Title Search Due Diligence for Non-Performing Notes

7 Replies

I recently took a "title record searching" course in San Diego County offered by Ward Hanigan and his son Eric which included visiting the local county office and performing hands-on title searches. It was a great under the hood view of real estate titles – not to mention how and what gets attached to them. I recommended it. Ward originally developed the course for those interested in foreclosure sales – where it wasn't cost effective to pay a title company to research titles by the dozen prior to each auction. But my interest in the course was as an aspiring Non-Performing Notes Investor. 

As is the case in San Diego County, and Los Angeles County where I live – most title records are only searchable in person, but NPN investing is spread all over.

I'd love to learn how others evaluate titles prior to purchasing Non-Performing Notes. 

Thank you,

Marco Bario

Sherman Oaks, CA

Most of us simply pay for a title search.  In a foreclosure auction situation, validating title is a step which must be done prior to bidding.  This is not the way a note purchase works.  Note sellers will indicate lien position of the loans they are selling and your indicative bid is based on the assumption that this is correct.  If your bid is accepted, you have a period of  time to complete final due diligence before funding the deal (or passing on it).  This final due diligence includes title search, so you are only spending money on those assets you are ready to close on.  I actually save it as the last thing to check in final due diligence because of the cost (~$100) and the fact that finding title issues is relatively rare (but common enough to make it an essential due diligence step).  I am much more likely to pass on a purchase for valuation or other reasons related to the property itself than for title.

Thank you Mike, I knew there had to be a simple answer. That helps a lot and the order in your workflow makes sense. 

I noticed FCI Exchange has indicative bids, but wasn't aware that it's common overall, as it sounds like from your post. Also great to know.

Thanks again and Happy Holidays.

@Marco Bario – Many years ago, I took Ward's foreclosure course. It was the first step which enabled me to do extremely well at trustee sales. Checking title was a major part of the course, and although I never had to go to the county recorder's office after the course, his teaching enabled me to catch a few potential costly errors from title companies. 

Ward's list of "students" is impressive. He taught the guy who started auction.com, also Bruce Norris' son Greg Norris and many of the top trustee-sale buyers in California.

As you probably know, Ward is always available to help you. If he doesn't know the answer, he'll direct you to someone who does. He's a super-solid guy who's been around for a long time, has tons of friends in real estate and is dearly loved by everyone who knows him. His integrity is legendary.

I hope you have tremendous success in non-performing notes.

@Paul Chapey - A year ago I had no idea about the real estate community that exists. I've also noticed how successful investors tend to acknowledge those they learned from. Somehow the same 8 or 10 names come up. Pretty amazing how it's developed and how the knowledge has been shared. 

And thank you for your wishes for success. As you may have gathered, I love to learn new things and I can also share that I'm pretty patient. Not expecting to get rich quick. 

@Marco Bario Perhaps you know these guys – they are friends of Ward and very involved in non-performing notes: Gordon Moss of Quixote Ventures and Gerald LeMoine of The LeMoine Group. Gerald is a past student of Ward and holds meetings in Orange County about notes. I have an investment with him. 

Until around 2013, Ward used to hold reunions but doesn't any longer. At the last one, Gordon was a quest speaker and gave a great presentation on NPNs. I believe he's still involved in note education.

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