Something to look out for (long) - Posted by Jasonrei

Posted by Ronald * Starr(in No CA) on July 17, 2003 at 22:31:12:


I hold properties for the long haul. Recently have bought properties at the OK state county tas resales–the foreclosures of delinquent property taxes. I probably have almost enough properties now, so will likely slow down buying and just manage what I have.

Good InvestingRon Starr*****

Something to look out for (long) - Posted by Jasonrei

Posted by Jasonrei on July 16, 2003 at 19:31:01:

Thought I might give a bit of advice that could save someone thousands of dollars.

Last year I bought a preforeclosure from a separated couple, maybe 4 days before it was to be foreclosed on. They had agreed to sell to someone else a couple of days before but the buyer called and told them he wouldn’t pay what they had agreed on. So I step in, check title, get the deed recorded, and bring the payments current- so now it’s my house. I fixed the house up, and while doing so the “other guy” comes by to see the house, and says he has recorded something against the property. I’m like, whatever, talk to the hand, but we had a friendly talk about real estate.
So a couple of months pass by and I get a buyer, they’re all excited, we go through waiting on the lender, it’s all set to close (and they HAVE to be out of their apartment soon). BOOM, the title co. calls the day before closing and says there is an affidavit recorded that clouds title. I check my deed, and the guy’s affidavit. My deed was recorded 4 minutes before his affidavit. Still, the title co wants a release. I track the guy down and he wants a bunch of money. I’d checked with my RE attorney and was told the guy had no leg to stand on, and was advised to serve him some notice that he must release the lien, but that he’d have 10 days to comply, and bringing suit would take some more time. I was also told that the guy would definitely be liable for damages I would incur as a result of his refusing to release. Thing is, I’m about to get top dollar for the house, so I keep quiet about my legal recourse, negotiate, and end up paying this loser $3k for a release he was legally obligated to execute for $0. Deal done, good money in my pocket.

Lesson to be learned: Unless your county allows you to do a title search using property info (mine is a grantor/grantee search only) you might miss something. So right when you put your houses up for sale I would recommend you have the title co do a thorough search and tell you what they find.

Your title company - Posted by Kristine-CA

Posted by Kristine-CA on July 17, 2003 at 10:07:58:

Jason: I’ve been running into similiar problems with title companies where I am. They want more documentation, releases and disclosures in order to write the policies. I’ve been quite surprised at how this could be, given that the law is already in place for issues such as the one you wrote about. You recorded first. Pretty clear cut. But no, they come up with this release idea.

It has helped me in the past to have my attorney speak with the title managers and their legal departments. The things that I have gotten an absolute “no” on have been reversed when the law has been clearly explained to them. Of course, now I never want to accept no for an answer because they have changed their mind too many times.

I think your story is a clear example of what a burden title insurance has really become. Even with the law on your side and the title company’s side, the title company doesn’t want any litigation risk whatsoever. They just want you to hand over the money.

In my opinion, you are correct to warn about possible title search problems. Here in CA, title company’s have info banks that include indexing by legal descriptions that are not available to the public. An affidavit of purchase contract or memo of one would most likely not be indexed in the grantor/grantee index.

Re: Something to look out for (long) - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 17, 2003 at 24:14:05:


I do not understand your comment about “Lesson to be learned: Unless your county allows you to do a title search using property info (mine is a grantor/grantee search only) you might miss something.”

I do much research in grantor/grantee index recorders records. That is the norm here in CA. However, if I were researching the current property owner before I recorded my deed, I would find all documents recorded in the owner’s name prior to todays recordings. If I were in your situation, I would not find the other investor cloud on the title, as it would not exist before I recorded my deed.

If one wanted to be absolutely sure nothing were recorded before you from the owner on the day that you record your deed from the owner, you should be the first one in the line when the recorder or clerk’s office opens, so you can be the first person to record that day. Run a quick check on the grantor/grantee index before recording to be sure that nothing was recorded late the day before.

It seems to me that the title company is the bad actor here. Did you show them the proof that your deed was recorded befored ths supposed cloud on the title? If so, that should have settled the matter. If you did show them and they still insisted on clearing the cloud off, I think I would have indemnified the buyer that there would be no problem with that person and his supposed interest in the property. There would not have been anything he could do once you transfered ownership to your buyer, in my opinion.

