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.

Washington Deeds Of Trust

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Dont forget, the more you learn about trust deed investments, the safer the risk and the higher the potential for excellent return. First and foremost, you need to familiarize yourself with the meaning of Loan to Value (LTV). Distribution of cost, insurance costs, taxes and assessment 7. Sometimes, in order to avoid the selling of their property through foreclosure, a borrower will try to obtain protection from what is known as an automatic stay. A title company will open a standard insured loan transaction, and will research the property.

You should make it a point to know how the borrower is planning to pay the private money loan.
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. A deed of trust is then documented at the county recorders office to legally notify the world that the property in question has now been pledged to secure a loan. With a loan servicing department, a borrower knows that such possibilities wont happen, and that no other agreement will be tolerated save for the initial one that was created when the loan was issued. The best way to ensure that you avoid pitfalls is to learn as much as you can about trust deed investing and everything it involves.

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You have complete control over the term of the loan. The third party separates the investor from interaction with the borrower, relieving them of burdens and hassles which helps the investor feel more secure in their investment because the loan process is likely to run smoother. _ Casements for a variety of purposes _ Real property taxes _ Any mineral uncertainties or the right to examine for them _ Covenants _ Any encumbrances or liens that presently affect the property _ Restrictions and conditions better known as CCRs. This remedy is a process known as foreclosure, and simply put; it is the process through which the property in question is sold in order to satisfy the debt owed to the lender. 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.