Tag Archives: Real Estate

Land Patents: An Important Part of Property Owners’ Rights

A land patent is the original granting of land rights, usually issued from the federal government and sometimes from a corporation. In most of the United States a land patent was the original transfer to the first owner. The U.S. government initially owned most of the land in the country and created a contract between itself and the original owner of a property which gave absolute ownership of that land to a specific individual. The contract also assigned ownership to the heirs and next owners of the original land contract recipient.

Land patents for real estate can be an important part of current property owners’ rights. The original land patent created ownership rights that are much stronger then every day rights granted on a property deed in today’s environment. A land patent may actually extend somebody’s rights to family members and even through to current owners depending upon the chain a title for that property.

In some cases, a land patent will give you protection as a property owner from certain things happening to that property. For example, sometimes liens are shielded and sometimes even ownership transfers are shielded. So, getting the original land patent to a property, finding out what it shows, what the terms and conditions of that patent were, and then seeing how that matches the current ownership and your perspective use or even defense of liens on the property could be beneficial. Searching back to that land patent and seeing what the actual rights which were conveyed based on that patent may be a way to accrue strong rights to the current owner of the property even if he or she was not the original grantee of that land patent.

Recently, land patent searching has become an important topic in foreclosure defense and how it can affect a foreclosure process. Searching back to the land patent shows all of the underlying original rights granted to that property in the patent from the federal government. Sometimes those rights can be extended as a legal theory to protect from foreclosure. Part of what entails the search is a chain of title which follows ownership back to that patent to see what the ownership structure was like and what the legal investing was.

This past July the San Diego County District Attorney’s office received over $800,000 in restitution for a foreclosure fraud case relative to this. According to San Diego 6 News, in this particular case, “victims were promised that having a recorded land grant or land patent gave them title that was superior to any claim their lender may assert against it. The defendants further promised that even if homeowners were evicted as a result of a foreclosure, they would be able to retain legal possession of the property and could somehow retake possession after the statute of limitations expired.” However, this was not the case. The victims not only lost their homes but also thousands of dollars in the process. Though, the San Diego Economic Crimes Division is diligently working to getting the victims their money back.

If you have any questions about researching land patents, what rights might appear on an original patent, or for more information on obtaining the land patent at your property, please visit titlesearch.com.

How To Deal With Liens On A Property At Auction

judge-houseIf you’re an investor and you’re looking at a property, such as a foreclosure auction or some other distressed sale type of transaction, you may find that many of these have liens. If a property has been through foreclosure it’s most likely that the prior owner or the borrower may have other financial problems. If someone is being foreclosed then they may have tax liens, child support liens, or other delinquencies. In fact, it’s more likely that they do because they probably stopped paying other expenses before they stopped making mortgage payments. Most people pay their mortgage up until the last minute because they want to have a roof over their head. They may not care too much about their car payment or credit card payment, but a house payment is very important. So, there are most likely other liens that accrue on a property prior to the foreclosure, and knowing about them is an important part of the due diligence in looking at a foreclosure property.

So, what do you do if there’s a lien on a property you’re bidding on at auction?

One way to deal with liens on a property at auction is to factor them into the price. For example, if a property is worth $500,000 and there’s $50,000 worth in liens, then you should only bid up to $450,000 so you account for the lien expense. However, if your financing the property and you’re getting a mortgage, it’s easy to get a mortgage for the property itself, but when it comes time to pay a $50,000 lien you may not be able to borrow that money, So, you may have to come cash out of pocket, which for most investors is not a desirable way to use your cash.

A trick to dealing with these types of circumstances, that many of our investor clients use, is lien mitigation. This works by listing out all the liens that show up on a certified title search prior to bidding at an auction. Then, in advance of that auction, contact each one of the creditors directly, one at a time. Let them know that you are a potential investor, that you want to buy the property and you’re not the borrower, you don’t owe them money, you just want to buy this property. Once that is clearly stated, ask if they be willing to negotiate to get the lien removed from the property. You can also remind them that in doing so they’re not waiving their right to the lien. They are still owed that $50,000 from the individual associated with it, but the lien is not attached to the property anymore.

