A reader inquired by email today about how the trustee sale program is coming along, and specifically how do I handle the title and occupancy issues. Here was my response:
I check with my favorite title officer, and he does the same investigation that they do when issuing title insurance. Here’s an example of what he sent today:
House in Encinitas 92024 = no back taxes, 1st ½ taxes pd, foreclosing on the 1st TD $1,248,000, current owner clear, see attached doc. don’t know if sale still on because of the litigation.
House in Carlsbad 92011 = back taxes due $39, 618.82 due by Feb., 1st ½ delinq. $7,169.64, foreclosing on the 1st TD $1,372,000, Owner clear.
Surprisingly, so far on the 25 or so properties that I’ve checked on, there were only a couple that didn’t have clear title, and a few owners who had their property taxes paid current, like the first guy above!
The TO doesn’t want to issue title insurance because the title officer doesn’t have control of the documents – after the sale, the trustee mails the trustee’s deed direct to the buyer. But he is ready to issue title insurance shortly after the trustee sale, should you want to refinance the property.
I’ve had to evict 30-40 people over the last two years, and it has been relatively quiet and unremarkable – but the banks offer cash for keys so that tends to make the occupants happy at the end. I’ve had a couple turn down the cash-for-keys, but eventually they go (2-3 extra months). Tenants get their lease terms honored, or have 90 days to vacate, whichever is longer, and any former owners still occupying can be given a 3-day notice to vacate. I haven’t seen one happen yet (the banks have been forgiving) but a 3-day would probably set off some panic in former owners who have been milking the free-rent program for months. Figure that cash-for-keys will fix just about anything, it’s just a matter of how much.
I am being very conservative, and hoping to only sell vacant properties at the trustee sales – I have enough to worry about, if anything goes wrong, I’m the only guy on the firing line. But if we see good ones that are occupied, we are talking to them – and hope to reach a level of comfort before even thinking about buying a trustee sale.
People have been critical of me suggesting this program as a viable option for buyers, mostly because I haven’t done one – either myself or with others. But the process is predictable, it’s the actual finding and buying of a property that provides the biggest challenge.
But the frustration of buying on the open market is so high that I have clients willing to risk buying at the court house steps – if the deal seems right. Let’s check them out and see!
It doesn’t cost you anything unless we’re successful, and then it’s 2% to me. I’m willing to provide plenty of investigation and evidence up front, and if you can be on red alert the morning of the next scheduled trustee-sale date with a handful of cashier’s checks, we might get one.