Chapter 9 - Lien Priority

You may or may not be aware, but a deed of trust is actually a lien on a piece of real property. What is a lien? A lien is a legally recognized claim or hold against one persons item by another which utilizes this item as security for a duty, debt or obligation. If there is more than one lien on a piece of real property there could be a number of reasons for this. Some of the liens an investor may encounter include:

? Tax liens
? Mechanics liens
? IRS liens
? Judgment liens
? Etc.






A few interesting facts about liens
It is important for you to know that liens in first priority are the most ideal. Therefore, in order to obtain this priority, this needs to be verified before the closing of escrow. In order to obtain the accurate information that is required to verify the priority of the deed of trust, you will find that Title insurance policies will provide you with what you need to know.

If it happens that an error is made, or a lien has been overlooked and such aspects affect the trust deed holder, then the holder can take legal action against the company that issued the title insurance policy.

When the holder is in possession of the priority lien, they can foreclose and any junior lien holders wont be able to stop it. That being said, there are ways in which junior lien holders can protect themselves should this happen.

To begin with, they can make certain that their lien has been accurately recorded with the county recorders office. They can also inform all senior lien holders about their lien, and ask them for written notification before they foreclose.


Tax Liens
Tax liens have priority over deeds of trust. This is a fact you wont want to forget should a tax lien appear. Thus, in order for the investor to protect themselves in the event of a tax lien, a provision should be added in the trust deed and note that explains if the borrower and their property have or will receive a tax lien; it is the trustors responsibility to contact the investor.

In addition, the note should provide the investor with the choice of needing the payoff, so that they can protect their principal from foreclosing on the tax lien.

Trust Deed Note

Name of the escrow agent, third party or depository 2.

In addition, you should also have a good idea of what to expect from your mortgage broker, and should be able to make educated decisions in regards to the loans you wish to invest in. After 20 years, the 0. Finally, when it comes to a construction loan, construction control is imperative to any construction project. _ Read the appraisal Take the time to learn the difference between personal and real property. If this action can not be performed, it may become mandatory that you seek the service of an attorney. Private money loans are generally based on the real estate value itself, to the degree of the individual borrowers credit.

Typically, a lender should want to conduct business with a borrower who has a decent record.
Another reason is the borrower destroyed the property value by removing or demolishing the building(s), or by failing to keep the property in top condition. However, regardless if you are loaning money on real property as security, or are investing in a deed of trust, the documents you would require for both are the same; you would require the trust deed and the note. Furthermore, it is in the investors best interest to safely secure the escrow agents card, and inset the escrow number on it. Always remember, although trust deed investments are one of the safer investment risks you can take, and have the potential to provide you with high return, ultimately the risk is yours. However, to give you an idea of some of the pitfalls you should watch out for, the following are a few tips: It is always in your best interest to physically inspect any real estate you are intending to invest in, even if the property has already been checked out by the appraiser, broker or title company.

Chapter 4 - Typical Borrowers There are a number of reasons why borrowers require private money loans.
) _ Other Liens (property taxes, judgment liens, etc. Remember, all things being equal, the greater the Loan to Value, the more risky the loan. The process of underwriting is what the lender goes through in order to qualify a borrower for a loan, and also makes certain that the loan has been properly documented and structured. As you can see, using a third party when investing in a deed of trust acts in your best interest, and is something you should seriously consider before you decide to make a trust deed investment. Should a borrower file for bankruptcy, it is always in your best interest to respond as quickly as possible to ensure that you receive full payment of the amount owed to you. Trust deeds sell fairly easy because they are liquid5.