The Million Dollar Foreclosure System - Part 14 15-5
For example: If you need all cash to save a great deal that otherwise will be sold
at auction tomorrow, you will have an investor with the cash ready to go.
Eventually you will have enough of your own cash to do most deals.
You build a track record by keeping careful records of the details of every
deal that you do. Take before and after photos of the property. Make up a "case
history" album. You can show this album to interested investors to prove you
know how to find good deals and turn them into very lucrative experiences for all
concerned.
Be prepared to persevere! It is easy to get discouraged when you are
trying to get started. Nothing that can make this much money is easy to start.
After a time you will be earning more than a successful doctor or lawyer. They
had to go to school for close to ten years to prepare themselves to earn that kind
of money. You will be struggling for a year or two if you will work the plan as we
have explained it in this manual. This system is your money machine. It is your
determination that will fuel the machine.
The more deals you do the more you learn, the better you get at what you
do, the more money you make. More people hear about your success and what
you are able to do for others, both homeowners and investors. Success breeds
more success. Work hard to get your program rolling and then be ready to enjoy
the ride.
(Example)
ASSIGNMENT OF REAL ESTATE PURCHASE AGREEMENT
For valuable consideration in hand paid, receipt whereof is hereby acknowledged,
(Your Name and Address)
Hereinafter, "assignor", does hereby set over, transfer, and assign unto,
(Investor's Name and Address)
hereinafter, "assignee", his/their heirs, executors, administrators or assigns all of its right,
title and interest in and to that certain attached contract entitled "Residential Purchase
Agreement and Deposit Receipt" dated ________________, hereinafter the "contract",
executed by one (Name of Seller) as seller and assignor (Your Name) as buyer, for the
purchase of said property knows as: (Address, City and County),
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and legally described as:
(Legal description as found on the deed)
a. By accepting this assignment, assignee agrees to undertake and perform the obligations
imposed on assignor as buyer under the aforementioned contract. Assignee accepts this
assignment subject to all terms and conditions contained in the contract or imposed by law. A
copy of the contact is attached hereto as Exhibit "A" and incorporated herein as if fully set
forth herein.
b. It is hereby agreed that the obligations of both assignors and assignee hereunder are not
contingent upon the property closing or recordation of a deed or other completion of the
purchase of the property under the contract. It is the sole responsibility of assignee to comply
with the terms of the contract, and it is the sole responsibility of the assignee to seek legal or
other relief in the vent that the contract is not performed as a result of the act or omission of
the other party to the contract.
Assignor ______________________________________ Date __________________________
Assignee ______________________________________ Date __________________________
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Chapter Sixteen
TITLE SEARCH
When purchasing any real estate you must be sure that you understand
exactly what you are buying. What is the condition of the title? Can it be freely
transferred? Who must sign the deed to transfer title to the property? And,
equally as important, are there liens against the property?
In the normal course of a real estate transaction you would have a title
search done by a title insurance company or an attorney who specializes in real
estate closings. The search would show who the legal owner(s) of the property
is and exactly what liens (and who holds them) are encumbering the property.
The report you would receive after this search is called an "abstract of title." If
you approved the results of this search you would purchase a policy of title
insurance that would compensate you if there was an error made in the title
search.
Whenever possible you should follow normal procedures and have a title
search, check the abstract and arrange for title insurance.
A title search done by an escrow company or attorney takes time. That’s
something you don’t always have when buying properties facing foreclosure.
Yet, some of the very best bargains can be found just a few days before the
scheduled forced sale. The homeowner has truly run out of time and may be
desperate to sell and salvage what he can. You can profit from these situations if
you can get a quick and inexpensive title search.
You could go directly to a title company or a title attorney and pay them to do the
search for you. Could they do it quickly? Probably. Would they do it
inexpensively? Maybe? Cost is a factor here, because many of the properties
you search won’t be worth buying. You will find there is just no equity. You would
be paying for searches where no deal would be possible. But, there is another
solution.
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If you are taking all of your business to one title company they may be
willing to do a preliminary search for you at no cost. That usually only happens
after they know you will be a profitable and continuing customer.
You have two other choices. Make an arrangement with a freelance title
searcher or by doing the search yourself.
Now many counties put all of their property records into computer files and
often you can access those files from your home computer. Otherwise you will
have to visit the records office at your county's government center to search title.
