Los Angeles, CA · Member since 2014 · 113 posts · 17 votes
I am in the process of bidding on my first courthouse property. I am aware of the due diligence, title search, comps, etc...
I also know how some second or third lien holders may be the ones foreclosing on the property. An example would be someone took out a 2nd mortgage for their pool, you bid on the auction thinking you are bidding on the 1st mortgage and get stuck with the 2nd mortgage.
I have online access to the research the deeds. I do not know how to correctly identify the which is the 2nd and the 1st. Granted I could look at the higher amount, however that is not accurate.
Could someone please point out the method to identify what mortgage is filing for foreclosure?
Also please do not tell me I should get a title company to do the work. I am doing that as well. However, I want to be able to weed out the properties I am not interested in before paying a title company.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
Maybe. One caveat to the "first in time, first in line" rule is that a mortgage may be subordinated to a later filed mtg. Happens all the time when someone refi's a first mtg, but leaves a HELOC in place. You have to actually read the mortgage document, both mtg documents particularly the later one as it may have a subordination agreement from a previously recorded mortgage.
San Francisco, CA · Member since 2014 · 345 posts · 281 votes
12y
When people say 'first' or 'second' deed, they are referring to the time at which the deed is recorded. A deed of trust for 5K recorded in June is senior (first position) over a $700K deed of trust recorded the subsequent July.
The notice of trustee sale (non-judicial foreclosure, speaking from California experience) always refers to the original date on which the relevant deed of trust was recorded. That's how you can determine which lender is foreclosing and thus the seniority of the claim on the asset.
San Francisco, CA · Member since 2014 · 345 posts · 281 votes
12y
Also, check out www.foreclosureradar.com (now propertyradar.com) if they have coverage for your local area. It is a screaming bargain at $50/$70 (whatever) per month and at least in West Coast markets you are at a major disadvantage if you are trying to do all of this title work yourself while everyone else has 85% of the work done from an on-line database.
Investor · Las Vegas, NV · Member since 2011 · 188 posts · 116 votes
12y
General process of identifying lien positions:
1. Identify all your possible liens, and get the date they were recorded, and instrument number.
2. locate all the lien releases. They'll commonly be called reconveyance. Identify which particular instrument number each lien release references.
3.Once you have identified all the liens that have been released, the ones leftover will be the ones that are still unreleased. Then oldest unreleased lien will be the first, second oldest will be the second, and so on.
Of course theres a lot more to it. Some liens may not be indexed by parcel number, or by name, or the name may be misspelled, causing a deed of trust to not be indexed at all etc.
Los Angeles, CA · Member since 2014 · 113 posts · 17 votes
12y
@Tom V.
I actually just looked at that. It is not offered in the Southeast.
I am looking into Realquest.com and Redfin right now, however i do not think it would solver my problem of insuring the primary mortgage is the one foreclosing on the property.
In the eastern part of the United States we may still have the use the manual process. Anyone have an idea of another automated or even a manual process to verify this information?
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
12y
@Bryce Davis The best sources are the trustee web sites and your county records. I assume you are using the Mecklenburg County Register of Deeds Web site. I see that some of the trustees (RTT, Shapiro & Ingle, etc.) are the same as here in Wake county. In my area, http://www.epreforeclosures.com/ is the site to use. There is probably some equivalent where you are.
Purchased on 2/1/2014 with loan of $250,000, recorded on 2/15/2014
Opened HELOC on 2/5/2014 with $50,000, recorded on 2/13/2014
For some reason, lets just say the closing attorney for the purchase on 2/1 delayed in filing the Security Deed for the lien. So then the HELOC would actually be in 1st position in this case??
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
Maybe. One caveat to the "first in time, first in line" rule is that a mortgage may be subordinated to a later filed mtg. Happens all the time when someone refi's a first mtg, but leaves a HELOC in place. You have to actually read the mortgage document, both mtg documents particularly the later one as it may have a subordination agreement from a previously recorded mortgage.
When people say 'first' or 'second' deed, they are referring to the time at which the deed is recorded. A deed of trust for 5K recorded in June is senior (first position) over a $700K deed of trust recorded the subsequent July.
...
The quoted statement is not always true. There can be subordination agreements that get recorded to change lien positioning.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
12y
In my area I see either a lien release or a satisfaction document get recorded for mortgages that are no longer liens. I believe a reconveyance might be used in some areas.
Also in my area, a sheriff's deed serves as a flag that some mortgage(s) will no longer encumber the property. I imagine a trustee deed might exist elsewhere to serve as a similar indicator.
They should be otherwise the public record is inaccurate. Your local recording rules will tell you what is required.
Another possible gotcha to watch for can happen when somebody takes out a loan for multiple properties in a single loan. Sometimes the recordings don't always show up for every parcel (at least I have observed that where I am).
The parcel is normally what you would want to search, because encumbrances can exist from previous owners (think subject to deals).
San Francisco, CA · Member since 2014 · 345 posts · 281 votes
12y
@Steve Babiak and @Wayne Brooks are correct about the potential of subordination agreements to re-order the seniority of liens. Sorting through all of these details is why title insurance companies get paid, or why you need to really understand these issues in detail if you are relying on your own title research. There are many horror stories about people buying at trustee sales and finding themselves owing an earlier debt on the property.
