Real Estate: February 2012 Archives

"Trust Deed Incorrect Legal Description" was a search hit I got.

There are all kinds of legal descriptions. Lot, Block and Subdivision Map, or just Lot and Map, are probably the most common for residential property. Sectional portions (Portion A of Section B of Township C, Range D) are probably next most common, followed by "metes and bounds", and often the two are mixed. Finally, in some areas of the country (like Southern California) there are remnants of prior systems here and there, like the Ranchos here, Parishes in Louisiana, etcetera. What they all have in common is descriptions of the boundaries of the parcel concerned. Condominiums are based upon cubes of airspace exclusively with an undivided common interest in the communal property.

There are technically incorrect legal descriptions, and there are significantly incorrect descriptions. There are three main categories.

1) Descriptions that describe the land with some technical difference. Missing an easement, missing part of a defined lot, something like that. This is by far the most numerous of these errors and basically means nothing. The land the trust deed describes was pledged as security. Practically speaking, these might as well not have the imperfection, and if you fight in court, you're probably wasting your money. If the legal description is missing part of the land, but the whole thing is only one legally zoned lot, they're going to get the whole thing, by and large. If it's out in the country somewhere and not covered by things such as lot regulations, they might split the part that was covered by the description off from what wasn't covered. Obviously, only part of the property was pledged as security, right? But most of the time, the lot cannot legally be subdivided anyway, and the lender is likely to get the whole thing in the case of foreclosure.

2) Descriptions that partially describe the property. There are three main subcategories: a) they describe part of the property, but not the whole thing b) they describe part of the property and part of some more, and c) they describe the entire property and some extra besides. Subcategory a, that describes part of the property but not the whole thing, usually count as the "technical difference" category, and for the same reason - the law forbids dividing that parcel. In other words, no big deal. Subcategory b, where they describe something extra as well, is only of special note if you also owned the other piece of property at the time the Trust Deed was signed. Otherwise, you deeded property you didn't own. Your neighbor may end up defending his title in court and coming after you for his expenses, but you can't deed away what you don't own. It's the part that you own that's important. Subcategory c, like b, is only interesting if you own the extra property as well. Then the lender might get a little extra! Otherwise, you can't deed away what you don't own.

3) Descriptions that describe another property. You can't deed what you don't own, so unless you owned the other piece of property as well, the lender is basically out of luck. It is to be noted that they're still going to do their best to come after you, and your neighbor may come after you for his expenses in defending his title, and the cops may be interested in you if they think you intended fraud.

Of course, the law varies and you should check with your lawyer and it's the court's decisions that are final. Your mileage may vary; these are just some rules of thumb.

Caveat Emptor

Original here

Something I feel the need to point out when people talk about current issues with the real estate market, for instance, housing prices fall yet again, mortgage rates hitting new lows yet again or the Federal Reserve indicating a need to keep returns low

Q: What happens when you artificially restrict demand (in this case by preventing large numbers of people from qualifying for a mortgage)

A: The price falls until it's low enough that the market will absorb the supply. Profits (return for mortgage investors) becomes non-existent. Money moves elsewhere. Because the supply of people who *don't* need a loan for property is limited to the rich, few people can buy homes. Prices for real estate fall.

Q: What happens to people who move their money from becoming mortgage investors to real estate investors?

A: As prices fall, the same money buys better properties. Capital returns become minimal, but rental returns become very attractive on their own as people who are prevented from buying are forced to rent, driving up demand for, and therefore price of, rental properties.

Q: What happens if you remove those restrictions (Dodd-Frank, et al)?

A: The above trends reverse. Those already wealthy people who moved their money from mortgage investment to real estate investment see massive capital returns as those formerly shut out return to the market.

Q: What is the net effect of this?

A: Massive wealth transfer from those consumers less well off to those with larger financial reserves, including major financial corporations.

Q: Ignoring what the politicians involved say, can I find in their actions any difference between those actions and a directed "evil plan" or conspiracy comparable to those hatched by any number of bad movie villains?

A: Thus far, those involved have gotten away with it.

Otherwise, no

I also feel obliged to point out that even if Dodd-Frank is never repealed, the intended beneficiaries are reaping large gains and will continue to reap them.

UPDATE for clarity

Q: Are the actions of these politicians a credible method of attaining what they say they want - protections for consumers, punishment of those responsible, and avoidance of a repetition?

A: No.

Caveat Emptor