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.

Quitclaim Deed Revocable Trust

_ Trust deeds, on the other hand, are purchased and sold through brokers, but can also be purchased and sold privately at no extra charge.

In the event that the borrower fails to solve their problems, regardless of the reason, the loans margin of equity proves to be helpful as it enables the lender to absorb the cost to solve whatever problems have occurred. If this action can not be performed, it may become mandatory that you seek the service of an attorney. A non-judicial foreclosure can be handled by just about any title company or an independent foreclosure company that has a good reputation. Be advised that once the escrow documents have been signed, if you try to cancel, regardless of the reason, you may be subject to penalties or even legal consequences. Thus, it is highly recommended that if you do decide to lend to either of the above mentioned entities, you require a larger money down payment and/or a lower Loan to Value. Take the time to research everything you can about trust deed investments.

Real property is that which is considered to be affixed to the earth.
Now thats a difference worthy of your attention. Regardless of the term used, the closing of escrow is when all of the final papers are signed, and the closing officer is prepared to record the deed to the property, and the sale goes to the seller. Escrow number V Should it become necessary in the future, for the investor to discuss a section of the escrow with the agent in charge, if the investor has the escrow account number it will be easier for the agent to locate the escrow file in question.

The reason is because LTV means to loan a percentage of money that is less than the actual property value.
The investor (you) should also check and see that the trust deeds and notes, as well as the amount of indebtedness are all in proper order. Preliminary Lien Notice V With a construction loan, most states will require that a preliminary lien notice be sent to the lender, general contractor and owner before, or on labor services or material provided by the subcontractor/material supplier. The Amortized Note - the amortized note is often used for real estate transactions.