Title Search Expense
According to what I learned up to now: One of the big deal is title search. If the tax lien sale prices from even $200 to hundred thousand dollars (maybe even millions) and if a title search costs about $250, so how we can buy many tax liens? I mean just this step is equal to 25% interest of $1000. And if we will buy them from another state, expense will include airplane ticket, hotel staying, etc. Is there any other way to learn the condition of title? I assume almost all of them at least one mortgage. but there are some serious issues about title we can't ignore.
Thank you
I will try to break down your questions one at a time:
1) You imply that you need to do a title search prior to purchasing a tax lien. I disagree with that assumption. There is due dilligence that should be done prior to pruchasing any tax lien, but a title seach is not required (in my opinion) at that step. The due dilligence is to determine, if it should come to pass, what is your estimated value of the property. You are looking for property that if the owners and interested parties do not pay off the lien, that you would not mind owning.
2) That you need to do a title seach on "low value" property. I do not activitely participate in the purchase of "low value" property, and it is not something I would pursue via tax liens. If however the property is valued at say $40,000 and your lien is for $1000, then the cost of doing a title seach can be easily justified.
3) Once the redemption period of the lien is expiring it is necessary to do a title search (and more) to find all interested parties who must be notified. At this point you are into a legal process to acquire a Deed and your legal fees will likely be more than the cost of the title search.
4) A high percentage of tax liens on "improved property" (i.e. includes a building of some sort with power and water) are paid off before the redemption period expires. You would only need a title search for those reaching the end of a redemption period.
5) If you will be doing several title searches at once (for several properties) you can sometimes get a bulk discount from title search providers. Shop around and look for your best value. Remember that this search is part of a legal process and you do not want to miss any interested particies to save $50 -- so deal with good reputable firms.
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I was just asking this same question to my lawyer. He clarified that the title search companies charge about 250 for going to 1 particular county. If you bundle up a number of searches (say 5 searches) at the same time in the same county the price is a little bit higher, but not much more than $350 .
That been said, I've never done this myself. So I'm taking his word for it. I shall see soon enough how it all turns out.
Thank you Glenn for your detailed answer. And Thank you R_Perez for your answer. So, you don’t give priority to title search. Actually I don’t mind to share the profit with more senior or/and junior liens on the property when foreclosure is necessary. But I’m concern about my obligations, troubles and the things I have no idea that they are existed. Generally it’s said tax lien is senior. But what about Federal liens, IRA liens, much worse FDIC and RTC. Without title search how can I know if they are on the property? It’s said FDIC and RTC can’t be wiped out by foreclosure without their consent. So, if they say no, there is no foreclosure, so what’s gonna happen next, I don’t know, but it sounds so much time and unfinished issue. Somewhere I read that in some states if a homeowner has medical debt, it passes to new owner. And let’s say debt is $300,000 when the home is $200,000. That is terrible situation. I though title search is to eliminate these kinds of troubles. So, may I ask what your plan is to avoid or to handle them?
Thank you
You can do it yourself online by going to the county clerk office website and looking for the grantor/grantee index in the deed recordings section. You can search the liens on the property by searching the current owner's name has the grantor. Then go back in time starting by searching the current owner's name has the grantee. I would buy one from a professional first until you can practice enough that you get the same results as the professionals.
Thank you so much for this gold advice.
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Sevmil:
If you contact First American Title Company and promise to purchase Title Insurance from them they will give you free access to run property profiles, comps, tax information, etc.... They will also give you free title reports upon request.
Contact the local First American Title rep in your area and take them to lunch, and explain to them you want to use them for
your Title Insurance in the future.
You can go to www.Firstam.com. for more information.
Best Riches,
Jeff Adam
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Jeff
Are you referring to Fastweb?
Mike
Thank you so much, it's great idea
)
I think the best idea as you said, finding the best ones in this business and always working with them.
Sash:
Yes, Fastweb. A very powerful tool!
