Episode 37: Title Reports and Exceptions

Most note investors know they need to check the property — but overlooking what else is attached to it can turn a good deal into a costly mistake. In this episode, we break down how to use a title report to surface every lien, judgment, and encumbrance before you close.

🔍 What you'll learn:

✅ What an ownership and encumbrance report is and why it costs a fraction of a full title search

✅ Why property taxes are the primary title risk for first lien holders and what tax deed status means for your position

✅ When to order title on a second lien — and which states have HOA super lien rules that can catch investors off guard

✅ Why past due HOA balances don't always show up on a title report and why a direct call matters

✅ The five things to review every time a title report lands in your inbox

This program is for informational purposes only and should be independently verified before taking action.

Transcript

SPEAKER_00 0:00

Welcome to the show, where you'll learn how to invest in mortgage notes, the savvy real estate investor's secret weapon to create cash flow without tenants and property acquisitions for pennies on the dollar. My name is Robert Haitha, the founder of Fix Notes, and my mission is to make note investing ethical, profitable, and accessible for you. In every episode, we're democratizing the industry to put these powerful Wall Street assets into the hands of mainstream investors like you. So without further ado, let's get into the show where you're in good hands with my AI clone. Let's go. This program is for informational purposes only and should be independently verified before taking action. When you are evaluating a mortgage note, you need to know what else is attached to that property besides the loan you are buying. Liens, judgments, unpaid taxes, homeowners' association balances, and other encumbrances can all affect the value of your position and in some cases threaten it entirely. That the tool you use to get that picture is called a title report, and understanding how to read one is an essential part of your due diligence process. The most common report used in secondary mortgage note due diligence is called an ownership and encumbrance report, or an OE. It is not the same as a full title insurance policy, which can cost three or four hundred dollars or more and looks back 30 years. An OE typically costs around $90 and reviews the public record back to the last property transfer. In most cases, that is sufficient because title is generally confirmed at each property transfer along the way. The OE gives you the current owner of record, the recorded liens on the property, any judgments, tax status, and homeowners association information. For the price and the turnaround time, it is one of the most efficient tools in your due diligence toolkit. For first position liens, ordering a title report is close to mandatory. Your primary risk as a first lien holder is what sits in front of you, and what sits in front of you is property taxes. If a borrower stops paying their taxes long enough, the county can move to foreclose on that tax lien and potentially take the deed. To in a tax deed state, that process can wipe out your first mortgage entirely. So seeing the tax status clearly on a title report, whether current, past due, or sold to a tax certificate buyer, is critical information that directly affects your pricing and your risk assessment. For second position liens, the calculus is a little different. Your primary concern is the first mortgage in front of you, and you will gather that information from a credit report rather than a title report. But title reports still matter for junior liens, especially on higher value assets. A title report on a second lien can surface active judgments, mechanics liens, HOA liens, and other encumbrances that affect the equity picture. And in certain states, homeowners association liens have what is called super lien status, meaning the HOA can actually get ahead of even a first mortgage if dues go unpaid long enough. Those are the kinds of state-specific rules that can catch an investor off guard if they are not paying attention. One important nuance with homeowners associations is that past due, dues do not always show up on a title report right away. An HOA typically needs to file a lien with the county before it appears in the public record. So if a property is in a condo complex or a planned community, it is worth calling the HOA directly to confirm that dues are current rather than relying solely on what the title report shows. When you get a title report back, you are reviewing it for a few key things. First, confirm who the owner of record is and that it matches what you expect from the loan data. Second, trace through the assignment chain to confirm your lien is properly recorded and that there are no obvious gaps. Third, check the tax status and understand when the next payment is due. Fourth, look at active judgments and liens and evaluate whether any of them have priority over your position or represent a meaningful risk to your equity. And fifth, note anything that needs follow-up, certificates of tax liens that may have been paid since the report was pulled, HOA balances that need a direct call, or assignments that look unusual and warrant a closer look. The title report does not answer every question, but it organizes the public record in a way that surfaces the most important ones quickly. Use it as a starting point and let it direct your follow-up research rather than treating it as the final word. Next time, we are going to look at how to read a borrower credit report and what it tells you about occupancy, payment history on the senior lien, and the borrower's overall ability and willingness to resolve. Thanks for sticking around to the end, and thank you to my trusty Robot and the Fixed Notes team for putting together another episode. If you want to learn more and hang out with the real not AI version of me, join our free school community at school.com slash fixed notes. That's s k o L dot com slash F I X N O T E S. In the meantime, we'll see you in the next episode.