Chapter 8Lien Priority
® Tax liens ® Mechanic’s liens ® IRS liens ® Judgment liens ® Etc.
A few interesting facts about liens It is important for you to know that liens in first priority are the most ideal. Therefore, in order to obtain this priority, this needs to be verified before the closing of escrow. In order to obtain the accurate information that is required to verify the priority of the deed of trust, you will find that Title insurance policies will provide you with what you need to know.
If it happens that an error is made, or a lien has been overlooked and such aspects affect the trust deed holder, then the holder can take legal action against the company that issued the title insurance policy.
When the holder is in possession of the priority lien, they can foreclose and any junior lien holders won’t be able to stop it. That being said, there are ways in which junior lien holders can protect themselves should this happen.
To begin with, they can make certain that their lien has been accurately recorded with the county recorders office. They can also inform all senior lien holders about their lien, and ask them for written notification before they foreclose.
Tax Liens Tax liens have priority over deeds of trust. This is a fact you won’t want to forget should a tax lien appear. Thus, in order for the investor to protect themselves in the event of a tax lien, a provision should be added in the trust deed and note that explains if the borrower and their property have or will receive a tax lien; it is the trustor’s responsibility to contact the investor. In addition, the note should provide the investor with the choice of needing the payoff, so that they can protect their principal from foreclosing on the tax lien.
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