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.

Smart Trust Deed Investing In

Recourse Note V For this note, the endorser is making a guarantee that the payments will be given to the present holder, as well as all the other holders.

), know that by compounding an annual 10% interest through trust deed investments, they have the chance to take years off the necessary time required to reach the target date they have personally set for their retirement. A construction control company that is well managed will ask each party involved to send their copies of all notices. 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.

Understand loan servicing authority, provisions and compensation.
Notice request V A notice request must be placed in the agreement to make sure that the investor will be notified should a default action start on one of the previous loans. Borrowers know that when they receive a fast response from the third party in regards to their lack of payment, that the loan servicing department has zero tolerance for such behavior. You need to understand that not every company functions the same. There are different loan documents that secure an investment.

Non-judicial Foreclosure V This process is usually simple and fast, and is the one that is commonly used for trust deed investments.
Remember, the lower the number, the more equity the investor will receive on the property. Finally, when it comes to a construction loan, construction control is imperative to any construction project. The loan-to-value principal is what makes carrying a high yield with a trust deed investment secure. At some point in your life you will retire, and like many other investors out there, you may be thinking about investing as part of your retirement plan. A mortgage investment is not as liquid as a stock or bond. The reason is because if you use your Pension Plan or IRA, your income is tax deferred and can increase faster, as you will not have to pay taxes so you will have more money for gaining interest.