X-Ray Vision: The Magic of Title Abstracts

Real Estate is an industry that is heavily dependent on information. The more someone knows about a property, the better able they are to make a decision about its value.

In the stock market, stock prices fluctuate based on information about that stock. The price reflects the knowledge of analysts, fund managers, brokers, bankers, traders, and everyone else who touches or has a stake in the stock. In other words, the price at any point in time is accurate because it reflects the information had by so many people involved in evaluating the stocks value.

Unfortunately, real estate is not nearly such a transparent asset. Utah lawmakers understand this and the division of real estate recently adjusted our standard purchase contract to emphasise the "As-Is" nature of real property. We are a "buyer beware" state.

This lack of transparency can create opportunity for some and pitfalls for others. I know individuals who make a living out of hoodwinking other less suspecting folks. I know other folks who tell a good story just to sound like the king of the hill.

For this reason, I have made it center part of my business to base my professional advice on facts and figures. Numbers don't lie, but storytellers often do.

The tool of choice in deciphering the truth behind a property's story is the title abstract.

Here is a copy of the abstract (click to enlarge) from one of my former investment properties - 2670 Jefferson Ave:


This abstract tells the story of who owned the property and who owed how much against it. The information on this abstract reads like this: In September 2001 Daniel Stuart purchased the property and got a loan for $90,000 from US Bank. In April 2002, Daniel deeded his property into his LLC name. In October 2003, Shalom Rubanowitz, the trustee for US Bank filed a Notice of Default against Mr. Stuart for non-payment. The auction at the court steps occured in March 2004 and, with no other bids on the property, US Bank took it back for at a sale price of $52,700. I purchased the property in June 2004 with cash from a hard money lender. (Note: The trust deed for this purchase isn't recorded on the abstract because of an error made at title). The amount I borrowed was $54,000 - $45k for the purchase plus 9K for rehab. In August 2004 I refinanced the home out of hard money at $59,500. We finished our rehab after getting a HELOC with America first in October 2004 for $7K. Finally, in May of 2006, we sold the property to a nice guy named Scott Miller who borrowed $70k toward the purchase. (We sold it for $88.5K) Scott still owns and manages the property today.

The title abstract is the key to unlocking this history. There are many properties with much more colorful stories than this. You can find federal tax liens, lis pendes, certificates of non-compliance, and other boogey-men on the title abstract. If you are looking to purchase a property, find a realtor that can get the title abstracts for you before you submit an offer. Its another tool to give you a better understanding of the property and an edge on negotiating your next transaction.