National Foreclosure Trends for July 2014

foreclosure 3The United States foreclosure activity has increased by two percent this past July. According to the U.S. Foreclosure Market Report for July 2014 by RealtyTrac, “foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 109,434 U.S. properties in July, an increase of 2 percent from the previous month but still down 16 percent from a year ago. The report also shows one in every 1,203 U.S. housing units with a foreclosure filing during the month.” The states with the highest foreclosure rates are Florida at 1 in every 469 housing units with a foreclosure filing, Maryland at 1 in every 553, Nevada at 1 in every 639, Illinois at 1 in every 747, and Ohio at 1 in every 839, this past July.

According to Daren Blomquist, the Vice President at RealtyTrac, “July was the 46th consecutive month where U.S. foreclosure activity was down on a year-over-year basis after nearly four years of falling foreclosures, we are starting to see evidence that foreclosure numbers are normalizing at the national level. The 16 percent decrease in July was exactly half the annual decrease we saw a year ago in July 2013, when U.S. foreclosure activity was down 32 percent on a year-over-year basis.”

If we break down the current distribution of foreclosures based on the number of active foreclosure homes in the U.S, pre-foreclosures make up 29.2%, scheduled auctions make up 47.1%, and bank repossessions make up 23.7%. Compared to May 2014, the amount of new pre-foreclosure filings is down 4.9%, scheduled auctions are up 10.4%, and bank repossessions are down 3.5%. Compared to the prior year, pre-foreclosures are down 21.3%, scheduled auctions are down 3.4%, and bank repossessions are down 29.8%.

The Difference Between a Certified & Non-certified Title Search

certifiedA title search can mean different things to different people. One way to insure that the report you get as a “title search” answers all your questions and provides the necessary information you require is to get what is called a Certified Title Search. This means that the search is done to certain standards, that all the procedures are followed, and all of the places where potential clouds on the title might appear are checked when the title search is prepared.

Essentially, anybody can do a non-certified title search. If an individual goes to the land records office, visits all four or five of the offices, pulls all the necessary documents to review and reads through them to create a summarized report, you can call that a title search. Even if it is hand written on a piece of paper, you could name that a title search and some people might even be willing to pay for that and call it a title search. However, it would not be an official certified title search.

A certified title search is a research project performed by a NALTEA (National Association of Land Title Examiners & Abstractors) certified title abstractor or title examiner. These certified examiners and abstractors will do all the necessary research according to certain industry standards.  To be a NALTEA member an individual must pass a rigorous exam, demonstrate that they have experience in the industry, and continue their education every year by showing that they have attended training or other industry events to show that their knowledge is improving. These certified examiners are qualified and trained to know what to look for, to make sure all liens and encumbrances on a property are found and that all sources are checked. The format of a certified report also meets certain obligations that will hold up in a court of law, if need be.

Understanding Mechanic’s Liens

house constructionA mechanic’s lien is a very particular type of encumbrance on a property that’s afforded credit and protection for a contractor or other builder that’s done work on the property. It is a process enacted usually by statute in a state where it protects contractors or builders for doing work on a property when they don’t get paid for it.

In many states a mechanic’s lien doesn’t even need to be filed as an official document in order to protect the general contractor. For example, if a contractor installs a new roof on a house and the property owner doesn’t pay the bill, a mechanic’s lien is in place even before any paperwork is filed. The person who completed the work on the property is thus covered for any forgone payment of their services.

Additionally, many states extend protection to subcontractors or companies that have delivered materials or provided labor to a project even if it was managed by a general contractor. If a property owner pays a general contractor for work done to their property and the general contractor doesn’t pay any subcontractors, even though the general contractor was paid in full by the property owner, that property may be encumbered by a lien placed by a subcontractor who didn’t get paid for his work.

However, this is not always the case; mechanic’s liens vary due to state laws. For example, in California there are certain filings that must be made for a mechanic’s lien to be valid. A subcontractor that wants to assert a mechanic’s lien must have previously served the owner, and original contractor or construction lender if necessary, with a “preliminary 20-day notice” stating what is being done on the property. Failure to properly serve a 20-day notice essentially renders any mechanic’s lien invalid. Once the project is complete contractors and subcontractors only have 90 days to file a mechanics lien. However, there are a couple exceptions to that 90 days rule. For instance, if the property owner files a Notice of Completion within 10 days of the project being finished it will shorten the time for a mechanics lien to be filed by a general contractor to 60 days and 30 days for subcontractors.

