From: J024330@LMSC5.IS.LMSC.LOCKHEED.COM
Subject: Re: Seminars are bad ? Why ?
Organization: Lockheed Missiles & Space Company, Inc.
Date: Tue, 26 Jan 93 07:32:31 PST

alexg@austin.ibm.com (Alex Gurevich) writes in
Date: Mon, 25 Jan 1993 23:07:55 GMT
Reply-To: alexg@austin.ibm.com
Organization: IBM Austin



AG>In article <93022.25271.J024330@LMSC5.IS.LMSC.LOCKHEED.COM> J024330@LMSC5.IS.
AG>:+>Title searches do not guarantee free and clear title.  An owner can have
AG>:+>a general lien placed against his name, which by default is attached to an
AG>:+>and all property he owns.
AG>
AG>I am afraid I'll have to correct you. General lien is NOT attached by default
AG>to any and all property one owns. It CAN be attached. That's a big difference

You're correct, however they are ALWAYS attached. In California during a normal
real estate transaction the title company requests a statement of identification
both buyer and seller.  This is in the event there are any liens or lawsuits pen
against either party that could subject the property to attachment by general li
If the selling party is subjected to a general lien, the title company will pay
instruct the escrow holder to pay off the lien from the proceeds of the sale.  I
you purchase a property without searching the title of the property or whether t
seller has been attached by a general lien, if that lien predates your deed reco
they can make a claim against the property.

AG>To really attach it to a particular property a general lien holder must
AG>record in the court house something called a "writ of attachment". The purpos
AG>of such a recording is to let "the rest of the world" know that the lien
AG>exists against THAT property. The lien then becomes specific, that is
AG>specific to a particular property, not general lien. It is no different
AG>from recording a Deed of Trust, or Mortgage, or mechanics lien.

Again you are correct, however it's just a means of securing the lien.  The gene
lien holder can attach as much property or any property until the amount of the
is satisfied.

AG>:+>Even the professionals (title insurance companies)
AG>:+>can miss these.
AG>:+>That's why they sell TITLE INSURANCE.
AG>
AG>This is misleading again. That does not mean they miss anything. They

Not necessarily.

AG>are not suppossed to and CAN'T find something that's not recorded, hence
AG>not in existance in their opinion. They issue a title insurance based on
AG>the very same records.

California Land Title (a division of Founders) accesses all recorded property
records for each county where they operate.  They also access all general liens.
They can put these records together extrapolate which properties may be subject
to a cloud on the title by virtue of the general lien.  The general lien has
not been recorded against the property, but they still caught it.  One day I
had the privilege of tourning the main plant for CLT.  The VP demonstrated how
accurate their records were.  He went on to explain that in one transaction,
after the deed was recorded, the seller's ex-wife of 10 years past filed a claim
against the title insurance policy stating she had an interest in the property
because she was not properly removed from title.  The claim was $50,000.  Ron
said his company was glad to pay it.  What really gets sticky is when the claim-
ant wants the property back.

AG>:+>I looked as a very
AG>:+>promising property in Campbell, CA.  Market value of $225,000, in foreclos
AG>:+>for $150,000.  Just for the heck of it, I ordered a preliminary title repo
AG>:+>($200).  Every thing looked in order.  Then, I made a call to the IRS.  Th
AG>:+>had an unrecorded lien against the property because they had a deficiency
AG>          ^^^^^^^^^
AG>:+>judgement against the owner.  The lien was only $45,000.  But it was
AG>:+>enough to make the property not worth investing in.
AG>
AG>See above. Untill the lien is recorded, it's not against the house but
AG>against the person. That means, you would have bought it without the IRS
AG>lien. The minute you buy it, IRS (and nobody else) can attach their general
AG>liens to this property.

Wrongo.  But it's not your fault. :-) Perhaps your seminar didn't explain the
different types of title (Fee Simple, Leasehold, Fee, Life Estate, etc.)
Taxes always take precidence over any lien.  Don't think for one minute that the
law makers would let this little loophole stay open.  With the exception of
property taxes, this doesn't mean the taxing agency will sieze the property
after you purchased it at an auction, but they do have the right to make you
sell it to them for your cost to obtain the property (less any improvements).

AG>+>What would have happened if you purchased title insurance on the
AG>+>property?  Would they have covered the $45K or not?  If not, what's
AG>+>the good of title insurance, if it doesn't cover all liens on the
AG>+>property?  And if it doesn't cover all liens, why isn't this a
AG>+>more widely known phenomenon?  I would think large numbers of people
AG>+>would get burned by this.
AG>
AG>>If I purchased the property from the owner in default, they would have
AG>>run an ID search on him
AG>
AG>Could you please clarify what's an ID search? I am pretty friendly with
AG>a a title officer who does property title search on a routine basis, but I
AG>never heard of such a thing.  I am eager to learn.

