Real estate investors must go through an extensive evaluation process before making any decision to buy a foreclosure. The acquisition price is certainly a key element as well as the cost of rehabilitation, marketing costs antitle insurance and foreclosuresd the final sales price or rental income. Yet many investors overlook an important factor: the title report.

As you find a potential foreclosure project, you know the importance of making a thorough inspection before bidding on any property. The last thing an investor needs to discover after buying a foreclosed property is the foundation is faulty and needs replacement or some other major repair. One poor inspection can mean not only wiping out any profit on the transaction but losing thousands. That’s why not just one inspection is a good idea but sometimes two. There’s no room for error.

Beyond the physical inspection however is a review of the current title report on the property. When property owners find themselves in financial straits and ultimately lose the home to the bank, the mortgage may not be the only thing that’s showing up on title.

Perhaps the property owner owed back income taxes to the IRS. Even if the owner was on some sort of repayment plan with the IRA, the IRS will still file a lien on any property that taxpayer owns, including the foreclosed home. Maybe the owner had some work done on the house and the contractor was never paid. The result? There’s probably an outstanding mechanic’s lien on the house.

Even items such as child support or alimony payments can have a lien placed on the property. Property taxes delinquent? Then you can bet the county filed a lien on the property and sold it to a property tax lien investor. Sure, the property owner can file for bankruptcy to discharge some of his debt but some things can’t be removed such as support payments, mortgage and equity loans, federal and state income taxes and property tax liens. All of these items must be settled before the property can change hands.

When considering a foreclosure, make sure you contact an attorney who can provide you with a recent title report identifying all liens, the filing date and the amount. If there are outstanding liens that can’t be discharged, you’ve got more on your hands than you bargained for.