Do Thorough Title Check before Deed in Lieu

[Andy Mirza]

This is a reminder to all note investors to do a thorough title review before finalizing a Deed in Lieu of Foreclosure/Cash for Keys Agreement. A foreclosure will eliminate most liens. In a short sale or Deed in Lieu, however, the liens have to be addressed & dealt with in some way during the transaction.

Do a title search and clear all of the liens by having the borrower clear them before your transaction or get the lien amounts credited to you so you can pay them off post transaction.

We generally pay the full amount of the net cash for keys amount when the borrower vacates the property & leaves it in broom swept condition.

Yesterday, we were surprised when a town refused to provide the transfer stamp, which we needed in order to record the Deed. (The town is in the suburbs of Chicago.) The $3,000 in unrecorded fees were incurred when the borrower's wife took a number of ambulance rides over the years without paying.

Our attorney assured us that this was illegal and that we wouldn't have to pay these. (Towns can get aggressive & lots of people just pay the fees instead of pushing back.)

In this instance, we could have been proactive in calling the town ahead of time. Another alternative would have been to withhold part of the cash for keys until we successfully recorded the Deed in accordance with our agreement.

Just do what you can to avoid surprise liens in your deed in lieu and short sale transactions :)