This is just my personal opinon, of course. I have not checked with an attorney before, or after, rendering this decision.

Good Investing*********Ron Starr***************

Re: Something to look out for (long) - Posted by JohnBoy

Posted by JohnBoy on July 16, 2003 at 20:20:57:

Slander of title is a civil offense. Blackmail is a criminal offense. He slandered title to YOUR property and then blackmailed you into paying him $3k to release his slander so you could close on the sale of YOUR property.

Your attorney is correct. He has no leg to stand on. He recorded his affidavit AFTER you had already taken title to the property. His deal was with the seller, not you. Once you took title he has no claim against the property because the seller no longer owned it. YOU DID! Had he recorded his affidavit BEFORE you recorded your deed then he would have had something to stand on, providing he had a valid claim against the seller.

It also sounds like he was trying to fraud the sellers. Get their property under contract, wait a few days before the sale, then tell them he refuses to pay their price agreed upon. So it sounds like he breached his contract with the seller. Then he either gets the property for less since the seller has no time to do anything or he goes to the sale to try and buy it for less. Only you came along in time where the seller sold to you instead, since he refused to pay their price, breached his end of the contract with the seller, and messed up his plans to steal the property at a lower price. So once he had word that the seller sold to someone else, he quickly runs down to record an affidavit to cloud title so he can get paid something to release it.

At the very least, I would take the SOB to small claims and sue for the $3k back. And if small claims in your county allows to sue for a higher amount I would sue for the maximum allowed claiming the difference as damages for slander of title.

Re: Something to look out for (long) - Posted by tyler

Posted by tyler on July 16, 2003 at 19:51:54:

I’ll let the experts site fact. But it seems to me you still have leg to stand on to sue the sh#t out of this guy! Maybe get even more now…you see you had to pay out of duress on a nonsense recodation becuase you were under the gun to sell and had no choice.

I wouldn’t give up, sue the sun of a gun! Oh, and make sure you go to all the local investor associations and spread the word on his misdeeds

Re: Your title company - Posted by jasonrei

Posted by jasonrei on July 17, 2003 at 13:09:18:

Hey, a couple more “shoulda’s” come to mind. I shoulda asked my attorney to call the title company. He would have charged, but maybe the issue would have gotten resolved right away. I coulda had my attorney call the SOB with the recorded affidavit, but the house was costing me over $1k a month in holding costs and I didn’t want the guy to dig his heels in.

Now I have my title co research the legal description for encumbrances BEFORE I list a house for sale. I wish our county recorder’s office had something better than grantor/grantee, but I don’t see that happening anytime soon. I can pay a local company to use their info bank, but now friendly title co searches for me.

Re: Something to look out for (long) - Posted by jasonrei

Posted by jasonrei on July 17, 2003 at 08:05:02:

Ron, I searched the grantor/grantee index after I thought there might be a problem (before I put the property up for sale). I searched my name, and the sellers’ names but nothing unusual came up. In fact, the affidavit didn’t list any of us, therefore I saw nothing. Had I asked the title company to run a check when I thought there might be a problem I could have forced this guy to release his (legally invalid) claim. As it turned out, by the time I found out about it the only choices I had were to 1. work with the guy and go through with my sale or 2. dig in and maybe fight the guy in court, which would have cost me the sale, leaving me with less money in my pocket and perhaps a crappy judgment against him.

On that other point, the title company didn’t do the right thing in my opinion. I cried and moaned, they checked higher up, but still ‘no’. Had I used MY title company of choice I bet they would have dismissed the claim, so now I insist on using my title co.

Re: Something to look out for (long) - Posted by jasonrei

Posted by jasonrei on July 17, 2003 at 08:47:02:

I think he’s an SOB, too. I felt so bad negotiating with this guy, meeting him at his work, drawing up the docs, his arrogance. He wanted to stall. I wanted to kick his %^&. But a good sale was at stake, plus the buyers really did need to get into the house and I would’ve felt bad about them having to rearrange all their plans because I didn’t make sure title was clear before putting it up for sale.