If you are a property owner and are doing any sort of remodeling, be sure to check what the laws are for mechanic’s liens in that state. In addition, if you are purchasing a property in a state which doesn’t require mechanic’s liens to be filed, you should see what work has been done on that property recently, make sure all contractors and subcontractors were paid and that no mechanic’s liens are in place. A standard title search on a property would indicate if there is a mechanic’s lien placed on the property, along with identifying any other current liens.

Dormant Mineral Rights May Have Value Now Or In The Near Future

Increasing energy prices in the US are making extractions of minerals much more appealing to energy companies. This year US consumers can expect to pay approximately three percent more for electricity due to an unusually harsh winter that strained the Northeast’s grid and increased natural gas demand, even amid a boom in domestic production, according to US electricity prices are rising. Thank the ‘polar vortex.’

New methods of extraction such as hydraulic fracturing, or “fracking”, which is the process of drilling and injecting fluid into the ground at a high pressure to fracture shale rocks to release natural gas, are making prior types of mineral resources more appealing to go after. For example, if there was a known oil field somewhere but it hadn’t been worth getting the oil out of the ground for the last twenty or so years, now, with these new methods, energy companies are going after the mineral rights owner of that property.

If you are a landowner, dormant mineral rights may have value now or in the near future but non-action may jeopardize your mineral rights. Processes like adverse possession may encumber your mineral rights, where, if you don’t use them, they might revert back to someone else. Additionally, energy companies who have oil and gas leases may not be able to keep their leases if they don’t use them. To find out if you have mineral rights to a property you need a specific type of title search done for that property.

A mineral right search that looks for any subsurface claim on a property will allow you to discover if you have mineral rights to oil, gas, or other minerals that are beneath the surface that a company might want to use for energy production. This type of search looks at the chain of title on a property by tracking back through previous owners and then chaining back forward through each one of the owners to see if the mineral rights were ever transferred or split off from the property. You won’t find any information about oil rights on a property deed. Normally the rights are transferred on a separate document. Most property deeds will not even mention who owns the mineral rights, if it is the current owner or if they have been split off in the past. If you or someone you know may have mineral rights to a property a mineral rights search may be of benefit, especially in the chance of potential adverse possession where the owner may lose their rights due to non-action.

Shill Bidding May be Banned in CA Real Estate

Shill bidding at real estate auctions occur when an individual, or company, places a bid on a property without the intention of actually buying it. Instead a bid is placed for the purpose of influencing other people to bid, and thus, increasing further bids placed on that property.  This method of bidding on one’s own auction to artificially drive up the price of a property has been used many times by real estate companies, such as Auctions.com, but it has just recently gotten the California Association of Realtors to stand up against it.

When the California Association of Realtors first began digging into this shill bidding issue they found that there is no law against it in California. In the article REAL ESTATE: Group wants to ban ‘shill’ bidding on auctions, Alex Creel, a chief lobbyist for the California Association of Realtors, explains, “while companies like eBay publicly proclaim shilling is not allowed on their site, auction companies can and do put up a reserve the seller doesn’t always publish for the benefit of bidders. This secret reserve motivates some auction houses to put in real bids from ghost-bidders to hit that price.” However, Rick Sharga, Executive Vice President for Auction.com, believes Realtors are deliberately misrepresenting what’s going on and openly defends the use of shill bidding by pointing out that their website states that it uses the tactic.

Ultimately, this shill bidding problem has caused the formation of a Realtor-backed bill, Assembly Bill 2039, which is currently pending before the California Senate committee after having passed the lower house of the Legislature. The Assembly Bill states it would, “with respect to an auction that includes the sale of real property, prohibit a person from causing or allowing any person to bid at a sale for the sole purpose of increasing the bid on any real property being sold by the auctioneer. The bill, however, would allow an auctioneer or another person to place a bid on the seller’s behalf during an auction of real property if prior notice has been given that liberty for that bidding is reserved and the person placing that bid contemporaneously discloses to all auction participants that the particular bid has been placed on behalf of the seller. By expanding the scope of an existing crime, this bill would impose a state-mandated local program.”