Sometimes after a foreclosure or auction part of a lien might be wiped out anyways, or harder to collect. In most cases many creditors are willing to take pennies on the dollar just to get some money coming in. The federal government is notorious for taking less money for liens that are owed to them. For example, we have had clients who’ve reported paying a couple hundred dollars to erase a $50,000 federal tax lien.

So, once you have your lien mitigation taken care of you can go to the property’s auction and bid for it knowing that the $50,000 lien will not affect you. The other competing bidders won’t have this valuable piece of information so they’re going to lower their bids to account for the lien. This in turn gives you a competitive advantage over the other bidders at that sale.

2015 Housing Market – Another Year Of Slow, Incremental Growth

canstockphoto21442914February 2015 had the lowest level of foreclosure filings, which includes default notices, scheduled auctions and bank repossessions, since July 2006. At 101,938 foreclosure filings in the U.S., activity was down 4 percent from the prior month and had decreased 9 percent from a year ago. Despite the national decrease in foreclosures in February, looking at year-over-year numbers, 22 states reported increases in foreclosure starts. Additionally, 25 states reported year-over-year increases in foreclosure auctions and 15 states reported increases in REOs.

When reviewing the housing market over the past year it is safe to say that it was a decent, but not great, year. This can be attributed to the low level of properties for sale in many markets in the U.S., which foreclosure rates specifically contributed to. The continued decline of distressed properties, since its peak in 2010, has limited the available inventory in the housing market.

Other factors that contribute to the current inventory of existing homes being lower than it should are homeowners not having enough equity to sell their homes right now to move to new properties or them being under/behind on their mortgages.

So what does this mean for the housing market looking forward?

In order to forecast what’s going to happen in the rest of 2015’s housing market, we should apply the concept of supply and demand. In regards to homeowners not having enough equity, Rick Sharga, executive president at Auction.com, seems to think, “As home prices increase, and borrowers pay down their balances, this situation will ultimately resolve itself.” In an article by RealtyTrac, Rick goes on to say, “On the new home front, builders continue to proceed with caution – January single family housing starts actually fell from relatively weak December numbers – and the homes being built tend to be higher-priced than what entry-level buyers can afford. Until these situations change, low inventory will keep sales relatively flat, and keep prices relatively high.”

Additionally, Daren Blomquist, vice president at RealtyTrac, gave his two cents on the matter saying, “Given that August 2006 was the peak of the housing bubble, this eight-and-a-half year low in foreclosure activity is a significant milestone and a sign that nationwide foreclosure activity is on track to return to historic norms this year — and is possibly even headed below historic norms given the skinny-jeans-tight lending standards over the past five years. In markets where foreclosures were processed more efficiently we are seeing foreclosure numbers now below pre-crisis levels in some cases. Conversely, the cleanup of deferred distress is continuing in markets where a logjam of in-limbo foreclosures is still lingering from the housing crisis — as evidenced by rebounding foreclosure activity in those markets.”

Due to the pricing of new homes not being the targeted price-point of entry-level buyers and the recent activity and inventory of foreclosures, the U.S. can expect the housing market to be relatively weak for the rest of 2015, or rather, another year of slow, incremental growth.

Shill Bidding May be Banned in CA Real Estate

Shill bidding at real estate auctions occur when an individual, or company, places a bid on a property without the intention of actually buying it. Instead a bid is placed for the purpose of influencing other people to bid, and thus, increasing further bids placed on that property.  This method of bidding on one’s own auction to artificially drive up the price of a property has been used many times by real estate companies, such as Auctions.com, but it has just recently gotten the California Association of Realtors to stand up against it.

