From: alexg@austin.ibm.com (Alex Gurevich)
Subject: Re: Seminars are bad ? Why ?
Originator: alexg@madrid.austin.ibm.com
Date: Mon, 25 Jan 1993 23:07:55 GMT
Reply-To: alexg@austin.ibm.com
Organization: IBM Austin



In article <93022.25271.J024330@LMSC5.IS.LMSC.LOCKHEED.COM> J024330@LMSC5.IS.LMSC.LOCKHEED.COM writes:
:+>Title searches do not guarantee free and clear title.  An owner can have
:+>a general lien placed against his name, which by default is attached to any
:+>and all property he owns.  

I am afraid I'll have to correct you. General lien is NOT attached by default
to any and all property one owns. It CAN be attached. That's a big difference.
To really attach it to a particular property a general lien holder must 
record in the court house something called a "writ of attachment". The purpose
of such a recording is to let "the rest of the world" know that the lien
exists against THAT property. The lien then becomes specific, that is 
specific to a particular property, not general lien. It is no different 
from recording a Deed of Trust, or Mortgage, or mechanics lien.

:+>Even the professionals (title insurance companies)
:+>can miss these.  
:+>That's why they sell TITLE INSURANCE.  

This is misleading again. That does not mean they miss anything. They 
are not suppossed to and CAN'T find something that's not recorded, hence
not in existance in their opinion. They issue a title insurance based on
the very same records.

:+>I looked as a very
:+>promising property in Campbell, CA.  Market value of $225,000, in foreclosure
:+>for $150,000.  Just for the heck of it, I ordered a preliminary title report
:+>($200).  Every thing looked in order.  Then, I made a call to the IRS.  They
:+>had an unrecorded lien against the property because they had a deficiency
          ^^^^^^^^^
:+>judgement against the owner.  The lien was only $45,000.  But it was
:+>enough to make the property not worth investing in.

See above. Untill the lien is recorded, it's not against the house but
against the person. That means, you would have bought it without the IRS
lien. The minute you buy it, IRS (and nobody else) can attach their general
liens to this property.

+>What would have happened if you purchased title insurance on the
+>property?  Would they have covered the $45K or not?  If not, what's
+>the good of title insurance, if it doesn't cover all liens on the
+>property?  And if it doesn't cover all liens, why isn't this a
+>more widely known phenomenon?  I would think large numbers of people
+>would get burned by this.

>If I purchased the property from the owner in default, they would have
>run an ID search on him 

Could you please clarify what's an ID search? I am pretty friendly with
a a title officer who does property title search on a routine basis, but I
never heard of such a thing.  I am eager to learn.

>and the lien in the form of a general lien would
>have shown up.  

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

CAVEAT #1. Since a title report costs much less than insurance,
some of the title companies (bad ones, of course) may not bother to search
for stuff we are talking about, that investor buying at the auction must
be aware of. 

So it's investor's responsibility to tell them what (s)he is 
looking for: trust deeds/mortgages, judgements, IRS liens, mechanics liens,
bankruptcy, and to have them make a written statement in the Title report
specifically enlisting the items they searched for.

If they refuse to do so, go to the other company, develop a relationship.
I did my last report less than a month ago for just $81. They do want
your business. Don't forget to come to them for a title insurance when
you buy :-).

>They would have paid it through escrow to the IRS.  If I
>purchased the property at the auction, the IRS would have the right to
>buy the property from me at what I paid for it (so I wouldn't lose my ori-
>ginal investment, but possibly any improvements done after the sale.

It would only have to happen if the lien was recorded at the time you
bought it.

+>Is the IRS in the business of divulging the info you mention to anyone
+>who calls?

>They will reveal tax liens on a property.  It could be a matter of public
>record if they recorded the lien against the property.  They do cooperate
>if you tell them you intend to purchase a property at a foreclosure sale.

The IRS must record if they want to claim their interest in the property.

+>Stupid question: does a forclosure sale allow the buyer time to run a
+>title search and obtain title insurance before commiting to the purchase?

>Yes, you can purchase a preliminary title report prior to a sale, but you
>will be hard pressed to find a title insurance company to insure title on
>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.

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

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

Happy bargain hunting.

- Alex Gurevich      alexg@austin.ibm.com
Newsgroups: misc.invest.real-estate