Hidden Property Liens

If you are going to spend time looking for liens on real estate you don’t want to just get the most basic obvious liens, you want to make sure you are getting every lien there is, including the hidden liens. There are many types of liens but here are the seven most common types of hidden liens.

UCC Filings – Also known as universal commercial code filings, these are normally not filed in the land records office but rather with the secretary of state. If you are looking in the county records you may not find UCCs that exist for the property. The secretary of state may have a filing that can encumber the personal property.

Mechanics liens – These are liens and encumbrances that occur when a contractor, builder, or an individual does work on a property, for example putting on a new roof, and if the property owner did not pay for the roof then the contractor has a lien by statute on the property even if there is nothing filed in land records. This is the law in many, but not all, states. Most counties have a very specific procedure for the contractor to be protected on their efforts in improving that piece of real estate.

Civil court records – A property owner could have a judgment against them personally that automatically attaches to their property by statute. If this were the case it would not be stated in the land records. You would need to look in the civil court records, small claims and superior court to find something like this.

Probate records – Probate records can put encumbrances on a property. If there are transfers of property by statute, in the case of death or divorce, then that can affect the property and have liens accrued to the property.

Delinquent taxes –If you check the tax assessor’s office you may find that there are past due taxes on a property. If someone were to buy a property now and the previous property owner did not pay their property taxes for the previous year the new owner would be responsible for paying those delinquent taxes which could potentially be thousands of dollars.

HOA underfunding – If you are buying a house in a homeowners association or a condo complex and that complex has obligations like fixing the pool or paving the streets and they have not accrued money in their budget over the years, that HOA underfunding becomes a defacto lien on the properties because whoever owns them is going to have to pay for it when it comes due.

Easements – If you look at a property’s mortgages and deeds you may not find that there are current easements that allow adjacent property owners to have access to your property or even financially benefit from it. Generally, easements are written and recorded with the local assessor’s office so you would need to look there for any existing easements.

Once a lien has attached to a property there are very specific methods to have that lien removed. One way is to have the lien holder actually sign a release of lien that has to be filed in the land records. Until it’s filled, it will still show up on the title search. Another way is by statute. There are certain types of liens that automatically become inactive after a certain period of time. This depends on the type of lien, the statutes of the county, and what the laws were when the lien was filed.

When looking for liens on a specific property, remember to check for UCC filings, mechanics liens, the civil court records for judgments, probate records, delinquent taxes, HOA underfunding, and easements.

Foreclosed Property with Power Purchase Agreements

A Power Purchase Agreement, or commonly referred to as a PPA, is an agreement in which home and business owners, along with nonprofit and government groups, have a photovoltaic (PV) system installed on their property by a third party developer who typically owns, operates, and maintains the PV system and the property owner, or host, purchases the power that is produced by it. Depending on the agreement, there is usually no upfront cost for the host of a PPA and the agreement typically results in predictable electric bills and overall monthly savings. The right to receive the electricity is tied to the ownership of a property and thus is transferred with the title of the property whether it is a voluntary transfer or a foreclosure.

Many solar companies are doing property due diligence prior to signing a PPA to ensure the host who is signing is the owner of the property and that the property isn’t in the process of foreclosure. The reason for this is due to the fact that most property owners are paying off a mortgage to a bank when they sign a PPA and if that property owner were to fall behind on their payments then the bank would have the right to foreclose on the property. When a foreclosure occurs, the bank can then take the land, the house or building on the property, and all permanent fixtures attached to the house or building. According to Solar PPA Protection in Foreclosure, if the PV system is separate property, aka personal property or chattel, then the solar company can repossess it.  If the PV system is deemed a “fixture” then the bank that is foreclosing the property has the rights to the system. When this happens the solar company not only loses the ongoing energy payments they were receiving but also the money and resources it took to install the system itself.

It is recommended that any third party developer entering a PPA have a title search done on a property. A title search would generally help the developer protect their investments, assuming that, if a foreclosure is in the foreseeable future, they would either not proceed to enter the Power Purchase Agreement or they would ensure that the system is considered separate property so they could repossess it if a foreclosure were to occur.