Title Search Due Diligence for Non-Performing Notes

[Marco Bario]

I recently took a "title record searching" course in San Diego County offered by Ward Hanigan and his son Eric which included visiting the local county office and performing hands-on title searches. It was a great under the hood view of real estate titles – not to mention how and what gets attached to them. I recommended it. Ward originally developed the course for those interested in foreclosure sales – where it wasn't cost effective to pay a title company to research titles by the dozen prior to each auction. But my interest in the course was as an aspiring Non-Performing Notes Investor. 

As is the case in San Diego County, and Los Angeles County where I live – most title records are only searchable in person, but NPN investing is spread all over.

I'd love to learn how others evaluate titles prior to purchasing Non-Performing Notes. 

Thank you,

Marco Bario

Sherman Oaks, CA

[Mike Hartzog]

Most of us simply pay for a title search.  In a foreclosure auction situation, validating title is a step which must be done prior to bidding.  This is not the way a note purchase works.  Note sellers will indicate lien position of the loans they are selling and your indicative bid is based on the assumption that this is correct.  If your bid is accepted, you have a period of  time to complete final due diligence before funding the deal (or passing on it).  This final due diligence includes title search, so you are only spending money on those assets you are ready to close on.  I actually save it as the last thing to check in final due diligence because of the cost (~$100) and the fact that finding title issues is relatively rare (but common enough to make it an essential due diligence step).  I am much more likely to pass on a purchase for valuation or other reasons related to the property itself than for title.