Talk to the people at the title company you plan on using and ask if they
know of a title searcher who would be interested in teaching you how to search.
Explain that you would be willing to pay for the lessons.
Here is a basic guide to researching real property titles.
THE DEED is the document that transfers title to a parcel of real estate. It might
be a Grant Deed; a Warranty Deed or a deed of another name (not a trust
deed). Learn what document is most commonly used in your state. After you see
one or two they all will look very familiar.
A MORTGAGE OR TRUST DEED is a lien against the property. It secures a
loan, debt or some other promise made by the homeowner. Other types of liens
include IRS liens, property tax liens, judgment liens, mechanics liens, etc. They
do not transfer ownership. A "Les Pendens" recorded against a property
indicates that there is a legal action pending against the owner.
When you search title on property you are considering buying you want to
know exactly what liens are against the property, so that you can determine how
much money is owed by the prospect. All of the liens will become your
obligations if they are not paid off or settled before you take title. If you buy a
property with a market value of $100,000 and it has $110,00 worth of liens and
mortgages against it, you are in trouble.
You won’t know if a property is worth buying until you know the total amount of
debt represented by all mortgages and liens. You also want to know if anything
unusual have been recorded concerning the property. Has someone recorded
an option or a lease notice? That means a third party may have some interest in
the property that could complicate your purchase.
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You will find all valid liens and notices that have been recorded against the
property listed in the County Recorder’s index as we discussed earlier.
Your starting point will be the deed conveying title to the property where
the documentary transfer tax paid was on the full value of the property.
For example: Whenever a deed transferring title is recorded in California a
documentary transfer tax must be paid. The tax is computed upon the lesser of
either the "full value of property conveyed" or "full value less value of liens and
encumbrances remaining at the time of sale" (that means assumed loans and
liens).
If that tax is on the full value, then he property was free and clear at the
moment the deed was recorded. Here’s why – If that deed was recorded by a
title insurance company as part of a conventional escrow for an institutional
lender (bank, insurance company, pension fund, etc.), then you can be
reasonably sure that the tax information is accurate.
What is a conventional escrow? Most property title transfers take place in
an escrow that also processes any new financing. Here is what happens. Your
prospect is buying the property. He reaches an agreement with the seller on
price. He then must put up cash for the down payment and find a new loan for
the balance of the purchase price.
As the escrow closes all existing mortgages, trust deeds and liens are paid
off and for an instant the property is free and clear of any and all encumbrances.
The Grant Deed or Warranty Deed is then immediately recorded. That transfers
ownership from the seller to the buyer. Then, in the next instant, a mortgage is
recorded to secure the buyer’s new loan.
You can determine if the transfer was a conventional transaction by
looking at the upper left hand side of the deed for an "Escrow No.", "Order No.’
or "Title Order No."
This is very important, because in this normal, conventional process
conducted by trained professionals, you can be reasonably sure that the new
institutional lender insisted that all loans, debts and liens encumbering the
property had to be cleared before the institution’s mortgage was recorded. The
institution would insist that its mortgage be recorded in the number one position.
It would then become the "first mortgage".
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When you find a recorded entry that meets the above requirements (or the
equivalent in your state) it means you do not have to search any further back in
time. This can be your starting point. From this point you can begin moving
forward in time in the index to check for any liens or encumbrances that have
been recorded since that date.
If you find that the deed is stamped "Accommodation" or "Accommodation
Recording", or if the deed is hand-written with no indication on the face that it
was created through a title insurance, escrow company or real estate attorney,
then you will have to go further back in the index until you can find a proper deed
as your starting point.
From the starting point you can start working your way forward in the index
looking for your prospect’s name to see if you find any other liens that have been
recorded against the property. If you find one write down the type of lien and its
number, so you can later find a copy of the document in the county’s files and
examine it.
In many cases you may find that a lien has been recorded against the
property and then months or years later you will find, in the index, another
document that cancels or lifts that lien. With a trust deed the document that
clears the lien is a "reconveyance." With a judgment lien it is a "satisfaction." A
Notice of Default is usually canceled by a "recession".
On your list of liens you can cross off those that have been lifted.
If you starting point was August 11, 1989 you would have to search from
that date to the present date in the index looking for recorded liens. You would
make a list of all the liens you found in the index, crossing out the ones that had
been closed. In the language of title searching a lien is considered "open" when
it is recorded against a property and "closed" when a document that is required
to lift the lien is recorded. Your next step would be to learn how much was still
owed on the liens remaining open.