Anyway, I will consult my attorney and see if I have recourse. Another lesson to be learned: I should have had the title co put it in writing that they wanted the cloud on title released; I should have specifically referenced the $3000 payoff in the release (don’t know if I mentioned consideration or not); I should have documented in writing my calls and meetings with the guy. All these things would have strengthened any case I might have.

Re: Something to look out for (long) - Posted by jasonrei

Posted by jasonrei on July 17, 2003 at 08:51:51:

I think I will sue. Don’t know about spreading the word, though! Might get me in trouble, too. ; )

Hopefully, just telling the story will help someone avoid a similar problem, or remind people that when they’re in the middle of deal with possible legal ramifications to make good notes and get as much detail in writing as possible.

Re: Something to look out for (long) - Posted by Jerry Martin NC

Posted by Jerry Martin NC on July 16, 2003 at 20:53:28:

Ever heard of triple damages?

Re: Your title company - Posted by Jason-CA

Posted by Jason-CA on July 17, 2003 at 13:54:38:

Jason: It try not to think of them as shoulda’s. More like, next time I’ll make sure to …

I’ve got so many should haves that if I thought about it too much I would never be in this biz.

Getting the deal done was important and $3K seems reasonable to me. A law suit of any kind would likely be more. But more importantly, I think it’s good to move on. If you are happy with your profits, the 3K was just part of the costs.

Sincerely, Kristine

Re: Something to look out for (long) - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 17, 2003 at 09:21:16:


Interesting. So here is another problem in real estate investing. Makes you feel like giving up totally on real estate investing doesn’t it? Always more odd problem to worry about. I might do that, if it weren’t for the fact that I’m getting a lot of money from rental properties and building up a wealth pile.

So, he did not have the owner of the property’s name in the document. Just the legal description. Interesting.

How about my suggestion that you directly indemnify the new buyer, while the title company put in an exception for this wild document? Your attorney assured you that it would not be a problem. Did you suggest that to the title company and the buyer?

Good InvestingRon Starr*

Sorry Jason. Forgot my own name for a minute… - Posted by Kristine-CA

Posted by Kristine-CA on July 17, 2003 at 13:59:37:


Re: Something to look out for (long) - Posted by jasonrei

Posted by jasonrei on July 17, 2003 at 13:27:13:

(chuckle) No, I love real estate. Like I said, I still made a nice profit on this deal.
$82k sale
-$36k 1st lien I took over but didn’t assume
-$ 8k cash to make up arrears and pay sellers
-$10k cash for repairs (made a coupla mistakes)
-$ 6k cash for my holding costs
-$ 4k at closing for closing & sales costs
-$ 3k to the bozo with the affidavit
= $15,000 CLEAR profit on this deal. Not the BEST deal, but I was still very pleased. It was the last preforeclosure I bought, since I’ve been so busy with foreclosures and other deals to go out knocking on doors. Still, I’m anxious to get back to the pre’s.

I asked the title co what I could do to clear up the issue. They said they needed a release. In retrospect there were 20 things I coulda/shoulda done different. That’s what this post is about. Your idea is a good one, too.

I don’t mean for this post to scare anyone. In fact, it is intended to help by making people aware. I’m still PRETTY new at this stuff. I’ve bought 2 preforeclosures, 4 at auction, 2 from out-of-state owners, 1 investor flip, and over 20 foreclosures. Have two multi-family rentals. But I’m still early enough in this to get surprised by something on just about every deal. It’s not a negative, just the way it is. I’m glad I’m in a business that teaches me something new every week and allows me use my creative abilities so much.

Re: Something to look out for (long) - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 17, 2003 at 15:57:10:


Thanks for your comments. Hey, after over twenty years of real estate investing, there are suprises for me also. I agree, your creativity is certainly involved. I never get bored with real estate. There is always something knew to learn. I go to real estate investor club meetings, read books, watch videos, and listen to tapes to learn new stuff.

Sounds like you are doing fine with foreclosures. Where abouts do you invest?

Good InvestingRon Starr******

Re: Something to look out for (long) - Posted by jasonrei

Posted by jasonrei on July 17, 2003 at 16:16:54:

Houston TX. Mostly stuff in the $60-85k range.

Foreclosures have been good, but I see no trend. I work with a partner. We’re going to try our hand at new construction, and probably advertise more.

What is your bread and butter?