Described above.  In California, during a normal real estate transaction
whether or not with a real estate salesperson, where title insurance will be
involved, the title insurance company will have both parties fill out what looks
like a credit application.  It asks such questions as SSN, mother and father's
name, brother and sister names.  Place of birth, high schools, etc.  The idea
is to find eliminate one item that could mislead them into thinking the party
to the transaction is someone else.  I remember once when I applied for a job
at the department of corrections for Colorado.  It was to design security into
prisons.  They must have had a laugh when they got my resume.  It seems someone
with my exact first, middle, and last name is currently residing in the prison
at Canon City, convicted of beating his wife within an inch of death, and
abusing his children.  A friend of mine sent me an article on this character
after I told him about my application to the state.  The ID search is an attempt
to eliminate any of this confustion. BTW, I still drive the speed limit when
visiting Colorado.  I would hate to be mistakenly shot during a car stop if the
officer thought I was an escaped prisoner ;-)

AG>>and the lien in the form of a general lien would
AG>>have shown up.
AG>
AG>You have just told us they could not find it because it was unrecorded.
AG>They don't call IRS office, they only work based on court house records,
AG>bankruptcy court included. The difference in what they check for in a title
AG>report and in a title insurance is mainly in the things like easements,
AG>enchroachments, etc. Plus for a title insurance they go far back to check
AG>the chain of the title transfers. For a title report they may go just one
AG>or two owners back, usually to the date when the last 1-st mortgage (from the
AG>bank) is recorded.

They most likely won't call the IRS.  The preliminary title report in California
shows all of the above including recorded liens.  My friend at Cal Land does
however call different tax agencies when a property in foreclosure is going
through a normal transaction because there is a very high risk of tax liens
that may not have been recorded in these cases.

                  -CAVEAT #1. partially deleted (it was valid)-

AG>>They would have paid it through escrow to the IRS.  If I
AG>>purchased the property at the auction, the IRS would have the right to
AG>>buy the property from me at what I paid for it (so I wouldn't lose my ori-
AG>>ginal investment, but possibly any improvements done after the sale.
AG>
AG>It would only have to happen if the lien was recorded at the time you
AG>bought it.

See above for details of property bought at auction.  All you are doing is
purchasing the lender's position which gives you title to the property.  The
property was not deeded to you by the tenant (homeowner).  The IRS can still
force you to sell if they choose to do so.  You will get your money back
but what a waste of time.

AG>+>Is the IRS in the business of divulging the info you mention to anyone
AG>+>who calls?
AG>
AG>>They will reveal tax liens on a property.  It could be a matter of public
AG>>record if they recorded the lien against the property.  They do cooperate
AG>>if you tell them you intend to purchase a property at a foreclosure sale.
AG>
AG>The IRS must record if they want to claim their interest in the property.

The IRS is not subject to state laws.  They are however bound to due process.
Assume the homeowner has one mortgage.  The lender is in first position, the
homeowner is in second position.  The homeowner evades income tax.  The IRS
siezes the property from the homeowner sells it at auction subject to the
existing mortgage (they can't wipe out the lender because the lender was not
at fault).  In essence, all they did was sieze the equity of the homeowner.
When you win at the auction, you in essence become the lender.  The IRS 'siezes'
the property by paying off your paper and they auction the property.  If paying
off the tax lien would still make the property a great buy for you, you may
want to do that.  Either way, the IRS gets paid, but you don't get wiped out.
I don't know about Austin, but that's the way it works here.

AG>+>Stupid question: does a forclosure sale allow the buyer time to run a
AG>+>title search and obtain title insurance before commiting to the purchase?
AG>
AG>>Yes, you can purchase a preliminary title report prior to a sale, but you
AG>>will be hard pressed to find a title insurance company to insure title on
AG>>property you will be purchasing at auction.  Perhaps Lloyds of London :-)

This is right. They won't insure title before you buy. But PROPER title
report should be sufficient.

AG>CAVEAT#2. You get the title report about 2 weeks prior to the auction. Then
AG>in the morning of the auction date (or previous evening) you  call your
AG>title company and ask for an update on your title. They will check for the
AG>latest week they got on the computer. Be sure to ask if they update their
AG>plant  on a weekly basis.

Cal Land does it daily.

AG>Now you have about one last week prior to the auction not covered. From
AG>the title search you already know current owner's last name. You need
AG>to go to the court house and look through about 10-30 pages of "Registry
AG>Index" for this last week . This volume has everything that's filed in
AG>the court house one line per each document. Incuding last name, date, type
AG>of the document (judgement, lien, etc.) and who files. The document itself
AG>if it's recordable is later placed in the corresponding volume for public
AG>access. Make sure there is nothing  on current owner's name in the "Index"
AG>and you are safe enough.

Some counties have microfiche of grantee/grantor records.  Check these out too.
If you are bidding on the first at 0900 that the county isn't holding a tax
sale at 0901 at another location.  This probably won't happen though because
most loans have an acceleration clause if you don't pay your property tax.

AG>Happy bargain hunting.

You too!  Best of luck.  Take some community college classes.  My recommendation
Introductory Real Estate Salesman class (test preparation); Appraisal to fill ou
the URAR appraisal report; and Business Law.  For on line tax assessors records
check out Metroscan and REDI (Real Estate Data Inc.).  I think they both have
800 numbers so call 800-555-1212 for further info.  Their products are expensive
but will pay for themselves 10 fold in your first transaction.
Newsgroups: misc.invest.real-estate