July 18, 2012
Now that we are six years into our housing market crash, it is more common to see property owners associations (POAs) and county tax assessors auctioning defaulted properties.
POAs auction their defaulted properties with contracts using phrases like “buyer beware.” They have no obligation to disclose any liens or encumbrances. The chances are pretty good that some of the properties sold in POA auctions recently have had deeds of trust recorded against them.
As an example (used with permission from the buyers), 2528 Brentwood sold at auction in April 2004. The buyers paid $6,100 to the Pine Mountain Club POA, but were unaware that there was a deed of trust for $105,000 recorded against the property. Had they known, they would not have purchased.
Before you buy a property at one of these auctions, I advise you to check the title for the property. This is a service that most real estate agents or title companies can provide for free. Your real estate agent can pull the available recorded deeds online.
When you purchase a property from a POA, it is common for there to be a deed of trust lien still recorded against the property. This is because most CC&Rs agree to subordinate to any deeds of trust. When the POA forecloses on a property for nonpayment of assessments, the deed of trust remains in effect and is passed on to the owner and future owners.
If you want guaranteed clear title, purchase a title insurance policy from a title insurance company. This may save you a lot of heartache when the property ends up having a senior deed of trust recorded against it, or an easement of which you were unaware.
Before you purchase and risk losing your hard-earned money, do some research and ask your favorite real estate professional for some advice.
Jeff Mowry, Jennings Realty
This is part of the July 27, 2012 online edition of The Mountain Enterprise.
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