NEED EXPERTISE PLEASE! TAX DEED SALE!

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NEED EXPERTISE PLEASE! TAX DEED SALE!

Daniel Miller
St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes

I am currently under contract with an individual who purchased a property, via Florida Tax Deed Sale, less than three months ago.

I have looked up the county records and he did actually purchase it from the county. I just received an e-mail back from the title company stating that they cannot grant title insurance on the property because he has not filed a suit to quiet title. He can either file the suit to quiet title or wait four years to make this property eligible for title insurance.

I am having one of my friends (a woman at a closing agency) dig into this and see if there are any existing liens, encumberances, etc.

He does not want to do that. Also, he will only sell through a Special Warranty Deed. I understand that MORE THAN LIKELY everything would work out but I am not willing to take that chance.

What would your next move be? I want the property and am willing to work with the seller.

Should I go through and purchase the property and file a suit to quiet title myself (I will take $5,000 off the purchase price or negotiate something like that)

Should I attempt to force the gentleman selling the property to file a suit to quiet title?

I am uncomfortable because I have no recourse against anyone who owned the property before this previous seller.

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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
12y
Originally posted by @Daniel Miller:
E-mail from agent...

Hi Dan, I am also working on this for you as well....My title company is finding out what to do. You will have to do suit for quite title after you own the property.

My understanding is that because Regions did not pay taxes the property was legally sold and they no longer have a lien on the property. I will also check with a Real Estate broker I know that does this all the time.

Talk to you soon.

I don't think that is an accurate statement. The truth is that it depends on if they were properly notified of the sale, if they weren't then they can prevail in the suit. That is why they require the quiet title prior to issuing title insurance.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    You're on the right track. A quiet title action takes 4-6 months, and around $2,000 unless there a crazy number of lien/judgment/mortgage holders. Run a very thorough title search, including the review of all the notices sent out by the Clerk of Court, for the tax deed auction.. If for some reason, one of the lien holders "prevails" in the quiet title suit (ie. they were not properly notified) they are only liable to refund the original buyer's price. Find an attorney specifically experienced with tax deeds. There is one that mentioned in other threads, from that coast over there somewhere, the name of Hicks, I believe.

    0Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    The weird thing is that the owner who was foreclosed on was the listing agent for the property this time around. She was very aware that it went to Tax Deed Sale and even told me that if the mortgage was not so ridiculous she would have tried to pay it down and pay the taxes. She was very aware that it sold.

    Do I need to attempt to force the current seller to perform a suit to quiet title or is it satisfactory to go ahead with the purchase of the property and do a suit to quiet title myself?

    0Reply
  • John Rooster
    Denver, CO · Member since 2013 · 409 posts · 105 votes
    12y
    Originally posted by @Daniel Miller:
    What would your next move be? I want the property and am willing to work with the seller.

    Should I go through and purchase the property and file a suit to quiet title myself (I will take $5,000 off the purchase price or negotiate something like that)

    Should I attempt to force the gentleman selling the property to file a suit to quiet title?

    Depends on the price you are getting the property, and a lot of other factors. If it is 25% of FMV, then I would probably go through with the purchase and take my chances. It probably is not, so I would advise you to ask for your earnest money back.

    How are you planning to "force the gentleman selling the property to file a suit"?

    Such a quiet title requirement by title companies is standard on tax deeds.

    I see from your second post it had a mortgage, price of the quiet title action just went way way up

    0Reply
  • John Rooster
    Denver, CO · Member since 2013 · 409 posts · 105 votes
    12y

    oops

    0Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    No earnest money put down yet.

    It is 25% off of Market Value.

    Does anyone have any experience purchasing a property through a Special Warranty Deed with NO Title Insurance and then performing a suit to quiet title?

    Need some advice.

    Thanks

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    Everyone who buys at tax deed auction, faces the situation you are in. See suggestion above.

    0Reply
  • John Rooster
    Denver, CO · Member since 2013 · 409 posts · 105 votes
    12y
    Originally posted by @Daniel Miller:
    No earnest money put down yet.

    It is 25% off of Market Value.


