Sheriff sale auction purchase.. should I buy title insurance?
Lakewood, OH · Member since 2013 · 68 posts · 23 votes
I purchased a home at an Ohio Cuyahoga County Sheriff's auction today for $46k. The comps are in the $110k area. The liens and taxes look good on the auditor and clerk of courts website. Nothing that wont clear up with this proceeding.
I have not bought a home at sheriff auction since 2003 and am rusty. For years I've been purchasing via MLS and FSBO. But given the heightened competition I'm branching out into auction to find deals this year... and it appears to be bearing some fruit as long as this home is not a complete train wreck when I finally get to see it.
My question since this is semi-new territory for me: Should I contact my title company and purchase title insurance? Or not spend that money (assume the risk) since rarely do liens show up later?
Are there any other suggestions?
I agree with David that are certain things buying title insurance will put title insurance company on the hook for but the problem is this. Look at your your title policies today they usually inoculate themselves to liability in the transaction. Over time more and more I am seeing the documents in my face I must sign to say I agree that they are not liable. What am I paying form if they arent helping me to clean up my title?
I basically wind up paying them to research for me then tell me they could be wrong dont hold me accountable if I they are.
So this is my opinion I would at least pay for preliminary title work to get the research but maybe thats it. The legality of title companies making any lien go away is highly unlikely. a 1910 tax bill that is unpaid and this held up in court? No probably you paid it to avoid court because it was a small lien. The aspect we are really discussing here is research not liability. Liability is yours if you buy it not the title companies..The title company will make sure they write themselves out of many liabilities. The greatly reduces the value of a policy in general.
This is another reason why half the time they shove a special deed down your throat when you buy bank property since no one wants to say its clean. Title insurance isnt quite as good as just sue for quiet title. cleaning up a mess in the chain of a title isnt easy and even bringing suit for quiet title can leave you open to attack by a jurisdiction later on in the life of ownership from previous claims. Here is just one of a bunch of examples of what seems to me a pretty blatant disregard for the basics of property rights. Here is just one example of my research below.
There is no statute of limitations governing quiet title actions as such. Rather, the statute of limitations for an action to quiet title depends on the theory of recovery. (Muktarian v. Barmby (1965) 63 Cal.2d 558, 560.)
In some cases, no statute of limitations runs against a plaintiff seeking to quiet title while he is in possession of the property. An outstanding claim that amounts only to a cloud on title is a continuing cause of action and is not barred by lapse of time until the hostile claim is asserted in some manner so as to jeopardize the superior title. Accordingly, so long as the adverse claim lies dormant and inactive, the owner of the superior title may allow it to stand indefinitely. (Western Title Guaranty Co., Sacramento County Division v. Sacramento and San Joaquin Drainage Dist. (1965) 235 Cal.App.2d 815.) Where the plaintiff remains in possession of the property, the dormant adverse claim does not trigger the statute of limitations. (Smith v. Matthews (1889) 81 Cal. 120, 121; McNulty v. Copp (1949) 91 Cal.App.2d 484, 493.)
When I tried to do legal research on this matter so many historical cases came up supporting both sides of this issue, that it amounted to a total break down in the legal system that doesnt recognize any particular piece of real estate law on the matter trumping all others.
It means title insurance is not worth much besides research. Bobby Gerry is right why bother if you are capable yourself.
Its a service to you and maybe banks require it but its does not clear up old matters.
This is murkey water and you take your chances in my opinion however buying title insurance and sue for quiet title does do something. It tells the court you made an attempt to handle your business using the matter of law on which the foundation of our civilization is held up.
All judge's knows if they begin stripping property away from enough people or entity eventually that governing geo area will become unstable and not a safe place to invest money. This country has a tradition of recognizing common law and our history in legalities thereof certainly show that in most cases.
My opinion buy title insurance or bring action for quiet title but your title is still not always going to be clean.
For people like me I cant stand this, it boils my blood that government allows this. Real Estate attorneys please do jump in comment on this matter? If you disagree please explain so I can gain a better understanding. I have been investing in tax deed property for 20 years and still feel like in some jurisdictions its not possible to guaranteeing property rights.
HB. If the property can be insured, buy title insurance. Not only does it perform miracles in the rare event there is a problem, it makes the property salable and mortgage ready.
I bought a tax deed property a decade ago. At purchase time I had no intentions of selling it or borrowing on it. Two years later, low and behold I had a need for cash. The title wasn't clear. It costed me $4K in legal fees and two years until I won my suit for clear title.
I bought a tax deed property a decade ago. At purchase time I had no intentions of selling it or borrowing on it. Two years later, low and behold I had a need for cash. The title wasn't clear. It costed me $4K in legal fees and two years until I won my suit for clear title.
Thanks for sharing. Why wasnt the title clear? Was it IRS taxes due?
I would. Title insurance is a good idea for any property. I've seen past heirs pop up who claimed forged signatures, and I'm sure there are 8700 more possibilities.
