Provided by Corinne Akerill, Escrow Officer at First American Title
When making a loan that is to be secured by an interest in real property, the following are a few questions that a title insurance company can answer.
- Does the person who wants to borrow the money have an interest in the property being offered as collateral? Are they the vested owner or do they have a vendor’s interest in a contract of sale?
- Are there taxes, city liens or judgments that would have priority over a new loan?
- Are there existing loans secured by the property?
- What is the legal description of the property?
- Is there a pending foreclosure action against the property?
- Is the person who wants to borrow the money involved in a bankruptcy?
- What is the priority (or position) of the lender’s security for the loan?
- These are the basics to know when lending money and taking real property as collateral. All of these facts are public records and any lender can research them at the courthouse. But why bother when a title insurance company not only gives you the answers, but insures them?
Title insurance is issued after a careful examination of copies of public records. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.
Some common hidden risks that can cause a loss of title or create an encumbrance on title are:
- False impersonation of the true owner of the property
- Forged deed, releases or wills
- Undisclosed or missing heirs
- Instruments executed under invalid or expired power of attorney
- Mistakes in recording legal documents
- Misinterpretations of wills
- Deeds by persons of unsound mind
- Deeds by minors
- Liens for unpaid estate, inheritance, income or gifts taxes
- Fraud
Always ask for a title insurance policy when loaning money secured by real property. Leave the research to the title insurance experts, backed up by a policy of title insurance to secure your position.
— Posted by Clay Sparkman (clay@privatemoneysource.com, 503-476-2909)
Tags: hard money investing, hard money lending, hard money loans, investing, private money investing, private money lending, private money loans, real estate, real estate investing, title insurance, trust deed investing, trust deed lending, trust deed loans
