How can I check for leins before making an offer?

Question

I'm new to real estate investing and am looking to purchase REO properties. Is there any way I can check the title before making an offer? Thanks in advance

Scott M. · Answer

I assume your talking about Detroit given your last two threads were about Detroit. If your buying REO's with a full warranty deed as Jon suggested your fine - don't worry about it. If your buying on QCD then you need to figure out liens / water / taxes. For water call the water depo - for liens call a title company (happy to suggest offline) - for taxes go to the wayne county treasures office online site. And if you are buying on a QCD - be careful - so many lists are trying to sell homes with HUGE taxes - I just got a list today of 24 homes - the guy wanted $60K for them and there were back taxes of $75K. have to be careful or make sure your doing a full closing with a warranty deed.

Brandon Gadish · Answer

Chad, Just one quick comment on checkiing title. They are right on a REO purchase or other traditional purchase there won't be an issue, but if you do end up doing deals such as pre-foreclosures or buying at the courthouse, you will want to know how the property is encumbered. If you have a relationship with a title company they will generally perform a title search for free for you if you close deals with them. Remember this is NOT Title Insurance, but you will have a good idea going into the deal, and it wont cost you a bunch of money for a property you may not ever own. If you don't have a relationship with a title company I would suggest making an appointment to meet with them and let them know you are an investor. They will want your business and will explain what they have to offer you. Regards, Brandon Gadish Landlord Technology LLC

Jon Holdman · Answer

Don't bother if you're buying REOs. The bank (or, any seller on a traditional transaction) will clear the title before it closes.

Marc Freislinger · Answer

The Fannie Mae real estate purchase addendum that they make you sign, part 15, says: "Defects in Title: If the Purchaser raises an objection to the Sellerâ€™s title to the Property, which, if valid, would make title to the Property uninsurable, the Seller shall have the right unilaterally to terminate the Agreement by giving written notice of the termination to the Purchaser. However, if the Seller is able to correct the problem through reasonable efforts, as the Seller determines, at its sole and absolute discretion, prior to the Expiration Date, including any written extensions, or if title insurance is available from a reputable title insurance company at regular rates containing affirmative coverage for the title objections, then the Agreement shall remain in full force and the Purchaser shall perform pursuant to the terms set in the Agreement. The Seller is not obligated to remove any exception or to bring any action or proceeding or bear any expense in order to convey title to the Property or to make the title marketable and/or insurable but any attempt by the Seller to remove such title exceptions shall not impose an obligation upon the Seller to remove those exceptions. The Purchaser acknowledges that the Sellerâ€™s title to the Property may be subject to court approval of foreclosure or to mortgagorâ€™s right of redemption. In the event the Seller is not able to (a) make the title insurable or correct any problem or (b) obtain title insurance from a reputable title insurance company, all as provided herein, the Purchaser may terminate this Agreement and any earnest money deposit will be returned to the Purchaser as the Purchaserâ€™s sole remedy at law or equity. If the Purchaser elects to take title subject to the title objections, the Purchaser shall so notify the Seller. The Purchaserâ€™s silence as to any title objections shall be deemed as acceptance." This sounds to me like they won't guarantee clear title. It sounds like you've had more experience Jon, have you had issues with this?

Ted Akers · Answer

Plenty of good advice for you here. When you establish that relationship with a title company you can ask them for an O&E (Ownership and Encumbrance) Report. It is not always a full search, but does include encumbrances. If you are proceeding with a property ask them to update the O&E and provide a full title commitment. If you are doing business with them you can typically get O&E's for free, as long as you do not wear out you welcome asking for dozens of them.