Run a Title Report
Never take the word of the defaulting property owner about the condition of the title of the property. Always check for yourself. This is critical, and it's the first thing you should do before considering the property as an investment. Order an updated title report.
Determine What Liens Are Placed Against the Property
The only way to discover what issues you might be facing is to check the title of the property at the county courthouse. A title search can reveal lots of information quickly and easily. With this information you can decide if the foreclosure property could be a viable real-estate investment. The title search should uncover:
Tax liens — federal, state, or local unpaid taxes
Unpaid judgments
Secondary or subordinate liens, such as second mortgages or home equity loans
Government liens — from unpaid student loans to overdue water bills
Mechanics' liens
State or federal welfare, child support, or medical liens
Liens can be either voluntary (such as a mortgage) or involuntary (such as a mechanics lien) when placed against a property. Some liens the property owner accepts, while others are placed because of unpaid bills. All the liens must be paid before the property can be successfully transferred.
The liens, those beyond the mortgage, can make a foreclosure unappealing to the real-estate investor. What might first look like a good deal could turn out to be one without any profit potential after the title is searched and you review the title report.
If the local municipality has placed tax liens against the property, it could be scheduled for auction at a tax sale. The local municipality could be the city, borough, or township; the county; or the school district. All of these entities need to be checked and a determination made if the taxes are current. If they are delinquent, it must be ascertained what amount is needed to pay all the owed taxes.
Due Diligence Is Important
The term
You will hear people saying that you need “to perform your own due diligence on foreclosure properties.” Due diligence is the process of investigation, research, and analysis of your investments. You are looking for any skeletons in the closet, and the fastest way to find those skeletons is to complete a title search. It is a basic part of your due diligence with the acquisition of any foreclosure property.
The deed recorder offices in the courthouse can be very busy places. However, most of the clerks working in the offices can help you and answer any questions. Once you learn how to search the records, extracting the information you need becomes fast and simple. With this information you can quickly decide to pursue or drop any potential foreclosure property as an investment.
The title search is done by checking the records at the county courthouse where the property is located. The deed recorder's office is where the records are maintained. They are public documents and open for examination during regular business hours. Some jurisdictions now have their records online. You can either examine the deed records yourself or hire a title company, attorney, or abstract company to do the title search for you.
You cannot have too much information about a foreclosure property. In addition to the courthouse records, look for any public information that might be available. This is easier with the powerful and free search engines available on the Internet.