Huggy Baird If I remember correctly, there was a problem in the chain of title from years back... caused by one of the heirs in an estate sale that failed to sign the old deed. We had to establish that the heir was deceased and that none of her heir had any claim to her share. Some twisted mess such as this.
I want to stress that the biggest trauma I faced was that I failed to initiate the suit for quiet title as soon as I bought the unit. The trauma came from "thinking" I could use the property for a loan, but was caught "with my pants down" when I found out the title wasn't insurable.
Huggy,
Don‘t waste your money buying title insurance. Sorry to go against all the advice here (especially Justin S. who never calls me anymore, ha) but here’s why.
If you purchased a first lien foreclosure (and it sounds like you did) then anything junior to that lien was wiped out. If there’s something senior to the lien that foreclosed then buying title insurance now does nothing for you.
The title company can’t make a senior lien go away. Anything senior will show up as an exception to the policy, and then you’re out the title insurance premium plus the senior lien. I think buying a policy after a foreclosure sale is like closing the barn door after the horse has left.
When you go to sell the house, you can get the buyer to buy a title policy on their end.
And now I’ll have to get ready to start rebutting the rain of abuse I’m going to take from my fellow BP’ers on this issue. But I'm ready. :)
Best, Bobby
ps. I'm leaving a ps. here to remind myself to write about the times I bought single-family homes at foreclosure that had IRS tax liens on them .. on purpose. But that's a different story.
@Bobby Gerry,
Abuse Raining Down.....
Abuse Raining Down.....
Ha Ha!
Yep those IRS liens scare some, that don't know better. The bigger the lien, the better.
Wayne Brooks you know I have to say the federal tax lien thing is probably one of the better kept secrets out there for foreclosure buyers. A veteran foreclosure buyer and friend of mine made me swear up and down a couple of years ago that I would never talk about it.
...You know, wait, actually I don't want to say anything that would encourage people to try it because there are a couple of things that can be accidentally messed up while doing it. Better to leave it alone.
..Dang, look at the clock. Time for bed.
Bobby Gerry Interesting view on title insurance. Would you recommend a buyer get a title company to run title to see what/if any the exceptions would be? Now that I think about it, this would be a "free" way to find out if it is insurable and be notified of any issues.
[solicitation removed]
Thanks.
@Huggy Baird
AS Dirty Harry would say, "Do you feel lucky?"
imho, third party sales like sheriff and tax sales are MORE prone to title errors. One just recently had unpaid municipal liens for water, sewer and trash.
One thing that is prevalent on the Sheriff Sales is that the mortgage has been assigned and re-assigned sometimes multiple times. Banks buy banks, mergers, go out of business, etc. Another one recently the bank doing the foreclosure didn't have any recorded assignment and couldn't locate one in their files. So the bank holding the mortgage was not the bank doing the foreclosure.
And notice is always a possible issue on third party sales. If a junior lien holder is not notified of the sale, their lien is not wiped out.
Its your call.
David Krulac makes a good point above regarding junior lien holders.
If they were not notified of the foreclosure sale, then their lien is not wiped out.
There's probably a thread here on BP that goes over all the intricacies of buying at foreclosure auctions.
But back to Huggy Baird's point regarding whether or not he should buy title insurance after making his purchase:
Even if a junior lienholder was not notified of the sale (and their lien is still in place), buying a title policy will not make the lien go away. It will appear as an exception to the policy. And so again I do not think there is value in buying a policy after the sale.
Purchasing a title policy does not make any lien of record go away (either senior or remaining junior). If you are concerned about the existence of such liens I'd say simply ask a title company to abstract the title for you (i.e. research it for you). That's cheaper than buying an actual policy.
Sometimes liens are missed on the searches, title insurance would cover that.
Tittle insurance can cover unrecorded municipal liens. Had one where the municipality bills for trash and had not been paid in 4 years, no lien was recorded. another time town installed new side walks billed owner, they never paid, town never recorded lien, title insurance covered that.
Mechanics liens here don't have to be recorded until 6 months after work is completed. So they are often not of record.
Plus the forgeries and missing signatures can be covered by title insurance.
Unpaid tax bills are often no recorded. My grandmother bought a property where there was a real estate tax bill from 1910 that was unpaid, yes over 100 years ago. Here there is no limit on unpaid tax bills, she had to pay the bill plus interest, fortunately the real estate bills in 1910 were very small to begin with.
So I still say, "Do you feel lucky?"
I agree with Bobby on this. I have never bought title insurance on Sheriff Sale purchases.
Yes, there can be errors and things that pop up in SHeriff Sale transactions but to my knowledge, none of the things that pop up are covered by Title Insurance and the things that Title Insurance covers never pop up. So it might FEEL like you are being prudent and are covered but you really are just wasting money.
Getting a title search is a totally different deal and should be done.