You can find totals for some of the money stilled owed by examining
copies of the documents. For example: Judgment liens will show the amount
owed on the original judgment. But there may be some cost and interest that
must be added to that. Most judgments earn interest. For example: In California
an unpaid judgment earns interest at the rate of 10% per year. A one thousand-
dollar judgment that was three years old would cost at least $1,300 to pay off.
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In most cases the recorded document will not indicate the amount due.
The homeowner should have documents (promissory notes, payment books,
etc.) from which you can calculate how much money will be required to clear title
of those encumbrances.
If the debt amount is not indicated there should be an address on the
documents where you can contact someone for that information. You should
have the cooperation of the homeowner, so prepare a letter to the lien holders
asking for the amounts due and have it signed by the owner.
Sometimes in the Recorder’s index you may find documents that have
been filed against people with the same or similar name. For example, your
prospect’s name may be Robert Randall. You may run across a listing in the
index for Randall, R. How can you be sure if that is your Robert Randall or
someone named Randy Randall?
Start by finding the document in the files and seeing if the full name is
listed there. Or there may be an address that will give you a clue as to whether
this is your man or not. Take the address for R. Randal to the assessor’s office
and look in that index to see of there is some other R. Randal living at that
location. Then you know it is not your man – or maybe it is your man?
You will find some index listings that may require some detective work.
Even going so far as to compare signatures on various documents. Tracking
these things down can be a bit of fun, if you have the time.
Remember you are only going to expend the effort of a title search when
you have found a homeowner who is willing to sell his property at a bargain
price. He has provided you with information about the deed and liens on the
property. You are checking to confirm what he has told you. You must always
confirm any information you get from a homeowner.
If he has done as you have asked he had all of his documents and notes
available for your inspection when you first visited him. From these you get
dates that will help you find your starting point for the title search. If he has been
honest with you (not everyone will be) the search should go rather quickly.
If you find anything recorded against the property that you don’t
understand, either find someone you trust to explain it or don’t buy the property.
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Get copies of all documents that have been recorded against the property
or the homeowner and read them! You are playing with real money and you
can’t afford to overlook any detail.
Knowing how to do title searching is valuable knowledge for any real
estate investor. That goes triple for the foreclosure buyer. You may be able to
find an experienced title searcher who will give you some tutoring and be
available for advice when you need it.
If, because of time constraints, you have made a mistake and purchased a
property without a conventional escrow and title search you will want to get title
insurance as soon as possible. This will be the test, because they will search
title and you must pray they don’t find any unexpected "gotcha’s".
Look, if you are starting out flat broke you may have to do your own title
searching. But!…it is always best to have a title company or attorney do a low
cost preliminary title search. However, now you know what's involved in a search
and why it must be done! A title company my provide you with a "preliminary title
report" for a nominal fee, or even free after you have done some business with
them.
Binder When you are buying a property and plan on flipping it quickly it is
wise to get a title insurance "binder". A binder is a title insurance company’s
commitment to issue a title policy within a certain period of time. For many title
companies that period is two years. You pay extra for the binder, usually 110%
of the normal cost of a title policy for that particular property. Why a binder?
Because it saves you money!
The binder allows you to resell the property during that two-year period
and get a refund on your title insurance costs, if the buyer purchases title
insurance from the same company. If the normal cost of title insurance would be
$400 it would cost you $440 for a binder (110% of normal cost).
Here’s the good part. In your purchase agreement with the new buyer
require him to buy the title insurance from the company that issued the binder.
Then, at the close of escrow, you will get a refund of 100% of the normal cost of
the title policy. In this case your refund would be $400.
Your binder policy insuring your good title while you held the property really cost
you only $40.
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By having this knowledge you have saved $400, which goes right into your
pocket. Is that not a sweet thing?
Always shop for title insurance companies that offer you the most service
at the best price. A binder policy will play a profitable part in your investment
program. Remember you can negotiate fees and services with a title company,
especially if you are a regular customer. This document and accompanying materials are designed to provide authoritative information in regard to the subject matter covered in it. It is for illustration purposes only and presented with the understanding that the author and publisher are not engaged in rendering legal, accounting or other professional opinions. If legal advice or other expert assistance is required, the services of a competent professional should be sought. |