When the California Association of Realtors first began digging into this shill bidding issue they found that there is no law against it in California. In the article REAL ESTATE: Group wants to ban ‘shill’ bidding on auctions, Alex Creel, a chief lobbyist for the California Association of Realtors, explains, “while companies like eBay publicly proclaim shilling is not allowed on their site, auction companies can and do put up a reserve the seller doesn’t always publish for the benefit of bidders. This secret reserve motivates some auction houses to put in real bids from ghost-bidders to hit that price.” However, Rick Sharga, Executive Vice President for Auction.com, believes Realtors are deliberately misrepresenting what’s going on and openly defends the use of shill bidding by pointing out that their website states that it uses the tactic.

Ultimately, this shill bidding problem has caused the formation of a Realtor-backed bill, Assembly Bill 2039, which is currently pending before the California Senate committee after having passed the lower house of the Legislature. The Assembly Bill states it would, “with respect to an auction that includes the sale of real property, prohibit a person from causing or allowing any person to bid at a sale for the sole purpose of increasing the bid on any real property being sold by the auctioneer. The bill, however, would allow an auctioneer or another person to place a bid on the seller’s behalf during an auction of real property if prior notice has been given that liberty for that bidding is reserved and the person placing that bid contemporaneously discloses to all auction participants that the particular bid has been placed on behalf of the seller. By expanding the scope of an existing crime, this bill would impose a state-mandated local program.”

What Is A Title Search And Why Do You Need One?

A Title Search is conducted for many reasons.  The most common is before the transfer of ownership interest from one party to another or simply put, “before it is sold”.  If the buyer is securing financing for the purchase, the lending institution usually requires proof of ownership of the seller and their right to transfer interest as well as to ensure that there are no outstanding liens or encumbrances on the property that may be associated with the subject property.  In some instances a lender may want to use this information for title insurance, thus adding a high level of security to the lenders investment.

Experienced investors routinely obtain title search reports.  One of the biggest mistakes commonly made by a novice investor, is the failure to obtain a Certified Title Report prior to a sale or auction   Sean O’Toole, founder and chief executive of ForeclsoureRadar.com says on MSN.COM  that a title search is your best chance of success and that “the title search is must.”

Litigation and property rights are other important reasons to obtain a title report.  For example:  What do you do if your home is being wrongfully foreclosed?  How do you resolve an ownership dispute?  Does someone else have the mineral rights to your land?  Do you suspect you inherited land from a deceased family member, but you can’t prove it?  What if you are being audited by the IRS or other government agency? Did you re-invest your capital gains into a piece of real estate in accordance with the law? How do you prove that you did?

The bottom line is, if you are buying, selling, financing, litigating or investing in a piece of real estate, it is part of your due diligence to obtain an official title report.

What is a title search?

1.      A title search is a process of determining who, from the official public land records, has the legal right of ownership to the subject property.  The answer can be as simple as a single person owning a house or as complicated as multinational corporations owning fractions of interest that may contain mineral rights, easements, contractual covenants, obligations and rights of survivor ship.

2.      There are two typical types of searches.  A Current Owner Search and a Chain of Title.  A chain of title search is just what it sounds like. It is the historical record of ownership from one party to another up until the present time.  A chain of title is usually for a specific period of time and is often used for mineral rights, litigation, title insurance and historical research.  A current ownership search looks at the subject property starting from when the current owner first took possession of the property.  This could be 2 weeks ago, or 2 centuries.  It is like a snapshot in time of the financial and legal standing of that property as it currently exists.

3.      A title search can show you if there are any open liens, mortgages, and deeds of trust or even other owners.  This information can be critical to determine who is needed in order to legally transfer the ownership to another party

4.      In addition to all of this, the title search provides the present status of real estate taxes and other municipal charges that may be due and payable from previous years.

5.      A quality title search will also contain a judgment search.  This is performed to determine whether there are any unsatisfied judgments, federal or state income tax liens, mechanic’s liens, bankruptcy or other judgments against the seller or prior owners that attached to the property.

6.      Some title search services may provide a list of “Comps”.  This type of information generally shows the buying and selling history of similar properties in the local neighborhood.  This information is important for home buyers, investors and developers.