Jeff Adam
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Sorry but you need to perform title searches before you buy. You need to atleast be familiar with the process and be able to spot IRS liens, hospital liens, mechanics liens, etc.
You also need to know how to get a list FDIC held liens and determine if a mortgage is being administered by the FDIC.
IF you are going to invest in any kind of tax defaulted sale opportunity learn how to do your research. When I got started I would pay for bundled title searches (about 10 liens) at a lower price. Then I would take the tilte report and try to spot the liens that were found on the report myself.
I also suggest you go to the Recorder's Office and talk to some title abstractors. Learn how they look for these liens. Learn what the liens look like and how to spot them.
Please do some title research before you buy. I have plenty of people coming to my office who lost money investing in tax liens because they did not perform some research on the grantor/grantee index.
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Darius,
Your answer is incorrect - you cannot afford to do a title search prior to acquisition (I know where you work they have small lists - but in the real world a list can be several thousand parcels). In most lien situations you will not even consider a title search until you reach the noticing stage - and with a little bit of luck you will have enough redemptions that you are only doing it on about 1/4 of your acquisitions.
You have wrongly read my post. I do not recommend performing a title search on every parcel. Trust me I know how long it takes to perform a title search.
You do need to narrow your list of liens down and once you do this I then recommend performing some searches on these tax liens. Yes that includes learning to access the recording index and going through a quick check list.
I don't recommend running a title report for every lien on the tax sale list...again you have simplified my post way too much.
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Also the 'title search' I perform has nothing to do with the chain of title and who owns the parcel.
It has EVERYTHING to do with IRS tax liens and (depending on your state) any other liens that might survive your foreclosure action.
Regardless of the IRS right of redemption I believe in checking for other liens.
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I also stand by my previous reply -- a detailed title search is not necessary when purchasing tax liens in Illinois.
It is warranted once the redemption period nears.
Different states (and sometimes counties) have different rules - but in general most tax liens will redeem for $$ and not for a tax deed.
In Illinois almost all previous liens are removed/set-aside via the judicial process to convert a tax lien to a tax deed.
In my opinion determining (and the research assoicated with that investigation) if the property is one you actually want to potentially acquire is more important initially than a title search.
Darius, I have no idea why you suggest doing a title search prior to a tax lien auction unless it is to generate fees for someone.
Glenn,
Every state has different rules associated with it. I can tell you about 5 liens that survive foreclosure in Texas.
Investors who purchase tax foreclosed property in Texas will (a tax deed state) will take the deed subject to:
- IRS liens,
- state tax liens,
- mechanics liens,
- expenses of the decedent's last illness, and
- unemployment tax liens
A blanket statement that you don't need to search for liens before purchasing can sometimes be very misleading. People may apply such logic in every tax sale situtation.
Every state has it nuiances. I suggest that each investor read the tax code of that state and determine which liens will survive the tax foreclosure.
When dealing with tax lien certificates I like to perform all of my property valuation analysis first (but look at the property last) then I will look at the indexing system and determine if:
- IRS liens exist
- A mortgage exists on the property
-The mortgage is administered by the FDIC (actually done by obtaining a list of FDIC administered liens)
and
- Depending on the type of property whether an environmental lien or environmental issue exists.
Some may feel comfortable avoiding additional research and that's fine. It is a decision each person has to make.
I hope this helps!
_________________
Warmest Regards,
Darius M. Barazandeh, Attorney at Law / M.B.A.
NOTE: Any material found on this discussion forum or email with Mr. Barazandeh is for educational purposes only and does not create an attorney client relationship.null[ Edited by DariusBarazandeh on Date 04/12/2004 ]
I agree with your latest reply.
It is critical to know the rules/regulations (i.e. laws) about what liens/encumbrances will survive a tax sale.
Depending on what one is purchasing the lien (not deed) for, I either want an existing mortgage or not.
For example if I want quick redemption to make money and move on I want a lien on a property with a mortgage. If however, I want to have a chance the lien can turn into a tax deed I look for property without a mortgage.
