Cashleveraging

There are several types of foreclosure in Texas. Each of these has slightly different rules, which complicates the purchase of them. The 8 types we will cover here are 1st lien note, 2nd lien note, Home Equity Loans, Vendors Lien, Judgment,  Mechanics Lien, Tax and Homeowner’s Fees.

1. 1st Lien Note – By far the most common type of foreclosure is a 1st lien note. 1st lien notes are usually money to purchase a house and are usually the largest loans on the house. The 1st lien note will specify the property as collateral. A 1st lien foreclosure wipes out all junior liens. That means anyone else who has loaned money on the property will lose their investment. For the purchaser of this property, it means junior lien holders will not have to be paid. This includes second liens, judgments but not Tax liens. The purchaser will have to include the Tax Liens when determining the profitability of the investment. These amounts are fairly easy to determine by calling the taxing authorities (be careful there are several). Non-judicial foreclosure is the most common way of foreclosing on 1st lien notes. This means that no courts are involved
2. 2nd Lien Note – A second lien note is money that is borrowed after the purchase of the property. The 2nd lien note will specify the property as collateral. It is junior to the 1st lien note and therefore will not wipe out the 1st lien note. It also doesn’t wipe out Tax liens. It will wipe out all junior liens, including judgments. To the buyer of this property, this means you will need to be very careful if buying a second lien note. You must 1st determine how much is owned on the 1st lien note. This is not easy to do without the borrower’s permission. If the borrower is behind on the 2nd lien payments, there is a good chance he is also behind on the 2nd lien payments. Usually the 2nd lien lender is the same as the 1st lien lender unless it is a Home Equity Loan. Non-judicial foreclosure is the most common way of foreclosing on 2nd lien notes
3. Home Equity Loan – A Home Equity Loan is special type of 2nd lien note. These loans were not allowed in Texas until 1997.  Prior to this time a 2nd loan could not be made on a homestead property. The biggest difference is that a Home Equity Loan requires a judicial foreclosure. This means the lender must first sue the borrower and then get a court order to sell the property at auction.
4. Vendor’s Lien – A Vendor’s Lien is a 1st Lien that has been seller financed. The biggest difference is that a Vendor’s Lien requires a judicial foreclosure. This means the lender must first sue the borrower and then get a court order to sell the property at auction.
5. Judgment – A judgment comes as a result of a law suit. In Texas, the judgment is only collectable if the judgment can be attached to real estate which is not occupied by an owner occupant, in other words, investment property.  In general, the more difficult the judgment is to collect the greater discount you will receive on properties foreclosed.  In Texas, many judgment holders are glad to get any thing for there judgment after holding it a few years. A judgment does not wipe out any other liens on the property. This leaves the buyer with the burden of checking all other liens on the property, including the 1st lien, which as stated before is difficult to verify without the borrower’s permission.
6. Mechanics Lien – A mechanics lien is the result of someone working on the property. If the contractor is not paid, he can file a lien on the property for the amount owed. This is called a mechanics lien. A mechanics lien requires a judicial foreclosure. This means the contractor must first sue the owner of the property and then get a court order to sell the property at auction.
7. Property Tax – Property tax is due on January 1st in Texas. By February 1st it is late. At this point it becomes a lien even if not filed as such. A property tax Lien has priority over all other liens, including 1st liens, federal tax liens and state tax liens. The property is cleared of these liens as long as the taxing authority makes a reasonable attempt to notify the party concerned. Although they are cleared from the property they are still owed by the property owner.  The property owner is able to claim rights to and redeem the property up to 2 years after the sale by paying the taxes plus a fine.
8. Homeowner’s Liens – These are liens filed by homeowners association for the payment of subdivision or condominium maintenance fees. Texas allows non-judicial foreclosure of these liens. All superior liens on the property remain attached to the property. Although there is no right of redemption, a purchaser at the auction can not resale the property within six months of the sale date.

Disclaimer-This article was not written by an attorney nor is it meant to give legal advice. Its purpose is to give the reader a general idea of the lien types foreclosed in Texas. For detailed information on a particular property a title search is recommended. For additional questions consult your attorney. For more information on this subject please visit the Foreclosure Investment Weblog at http://alamofc.com/blog

David Josh has been investing in Real Estate since 1992. He is the owner of Alamo Foreclosure Service in Dallas, Texas. Alamo Foreclosure Service provides pre-foreclosure and post-foreclosure listings for the Dallas/Ft. Worth area online at Alamo Foreclosure Service For other articles on buying foreclosures go to Foreclosure Investment Weblog

Article Source:http://www.articlesbase.com/business-opportunities-articles/types-of-foreclosure-in-texas-1785869.html

This entry was posted on Tuesday, January 26th, 2010 at 12:10 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.