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.

Why Trust Deed Investing

_ A trust deed broker often charges investors no fees.

However, dont mistake all property that is fastened to the ground to be real property; some of these items are personal. As you can see there are many legal issues for investors to consider before they invest in a deed of trust. Escrow is a specific process in which a title of transfer and a funds transfer take place via a neutral third party during a real estate transaction. In addition, the agent will request a written statement regarding the default amount, the date up to which the interest is paid, the due date of the payment, and the unpaid principal balance. Distribution of cost, insurance costs, taxes and assessment 7. Note: Property can also be foreclosed by a senior lienor or through a deed in lieu.

Make sure you obtain title insurance and an independent property appraisal, as well as other significant documents that are required.
Before a loan is granted, a Coppercrest Funding officer will perform a personal inspection of all subject properties. Real property is that which is considered to be affixed to the earth. ) _ Other Liens (property taxes, judgment liens, etc. Is a Mortgage Investment Safe? These differences will be discussed later on in this chapter.

An asset based lender, Coppercrest Funding, primarily bases their decision on whether or not to provide a loan based on the amount of equity in the property.
There are three parties involved in a trust deed: 1. Trustor V Borrower 3. Some of the liens an investor may encounter include:_ Tax liens _ Mechanics liens _ IRS liens _ Judgment liens _ Etc.