    I said I would only consider it if it was "25% of FMV", not "25% off FMV". If you are buying at 75% FMV, then this it is a no brainer, run in the opposite direction.

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    @Daniel Miller

    Curious, how does your price relate to what he paid for it at tax deed auction? Not that it's a bearing on value, but at the tax deed auctions here, the bidders are paying 75% plus of FMV.

    0Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    He bought it for 55-60% of FMV. He got a great deal.

    He is now selling it for around 90% of FMV and I bid 75% of FMV and he accepted it. So perform a title search with a my closing company. Make sure there are no past claims to title, liens, or encumberances. Then proceed?

    It is a great property in a great area.

    Its tough to walk away from it.

    Any RE attorneys on here?

    1Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    Ok, update from before.

    The listing agent had the property previously. She owned it from 2002 through 2013. She purchased the property with a general warranty deed. Regions bank decided not to pursue her mortgages. They never foreclosed and they let the property go to Tax Deed auction.

    A gentleman purchased it in October. He is now selling it.

    I know its a good deal and I put it under contract the day it went on the market.

    I am doing my research now and looking back over the county records.

    Since the listing agent was the last person with a general warranty deed, would she be the only person who could hypothetically try to get the property back if I only got it through Special Warranty Deed? Or could previous owners come back? It is a weird situation, but this is a great deal.

    I have a pretty good feeling about everyone's intentions. I am a pisces...I have the ability to read people well. The listing agent is a machine. She doesnt care about this property she has ten closing scheduled for the remainder of the month. The gentleman who purchased at Tax Deed Auction wants to cash out.

    0Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    E-mail from agent...

    Hi Dan, I am also working on this for you as well....My title company is finding out what to do. You will have to do suit for quite title after you own the property.

    My understanding is that because Regions did not pay taxes the property was legally sold and they no longer have a lien on the property. I will also check with a Real Estate broker I know that does this all the time.

    Talk to you soon.

    0Reply
  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y
    Originally posted by @Daniel Miller:
    E-mail from agent...

    Hi Dan, I am also working on this for you as well....My title company is finding out what to do. You will have to do suit for quite title after you own the property.

    My understanding is that because Regions did not pay taxes the property was legally sold and they no longer have a lien on the property. I will also check with a Real Estate broker I know that does this all the time.

    Talk to you soon.

    I don't think that is an accurate statement. The truth is that it depends on if they were properly notified of the sale, if they weren't then they can prevail in the suit. That is why they require the quiet title prior to issuing title insurance.

    2Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    Exactly as @Matt Devincenzo

    says. It's not the owners who would have claims, it's any lien holders who may not have been properly notified.

    0Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    Sad UPDATE:

    I was scouring the county records for an hour and I came across a document, signed by the Regional Regions CFO, stating that they were a lienholder on the property and that there was a balance of $311,000. It was dated two days post tax deed sale. Disturbing evidence. There is no clear and marketable title and potentially (I say potentially because the information is not substantiated by a professional. That being said I trust my intuition) there is a mortgage with a balance of $311,000 on the property. I have an out in the contract. Contract stated that title insurance was mandatory. I am ready to bounce back, a little discouraging though. A surprise issue or poor negotiations have left me 0 for the last four. Oh well, it will not be the last time. This deal was good though. Thanks for all the advice...it paid off (pun intended) big time.

    0Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    UPDATE 12/29/2013

    The negotiations on this property took an interesting turn and I ended up going under contract last Friday.

    The seller decided to pursue a Suit to Quiet Title. We will stay under contract until the case is completed. I only had to put $2,000 down. It could take a couple months. The contract hinges on my ability to obtain Title Insurance and to simultaneously receive a free and equitable title. This should result from the Suit to Quiet Title. I hope to get a General Warranty Deed.

    I am not over optimistic. The bank has a case for the remaining balance of the original loan. I do not know how this is going to play out. If the bank wins our contract falls through. If the seller wins I get the property with a General Warranty Deed. I would be really stoked if that happened.

