, additional Township and VPR searches are highly recommended. We are accumulating the data on Reverse Mortgage pools and will share with our corporate clients.
Absorbing due diligence complexity is our goal at ProTitleUSA. We have launched a common reporting Tax/Title/Muni/Demo/Water/Sewer/Permit dashboard with consolidated Pass/Fail criteria, total liens surviving foreclosure, risk grading and asset scoring, and title exam with underwriting. If you are only running O&E reports in diligence currently, please feel free to reach out to us for a quick demo on all extra services you can add to protect your portfolio.
ProTitleUSA ran a break even analysis for the Township services on 3 pools with 2,000+ loans each, where our clients spent extra money in acquisition due diligence for township searches on top of the O&E reports. The results in all 3 cases were very similar. We wanted to show the ratio of discount(s) received from the seller based on township searches only versus the cost of the township search itself:
Sample Pool #1:
● 2.1:1 on verifiable township violations with print out proof for seller to cost
● 4.5:1 on total township violations to cost
● 1:1 Water/Sewer balance that attached to property
● 4 properties to be lost at Tax Sale
Sample Pool #2:
● 2.5:1 on verifiable township violations with print out proof for seller to cost
● 3.2:1 on total township violations to cost
● 0.5:1 Water/Sewer balance that attached to property
● 2 properties to be lost at Tax Sale
● 1 property already scheduled for demolition
Sample Pool #3:
● 4.1:1 on verifiable township violations with print out proof for seller to cost
● 5.3:1 on total township violations to cost
● 0.5:1 Water/Sewer balance that attached to property
● 4 properties to be lost at Tax Sale
As you can see from the analysis, if you are not ordering Township searches, you are not only paying off the Township search diligence effort but leaving money on the table as an additional discount request from the seller. This data was generated from NPL pool trades. We would assume that the RPL or Performing trades would be cleaner. But what about the reverse mortgage pools?
In Reverse mortgages, the borrower is responsible for paying taxes, HOA dues, Muni charges, and water/sewer balances. Additionally, when the borrower passes away the property becomes vacant, therefore it must be registered as vacant property (VPR) by the lender or last assignee of record (HUD or Reverse Mortgage servicer typically through property preservation firm). If the registration was not done correctly, in some states the penalties may be as high as $500.00 per day!!! (example: state of New York). As more and more Reverse Mortgage Pools are sold by HUD, additional Township and VPR searches are highly recommended. We are accumulating the data on Reverse Mortgage pools and will share with our corporate clients.
Absorbing due diligence complexity is our goal at ProTitleUSA. We have launched a common reporting Tax/Title/Muni/Demo/Water/Sewer/Permit dashboard with consolidated Pass/Fail criteria, total liens surviving foreclosure, risk grading and asset scoring, and title exam with underwriting. If you are only running O&E reports in diligence currently, please feel free to reach out to us for a quick demo on all extra services you can add to protect your portfolio.