My customers buy about $200m worth of properties at the trustee sales per month, and I've personally purchased 150. Of my 150 purchases my highest profit deals were ones where I identified something in the title that guys with 20 years of experience missed. Whereas they relied on a call to title co, I became a title expert as a way to differentiate in a competitive market. I have some of the craziest title stories you'll find in the industry, including buying a property where the hard money lender filed a subordination agreement the night before the sale to try and saddle me with what was just hours earlier a large second. So my recommendation, of course, is to become a title expert. But many aren't title experts, do rely on verbals from title co's, and have done quite well buying at trustee sale.
To that end let me try to summarize:
1. There is title risk buying at trustee sale. Period. There are no guarantees, even if you're are the best darn title researcher on the planet. And even if you have done a perfect search, anyone can sue you for anything. I've been sued a couple times by people claiming something different then what I found on title. Fortunately I won every time, but its expensive, time consuming and no fun.
2. Title is not that hard to figure out on MOST properties. A reasonable percentage are purchase money first mortgages going to sale, which are frankly pretty safe. Stick to these as you get started. IRS liens are fairly rare, and even when they occur aren't a huge financial risk, just a delay, or the possibility the IRS will buy it back from you with no profit. Most other liens and judgements are almost always junior to the loan you are buying and will be wiped out, as pretty much no lender will make a loan to someone with outstanding judgements (except perhaps a purchase money loan which is protected from those anyway). Where you need to start being careful is on buying junior loans, and refinanced loans. On those you need to carefully search for a reconveyance on every prior loan. Where you need to be most careful is when dealing with loans made by private or hard money lenders, anytime there are subordination agreements, and when there is a lot of lien and judgement activity. At that point you better be an absolute expert and have the financial wherewithal to fight it out. Or you can simply pass on those, easy enough.
Finding reconveyances, liens, judgements, etc is accomplished by doing a name search at the county recorder. This is the other thing that can get tricky, especially if the owner doesn't have a unique name as you'll need to wade through lots of documents to figure out which documents belong to your party or not. Again, this typically isn't terribly hard for most properties. Occasionally you'll find one that's a mess. On those you really need to ask yourself if you want to take the risk, or just skip it and move on.
3. @Ron Drake is right about not trying to "piggy-back" on more experienced investors. Following a successful investor and just bidding $100 more seems like a great strategy, and can actually work. The problem is that experienced investors typically spot that's what you are doing, and then they bid you up to where you are taking a loss to teach you a lesson. Risky on their part as they could end up with it if you get cold feet, but they typically can afford that loss, so they find it a game worth playing.
4. Ron Drake is also right that PropertyRadar, like every other service in this industry, including title companies, is not 100% accurate. We don't claim to be, and you'll find warnings to that point throughout the product. That said, I, as a title expert, who also has a high tolerance for risk, can and have bought properties using nothing more what we provide. Note that I am NOT in any way recommending that YOU do that. My only point here is that as your knowledge of the trustee sale process and of title grow, so will your appreciation for what a service like this offers.
@Chad U. Thanks for the stats! We see similar numbers. Based on your 1 of 10 that go to a 3rd party, if you are competitive enough to buy 1 out of 5 of those, you are doing about 50 title searches per property purchased, which is the estimate I provided above.