I also agree that it is always a good idea to find out as much as possible about a property prior to acquiring a tax lien. It is just sometimes not practical to do a title investigation prior to the auction of all potential tax liens.
A tax deed is a whole different matter. If/when one is going after a tax deed it is critical to know everything you can around the property -- since you are actually bidding to acquire it and the legal recourse for recovering your fees is much more limited if the property "does bad". I believe it is wise to approach a tax deed sale much as one would a regular real estate purchase transaction. In fact it is even more important to do more than for a regular transaction as it is "buyer beware".
Your points seem most valid to me around a tax deed.
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The presence of a state tax lien or a mortgage attached to a tax lien in a tax lien certificate jurisdiction are critical.
Many investors like to 'rachet' up the chances of foreclosure in tax lien states by focusing on liens that DO NOT have a mortgage attached to them.
In many states the STATE TAX LIEN will share equal priority to the property tax lien. If the state tax lien is large enough then it could significantly reduce your rate of return when you successfully foreclose.
As I said before in general as a last step it is a good idea to check the property indexing system right before the auction and check for some of these issues. Once you learn how to do it you will only need about 5 minutes per listing.
I have seen too many legal cases and bad investments to believe otherwise.
Best Regards,
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Quote:
On 2004-04-14 15:09, DariusBarazandeh wrote:
The presence of a state tax lien or a mortgage attached to a tax lien in a tax lien certificate jurisdiction are critical.
Many investors like to 'rachet' up the chances of foreclosure in tax lien states by focusing on liens that DO NOT have a mortgage attached to them.
In many states the STATE TAX LIEN will share equal priority to the property tax lien. If the state tax lien is large enough then it could significantly reduce your rate of return when you successfully foreclose.
As I said before in general as a last step it is a good idea to check the property indexing system right before the auction and check for some of these issues. Once you learn how to do it you will only need about 5 minutes per listing.
I have seen too many legal cases and bad investments to believe otherwise.
Best Regards,
Hi Darius and others,
I agree with Darius that it may be wise in some situations to do a title search. Speaking from current experience of somebody (me) who doesn't do title search. I just acquired 2 TLC's in oklahoma county, and looked at the title search of one of them (after having bought the lien). It turns out the current owner ows about $100,000 oklahoma income tax (when u include 15% interest accumulating since the 90s). That income tax will survive the tax lien.
I still expect to come up ahead, since my cost is only a couple of thousand dollars, and I will get a nice house in a nice neighboorhood before losing the house to the state. So I expect to get my money back, then some, by renting the house month to month while I own it. But if you spend big $$$ to get such a house with negative equity, you will obviously end up losing, unless you successfully negotiate a discount lien release.
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how can I say thank to you all? You all gave very valuable information, thank you so much
Abdenour ,
My point exactly. I have seen this situation through many different sides. First, as an attorney, then as an investor.
There is no reason to avoid spending 5 minutes to just look at the granting index and check things over.
Remember you are dealing with distressed property...can you risk no checking for additional liens? Unless you want to buy someone elses headache....then do it!
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Quote:
On 2004-04-16 11:56, DariusBarazandeh wrote:
Abdenour ,
My point exactly. I have seen this situation through many different sides. First, as an attorney, then as an investor.
There is no reason to avoid spending 5 minutes to just look at the granting index and check things over.
Remember you are dealing with distressed property...can you risk no checking for additional liens? Unless you want to buy someone elses headache....then do it!
Hi Darius,
Actually, I checked the Deed record online (county's web site) before buying the lien, but that state lien didn't show up. I didn't physically go to the county to double check because I live over 1,000 miles from Oklahoma. It's no big deal in Oklahoma, because the lien is only a couple of thousand dollars, and I will either rent the place to the current owner or live in it myself while the state is foreclosing. Of course, such mistake would have been devastating in a Texas tax deed sale given the amount of investment needed there.
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