Hello, again. I was discussing the potential pitfalls of buying a property at the public foreclosure auction yesterday when we ended our discussion. As I was mentioning at the time, one thing a potential investor has to be very careful about is that he or she is bidding on a property that is being foreclosed by the holder of a first mortgage, NOT a subordinate one. That is so that if he or she is the successful bidder, there are no surprises in store along the lines of a bank with a senior mortgage contacting the proud new owner demanding that the
loan be paid by that new owner.

If the property is in a trust deed/escrow state, an investor can pay a title insurance firm for a property profile that should reveal all of the liens recorded against the property. A careful review of the mortgages recorded should tell if the foreclosing institution is in first or some subordinate position, and the amounts of each loan.

For those of you in a state where the closing is handled by attorneys, your attorney should be able to search the title records and arrive at a similar result. Costs of each process will vary with state and locale, as well as between attorneys or title firms, but the few hundred dollars could be well worth spending if the cost saves you from a much worse fate--owing unexpected thousands! Good luck and keep you eyes here for more in the future.