Here are some Lessons I learned in Title Search For Foreclosure Properties
I can understand that when looking at foreclosure auction prices, most of the properties look like a bargain. You have to understand where the auction price came from, before getting too excited about it.
Let’s first understand how the property happened to be in foreclosure. A common reason is that current owners did not pay their mortgage or tax bills on-time, causing bank or municipal/state/federal government to place a lien against the property, in other words, the mortgage lender or government wants to get payment on the current owner’s obligations by any means, even if they have to go through the foreclosure expense and auction the house to recover the owed amount or gain possession of the house to sell it latest via real estate agency (REO properties).
If the current property owner had a single lender, then the amount you see at the foreclosure auction might be the only debt against this property (key word is might). In the case where the current owner had, say, a home equity loan in addition to home mortgage(s), there may be two or more liens against the property from different mortgage lenders. Whichever lender files “notice of default” first and puts a lien against the property gets to foreclose on the property first. The payout from foreclosure action to lenders or government always happens in order of court filing. The only way for you, as an investor, to find out what liens, mortgages, debts exist against the property is to order a Title search.
Foreclosure auctions (sometimes called sheriff’s sale) are typically held in the municipal (county) courts. The County does not offer you any protection against additional liens on the property, nor do they guarantee you a clean title. Lenders or government agencies are always represented by top notch real estate lawyers, which do not care about your interests and are only interested in selling the property at the auction.
I have done a fair amount of homework on buying properties from the lien holder (banks, not county) at auction. The piece of the puzzle I have not put together has to do with your post.
I know that when bidding on a property, you don’t want any unpleasant surprises in the form of another lien lurking after you “buy” the property. So I know you must search the title and tax history.
In my county none of this is available on-line, they privatized it a couple years ago. So, how do I physically look at 50 properties before the auction THEN verify the lien position of the auctioneer and ensure the taxes are current?
So here is my question:
Is there a good web site that can do title searching, owner records searches, lien searches, etc for a reasonable price? I don’t think a title company will work for this as I would need to run a lot at relatively the last minute the last couple days before auction.
Also, where can I get the list of upcoming auctions, banks, attorney doing the auction and opening bid amount?
Icon Property says
Brian, even if you are buying from institutions at auction, I don’t think that you “close” right there. Once you secure a property or two at the auction, you then proceed to do a title search, lien search, etc. If it’s clouded, you inform the seller and have him clear it, you help if you can(if the property is worth it), or you walk. They have to be able to transfer you a clear title. If that process takes a while, have a final check done a few days before closing to make sure nothing else snuck in while you were clearing the first problem. Any other thoughts anyone?
Brian, as the previous reply indicates, iif you are buying from a bank at auction (or thru real estate agency), there should be an a statement regarding that title will be clear of all liens (encumbrances) at closing. Normally, property taxes would also be announced as being prorated at closing. Just buy some title insurance at closing and you should have no work to do. THIS IS NOT TRUE at a foreclosure sale. A foreclosure auction sale is “BUYER BEWARE”. Title and tax research is a must! Go to a sale and see what is said and ask questions. Go to a title insurance company and talk to them about your concerns.