My process is:
Use a website to identify good deals (Screen for 10% of upcoming auctions)
Do prelim research on the best half (Down to 5% of upcoming)
Prepare to bid on X number of houses that match my budget. (Read all of the default notices, be able to trace the loan ownership and servicing as it passed through 5 years of financial crisis - who owned the loan when, who filed the notices, etc..)
This is one of the tough parts about buying foreclosures. You will find yourself dumping lots of time and effort into research on properties only to have those auctions postponed, cancelled, etc.. If you want to mitigate your risk through research, you will pay with your time.
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
12y
Regarding "This is one of the tough parts about buying foreclosures. You will find yourself dumping lots of time and effort into research on properties only to have those auctions postponed, cancelled, etc.. If you want to mitigate your risk through research, you will pay with your time. " ... and when you think you finally have one, then a hedge fund will step in and file an upset bid on you.
I do both. Although in this market, there is a lot of competition. In years past, my bid 2 weeks ago on 14SP672 would have been the winning bid. Not today. Multiple upset bids on this piece of junk property.
My 2 cents: When the market gives you strong signals, heed the market. We are in a seller's market and some motivated buyers are gumming up the works. So I don't chase upset bids. Bring in emotion and you lose a lot of money. Lots of the upsets are by new buyers in my county (per county record) and institutional buyers with seemingly unlimited resources. My view is let 'em go and come back next year.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
We may be behind here, I realize there are online auctions but the standard DOT says public auction at courthouse or place of sale. That means the trustee or his representative is actually conducting the sale. They did a title search. Prior to the trustee opening the sale, just ask! They know. I had my complete file with me and as trustee I would allow a bidder to review the title work, not all may, but I did. In the "calling of the sale" opening the auction I also identified specifically the subject lien as well as junior liens or a senior lien to be included. I realize sales vary from one area to another but at a physical sale the trustee should tell you what lien they are acting on. Might just ask. :)
San Francisco, CA · Member since 2014 · 345 posts · 281 votes
12y
@Chris Martin or @Bryce Davis or anyone else who is informed: What is an 'upset bid'? I have participated in a dozen trustee sale auctions for loans in California and I have never heard of that term before.
It sounds like an over-bid concept which I realize happens with probate sales in California, but I had never heard of anything similar for loan defaults.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
12y
Bill Gulley - in my State (CA) we're seeing even more litigious activity among trustee sale buyers.
Given the crazy sellers' market most of the country is experiencing, would you have any greater concern acting as an auction cryer today showing your title notes? Any concern that some bonehead buyer's bidder would state that s/he relied on your (defective) title report?
Maybe I'm just paranoid.
On the topic of paranoia, I saw a great bumper sticker: "You're just jealous because the voices talk to me, and not you!"
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
12y
In CA trustee sales the auction criers are typically independent contractors that are hired specifically to post sale notices on the properties and conduct the trustee sale. They really don't know anything about the condition of title unless the foreclosing trustee specifically instructed the crier to make a disclosure prior to calling the auction, which they very rarely do.
One exception is auction.com's trustee sales. They often post a preliminary title report on the website. Personally I'd never rely on them, but I'm curious if there has ever been a case where one was defective and a bidder bought a second thinking it was a first based on the defective prelim. The presence or absence of such a case might answer your question, @Rick H. , but I'd guess that there is probably a disclaimer somewhere in the auction terms saying that the prelims are for entertainment purposes only.
@Tom V. I've bought hundreds of properties at CA trustee sales and I've never heard of an upset bid either. Must be one of those judicial state things...
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Rick, No problem here, the south courthouse steps have a large wide ledge that I left a clipboard on with each page of the title commitment on. It was laying out with my briefcase. I'd have no liability of any kind if someone looked at my stuff, neither would the title company, anyone looking at my docs isn't the client of the title company. It was common practice, a wink and a nod, nothing is said, permission is implied I suppose as there is no objection, that's not much to hang on me as a representation of title. Not only was it never an issue, there was never a thought of it being an issue. They didn't have to look, weren't directed to it and when some asked a question as a few would, my answer was that I'm not an attorney and I can't give legal advice to title issues.
You'd think that those at the auction would be closed lipped, but no, someone would ask a question and someone else would often answer them in a rather matter of fact way. They talk amongst themselves.
I see no liability issues with this and this is Springfield, Mo. I doubt any of our judges would even entertain such a claim. :)
@Chris Martin or @Bryce Davis or anyone else who is informed: What is an 'upset bid'? I have participated in a dozen trustee sale auctions for loans in California and I have never heard of that term before.
It sounds like an over-bid concept which I realize happens with probate sales in California, but I had never heard of anything similar for loan defaults.
@Tom V. The upset bid is a material part of the foreclosure process in many states. Per NC statute (ref: http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/BySection/Chapter_45/GS_45-21.27.html) "An upset bid is an advanced, increased, or raised bid whereby any person offers to purchase real property theretofore sold, for an amount exceeding the reported sale price or last upset bid by a minimum of five percent (5%) thereof, but in any event with a minimum increase of seven hundred fifty dollars ($750.00)." Very common to see upset bids in a market like ours, but not common 5 or so years ago.