All Forum Posts by: Hal Thompson

@Stephanie P. How much was driven by subprime vs. prime isn't really the point. The effect that rising rates had on a ridiculously hot housing market 10 years ago is the point. I see some parallels with what is happening now. We probably won't see an insane crash like last time, but some of the flippers and the speculators will go broke this time around too, and prices will come down.

@Larry Bowers

Freyermuth runs the DIRT real estate listserve. https://www.refinblog.com/tag/freyermuth/

I have found he generally knows what he's talking about.

Good primer on pure notice, pure race, and race-notice jurisdictions: http://www.law.missouri.edu/freyermuth/ret/fall201...

Missouri appears to be a pure notice jurisdiction. Therefore, failure to search is irrelevant, because:

Pure notice (Missouri): estoppel should protect reliance; BFP’s reliance occurs at time of transfer – If prior claimant hasn’t recorded, prior claimant should be estopped from claiming title vs. BFP (without regard to whether BFP has recorded)

This means that a subsequent bona fide purchaser for vale (BFP) is entitled to rely on their lack of notice (as evidenced by the lack of recording). As Freyermuth states:

What if B was lazy/imprudent and failed to search the title records at the time B purchased Blueacre? – B’s failure to search is irrelevant – Buyer has no legal duty to search the title records before buying land – Buyer deemed to have constructive notice of what search would’ve shown • If B had searched, B would not have found A’s deed (which was unrecorded)"

This is in contrast to pure race jurisdictions, where the only relevant question is who records first, and race-notice, where question is both who recorded first and whether that person had notice.

So to answer your question, in a pure notice jurisdiction, intent is irrelevant. The question is whether the BFP had notice of the other interest. Can it be shown that the subsequent purchaser for value (BFP) had notice of the previous claim?

The Colorado reference was merely pointing out that some jurisdictions favor certain types of liens (in that case, a "purchase money" mortgage, where the bank has provided the purchase money) over other types of liens against property, regardless of when each was recorded. In Colorado, the lack of recording may not be fatal to asserting priority over another lien that is recorded first.

@Tom Gimer In most race recording jurisdictions, a certified copy is the equivalent of the original for the purposes of legal proceedings and rerecording. In jurisdictions that haven't formally adopted a race recording statute, this may be more of a gray area (see Connecticut).

@Larry Bowers Definitely take this up with the title company. You should be able to hit their E&O Insurance for this.

Rerecording in the correct county shouldn't require any additional signatures. The document speaks for itself.

As far as priority is concerned, this is a matter of state law. Not all states are pure race recording states. For example, 

https://scholar.google.com/scholar_case?case=64588... - "A mortgage recorded in the wrong county has no more effect than an unrecorded mortgage.[5] Such a mortgage is good as between the parties irrespective of recording[6] and only need be recorded as required by Colo.Rev.Stat. § 20-1-1 (1953) to be effective against creditors and third persons having liens enforceable by execution, attachment, or contract acquired during the time when the mortgaged property remained in possession of the mortgagor.[7] Colorado has further held that a purchase money mortgage has preference over other claims or liens through the mortgagor even though prior in time.[8]"

I am not a lawyer and this is not legal advice.

@Ken Dillard You will obviously get better terms if the bank has more assets to go after if you default. They get your house if your business deal doesn't work out. The fact that you have an LLC is neither here nor there if you default on a personally guaranteed loan, so that is a non-sequitur. The bank wouldn't be able to come after your stuff even if you didn't have an LLC, as long as the loan is collateralized solely by the property (no personal guarantee).

Whether the loan can be collateralized solely by the property will come down to the appraisal and LTV ratio the bank is willing to extend.

@Russell Brazil I'm not arguing that there is a perfect correlation between interest rates and housing prices. The answer to your question about rising rates and rising prices between 2002 and 2006 is that when rates spiked between 2005-2006, this was the setup for the biggest housing crisis in 100 years. Borrowers had locked in short term, low interest rate loans prior to that period, and when the interest rates reset after the inital fixed rate "teaser" period, the whole market imploded.

It is true that there is less subprime borrowing now, and generally loan terms are longer, and so a dramatic crash like last time probably isn't in the cards. But the correlation between interest rates and price still holds.

This time around, you have relatively stagnant wage growth coupled with massive asset price inflation. Why has there been massive asset price inflation? Because interest rates have been effectively zero. You cannot get ahead by saving, so that money has to go into financial assets like stocks, bonds and real estate. However, as interest rates rise (and they have to rise due to inflationary pressure from all the money that has been pumped into the economy), the housing market must fall.

http://www.businessinsider.com/us-home-prices-outpacing-inflation-2016-4

@Russell Brazil Would you care to cite to academic literature showing that home prices are immune to interest rate fluctuations? Are you saying that if rates move up 2-3 points in a year, there will be no impact on price? Schiller himself has said rising rates could tank the housing market:

https://www.foxbusiness.com/markets/higher-interes...

You're a real estate agent, so I can't say I'm surprised by your viewpoint. However, I completely disagree with it. As Schiller (and anyone who has taken Finance 101) understands, interest rate = time value of money. If I can make risk free money at 3-4% in the bank, then pumping that money into the housing market to make a 4% return makes no sense. Guess what the average cap rate on residential real estate is right now.....sub 4. So if interest rates go to 5-6% on the 30 year, you really believe there will be no change in the price of residential real estate? You think that the same consumer, who could afford a house twice the size a year ago, will now pay the same price for the house that is half the size, since that's all they can afford at higher rates? Effectively, everyone just downgrades their purchasing behavior when interest rates rise? This strikes me as purely delusional.

@Seattle Eltons I watch the property records in a number of markets, including Seattle. Clearly the price increases aren't being driven entirely by foreign investment. It is true that techies with big salaries don't equal a bubble, but if you check out who is buying property for 30% YOY price increases, I see a substantial number of foreign buyers. 

And it's not just mega mansions on the Eastside. The most interesting thing I see is property being purchased as rental investments that have absolutely no chance in hell of cashflowing. The numbers are easy to run; the investment makes no sense. Even after 40-50% downpayments (fairly common for foreign investors), they are still losing between $100-400 a month (again, not mega mansions. Think rental condos/medium size houses).

To me, that's the definition of a bubble. That doesn't mean the bubble will pop anytime soon, but if you are investing only because you are certain that future appreciation will cover your losses, that is a sign that there may eventually be a final sucker holding the bag when the whole bubble implodes.

The only market where I've ever seen that kind of behavior work is New York City (Manhattan). And I think Manhattan is an extremely unique market. Everywhere else, it tends to lead to an implosion sooner or later.

There are no super liens for HOAs in North Carolina. Why would you invest $7700 into improving a property that had a junior position to a mortgage that you didn't intend to satisfy? Unfortunately, this is one of those caveat emptor situations...

Just an FYI for anyone thinking about buying these, from a third party in particular. HOA foreclosure properties in Nevada have been in litigation for years. If your property is not in litigation now, it may be soon (check the property records for a lis pendens against the unit you want to buy).

It sounds like the property you are thinking about buying may have been foreclosed by the HOA after the 2015 modifications to the foreclosure laws, which may avoid certain legal headaches that have been created by the 9th circuit court of appeals (see: https://cdn.ca9.uscourts.gov/datastore/opinions/20...)

However, you will also want to check out which federal agencies may own an interest in your hoa lien. For example, if Fannie Mae or Freddie Mac owns the underlying loan, you may be in big trouble. It is likely that the person selling this to you knows quite a bit about these issues; it would behoove you to educate yourself about these issues before purchasing a Nevada hoa foreclosed property. Buyer beware...