What is a loss of priority package, and when would an investor possibly need one?

A loss of priority package is requested by a title company’s underwriter when there has been some type of work, or construction done to a property. That work could possibly risk the priority position of a new Deed, or Deed of Trust on the property.

Let’s start to understand the process by defining priority. The order or position of a lien, conveyance document, or other encumbrance document that affects the title to a particular piece of land. The date and time the document was recorded determines its priority. First recorded = first priority. Some unrecorded documents can affect that priority position.

Construction that has been started prior to a deed, lien, other encumbrance document or conveyance document could possibly affect the priority of that document even though a mechanic’s lien has not yet been recorded for the current construction. This is where the possible “loss” of that documents priority comes in to play.

The best way to address construction and title companies is be prepared! Know what you may need ahead of time and ask your contractors and subcontractors for the documents as the work progresses.

Here are some possible documents the title company will ask for:
1. Lien waivers from all material suppliers

2. Lien waivers from all subcontractors

3. Lien wavier from the general contractor

4. Affidavit by the general contractor which lists:

a) All the elements involved in the construction such as concrete work, carpentry, etc.
b) Who is doing the work on each basic element
c) The contract price, how much is paid to date, and payment amount now requested on each element

5. Current financial statement by the party contracting for the construction

6. Indemnity Agreement by the party contracting for the construction indemnifying the Title Insurance Company against any loss it might sustain by reason of the priority over the lien of the insured Mortgage or Deed of Trust, of any lien, or right to a lien for services, labor or material heretofore or hereafter furnished.

7. Certificate of Occupancy The title company may request a title inspection of the property. The visual title inspection will let the title company know what stage the project is at or near. This lets the company know whether the project is still in the Lien period, or time allowed for the material men to file their lien.

If you have any questions regarding loss of priority, contact your favorite escrow officer to inquire. If you have questions on mechanic’s liens and the specific time periods for the lien period contact one of the AZREIA real estate attorneys for more detailed information.
Good luck and happy investing! Article written by: Amy Frink AVP/Branch Manager, Chicago Title
AZREIA Subgroups & Supported Groups

Networking is paramount to successful investing. Networking is how you find properties, money partners, handymen, products recommendations, lenders, title & escrow people and virtually all types of service providers.

At AZREIA, we have several subgroups to help you with your networking and general investing knowledge. Currently we have subgroups for beginners, fix and flip, income property, notes and general. We have subgroups in Phoenix and Tucson. We also started letting our members know about non-AZREIA networking groups we feel offer good value and adhere to some general AZREIA requirements. You can find a complete list in the Member’s Area of AZREIA.org. AZREIA subgroups are a benefit of membership and only available to members. PLUS membership includes all AZREIA subgroups and the Phoenix Real Estate Club. AZREIA Investor members may attend subgroup meetings for a small fee.

If you’d like to start an AZREIA subgroup or know of a networking group outside of AZREIA we should let our members know about, please call the AZREIA office at 480-990-7092 or email mlaupp@azreia.org

By Jill Bright AVP/Sr. Acc’t. Manager Sales and Marketing
Chicago Title Agency