Messy prelim title report

3 Replies

I'm looking at a multi-family deal in Oakland and have been reading through the disclosure docs. First time I have ever come across such a messy prelim title report. The sellers haven't been paying their City of Oakland business tax or garbage service for years! Also seems like they have taken out multiple loans on the property with different lenders. 

How do I proceed? What questions need to be asked? Is this a deal breaker?

Doesn't really matter if there is 1 lien, or 20 liens.  What matters is if they can all be paid out of the sales proceeds.  Obviously you/the title co. needs to get an accurate total pay off.

Originally posted by @Jessica Yau :

I'm looking at a multi-family deal in Oakland and have been reading through the disclosure docs. First time I have ever come across such a messy prelim title report. The sellers haven't been paying their City of Oakland business tax or garbage service for years! Also seems like they have taken out multiple loans on the property with different lenders. 

How do I proceed? What questions need to be asked? Is this a deal breaker?

Hi Jessica,

Hope all is going well..
Add all the liabilities up!
(below assumes you already have a contract price..)

#1) RENT CONTROL - I thought you weren't doing MF deals in Oakland where there's rent control..? Or is this one after 1983? (I still love Oakland as a place and as an investment. Just curious..)

#2) "DEAL BREAKER?"  @Wayne Brooks is right.  Not necessarily! Did you know about the liens when you made your offer? (Did they disclose to you or did you pull a prelim title / property report?)

> POTENTIAL SOLUTIONS - "How do I proceed?"
a) If you didn't know and they didn't disclose (or didn't know themselves..), submit an addendum to the contract for the property to be delivered free and clear of liens and encumbrances (if you didn't already!)

have closing date be X days after seller removes all liens.

b) Adjust the purchase price accordingly

Talk to the title company for more information.

> WHAT QUESTIONS NEED TO BE ASKED?

1) Is the seller willing and able to deliver the property free and clear of any liens and encumbrances?
2) Is the seller willing to adjust the sales price accordingly for the liabilities, hopefully in addition to your time, effort, and risk dealing with the unknown (again, talk to title company).
3) Title company - can they be removed? how long will it take? what needs to be done for a title insurance policy to be issues with the items removed from Schedule B - exclusion to policy?

GARBAGE LIEN
The owner can contact (or I believe authorize the contact) city of Oakland and fax in a form to get a payoff statement for the garbage liens. Takes about a week or a little more front to back if you're diligent. Had title do it for the last deal I closed in W Oakland in August.

There you go! Hope you make some good money on it :)

@J. Martin, nothing has been set in stone yet. Oakland prices are high right now and CAPs are low so the economics are so-so but there are two parcels and a few are SFRs. I want to see if there is an opportunity to split them up. We are a few weeks away from closing on our sale so I need exchange properties! I'm also looking at Napa area. Prices are really low there right now. More so for SFRs than multi-family. Regarding the above, the listing agent told me he sold a few other places for this same seller in the last few months and they all had similar liens but would be clear before closing. I get back to town tomorrow. Are there any holiday meetup's coming up?

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