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    Nothing has changed since your original post, in relation to the bank's mortgage. The document you saw filed probably had more to do with collecting the surplus money in the Clerk's account from the overbid....in ay case that document is irrelevant to their mortgage claim. IF they were properly notified in the tax deed foreclosure process, they are out. Again, quit speculating, and READ THE CLERK'S FILE WHERE THE NOTICES WERE SENT, AND SIGNED RETURN RECEIPTS are on file, or just wait for the outcome.

    1Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    I didn''t think I was speculating...

    I thought it was a pretty safe contract.

    He is going through the suit to quiet title because the title search shows there are claims on the deed.

    When the process is through I am entitled to the property with a General Warranty Deed. I was going to previously cancel the contract...

    0Reply
  • Jean Norton
    Flipper/Rehabber · Austin, TX · Member since 2009 · 405 posts · 168 votes
    12y

    If it's a good deal and you can wait, then wait. I see prices appreciating in FL, so you could be in even a better equity position later.

    The other way to quiet a title, if I remember correctly, is to let the property sit for 4 years. If nobody makes a claim, then the property should be insurable.

    I went through the quiet title action - a surprise expense, but worth making sure you don't have any issues in the future. And the bank will be extinguished, however they are entitled to any overages that resulted from the tax deed sale.

    0Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    FINAL UPDATE

    I closed on my first property yesterday. The property that was the subject of this thread was the one I purchased. It was stripped of all encumbrances and liens and I received a full title commitment from Stewart Title Guaranty (A publicly traded real estate services company).

    Super happy about this deal. The purchase price was for $144,000 and I brought $141,000 to the table. The loan is basically being treated like an equity line at a rate of 7% annually.

    The subject property is on a well-traveled and densely populated area. The parcel measures 12,200 square feet or a little over a quarter acre. It's a large corner on a road that sees 15,000 cars on a daily basis. (Renting this property, upon some cosmetic touch-ups, should be no problem. I love rental properties on highly traveled roads. You do not have to advertise online if you post a sign.) One building is a two-story, masonry bottom, frame top 4 unit apartment complex. There are three 1bds (two large) and 1 studio. The property also contains a two-car garage and a single family, wood frame, 1000 square foot home.

    Breakdown:

    Price $141,000

    4 Apartments (2@650, 1@575, 1@500), 1 SFH (850)

    Gross Rents - $38,700 - 8% Vacancy = $35,604

    Expenses - RE Tax ($2800) Maint ($3000) Reserves ($1500) Utilites ($2400) Property Mgmt. @ 7% ($2492.8) LawnCare ($833.33) Misc. ($500)

    TOTAL - $13,526.13 NET INCOME - $22,077.87

    Cap Rate - 15.3%

    I made an offer on this property in January of 2012. The offer never came of anything and the property got lost in either the bank or county's system. The tax deed sale sorted out the whole process.

    3Reply
  • Jamane Y.Pro Member
    Greensboro, NC · Member since 2013 · 169 posts · 29 votes
    12y

    @Daniel Miller I'm glad things worked out in your favor. I'm about to embark on tax sales, and find this thread very helpful.

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    Great news, glad it all worked out. Now that you've "been there, done that" with tax deeds, you know the process, and pit falls.

    0Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    I would definitely do it again. It's not super complicated. If the persons/entities with claims on the property are cooperative about removing the liens/encumbrances on the title the process is actually pretty painless. If a bank or stakeholder is uncooperative with the suit to quiet title it can really throw a wrench in the process...

    0Reply
  • Account Closed
    SFR Investor · Stillwater, OK · Member since 2014 · 168 posts · 37 votes
    12y

    Just found this and it was nice to see it worked out in the end!

    hopefully mine all come out like your deal did.

    0Reply
  • Dan Bee
    Los Angeles, CA · Member since 2014 · 19 posts · 1 vote
    12y

    What can the bank do to reclaim the $311,000?

    0Reply
  • Daniel Miller
    OP
    St. Petersburg, FL · Member since 2012 · 173 posts · 44 votes
    12y

    The bank has no right to the $310,000. They had the opportunity to purchase at the tax deed sale. They did not purchase and thus lost their claim. They can "pretend" to have the claim. They send me letters on a weekly basis telling me I can refinance the $310,000 I owe. I think they are just fishing. Or they are so damn big they do not realize what they are doing. 

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