I agree with David that are certain things buying title insurance will put title insurance company on the hook for but the problem is this. Look at your your title policies today they usually inoculate themselves to liability in the transaction. Over time more and more I am seeing the documents in my face I must sign to say I agree that they are not liable. What am I paying form if they arent helping me to clean up my title?
I basically wind up paying them to research for me then tell me they could be wrong dont hold me accountable if I they are.
So this is my opinion I would at least pay for preliminary title work to get the research but maybe thats it. The legality of title companies making any lien go away is highly unlikely. a 1910 tax bill that is unpaid and this held up in court? No probably you paid it to avoid court because it was a small lien. The aspect we are really discussing here is research not liability. Liability is yours if you buy it not the title companies..The title company will make sure they write themselves out of many liabilities. The greatly reduces the value of a policy in general.
This is another reason why half the time they shove a special deed down your throat when you buy bank property since no one wants to say its clean. Title insurance isnt quite as good as just sue for quiet title. cleaning up a mess in the chain of a title isnt easy and even bringing suit for quiet title can leave you open to attack by a jurisdiction later on in the life of ownership from previous claims. Here is just one of a bunch of examples of what seems to me a pretty blatant disregard for the basics of property rights. Here is just one example of my research below.
There is no statute of limitations governing quiet title actions as such. Rather, the statute of limitations for an action to quiet title depends on the theory of recovery. (Muktarian v. Barmby (1965) 63 Cal.2d 558, 560.)
In some cases, no statute of limitations runs against a plaintiff seeking to quiet title while he is in possession of the property. An outstanding claim that amounts only to a cloud on title is a continuing cause of action and is not barred by lapse of time until the hostile claim is asserted in some manner so as to jeopardize the superior title. Accordingly, so long as the adverse claim lies dormant and inactive, the owner of the superior title may allow it to stand indefinitely. (Western Title Guaranty Co., Sacramento County Division v. Sacramento and San Joaquin Drainage Dist. (1965) 235 Cal.App.2d 815.) Where the plaintiff remains in possession of the property, the dormant adverse claim does not trigger the statute of limitations. (Smith v. Matthews (1889) 81 Cal. 120, 121; McNulty v. Copp (1949) 91 Cal.App.2d 484, 493.)
When I tried to do legal research on this matter so many historical cases came up supporting both sides of this issue, that it amounted to a total break down in the legal system that doesnt recognize any particular piece of real estate law on the matter trumping all others.
It means title insurance is not worth much besides research. Bobby Gerry is right why bother if you are capable yourself.
Its a service to you and maybe banks require it but its does not clear up old matters.
This is murkey water and you take your chances in my opinion however buying title insurance and sue for quiet title does do something. It tells the court you made an attempt to handle your business using the matter of law on which the foundation of our civilization is held up.
All judge's knows if they begin stripping property away from enough people or entity eventually that governing geo area will become unstable and not a safe place to invest money. This country has a tradition of recognizing common law and our history in legalities thereof certainly show that in most cases.
My opinion buy title insurance or bring action for quiet title but your title is still not always going to be clean.
For people like me I cant stand this, it boils my blood that government allows this. Real Estate attorneys please do jump in comment on this matter? If you disagree please explain so I can gain a better understanding. I have been investing in tax deed property for 20 years and still feel like in some jurisdictions its not possible to guaranteeing property rights.
Thanks for all the helpful replies. William Bannister you really shared a wealth of private research and opinions. More than I would of ever expected.
I'm going to roll the dice and not buy title insurance. I will have my title company do a search.
I'm no stranger to taking risk in exchange for expected upside. Lightning does not strike often.... so I'll take the chance i don't get struck on this one
Thanks again for the well thought out responses
hmmmm, there are so many what if's here. Did the bank take it and they are sending it to sheriffs sale? In this case the lender clears title in the forecolure process. Was it a receiver who is sending it to Sheriffs sale which is legal in many states? In this case the receiver may or may not have cleared title. And if they did, who did the previous title? When was it done? Gosh, i would gather from some of the replys that a number would even not recomend an attorney. But then, none of them appear to be attorneys. Do you know how dower rights effect a sale? I could list multiple questions I guess but my thought is this: you are buying a property that is in many cases a substantial discount to market value. Don't get too greedy, you will eventually regret it. Protect yourself an your investment.
So i attended a local REI yesterday about sheriff auctions, and they mentioned title insurance for properties bought at auctions. So I found this tread.
I agree with @Eric M. @Bobby Gerry @William Bannister Buying it after makes very little sense.
My question is, besides extensive title searches prior to bidding the house, what else do you gentlemen do in regards to title searches?
@John MacFarland It's not a issue of being greedy. Everyone wants to mitigate risk. But what's the point of buying an insurance policy if there're all sort of loop holes from protecting the buyer?
Any title companies care to comment on this?
You can Only buy title insurance after you own it, and more importantly only if the title is clean and has no liens to prevent clear title. It sounds like you think buying the insurance solves existing problems.....it does not. Title insurance is purely for issues that are not apparent today, and may surface in the future.
No, I know a title insurance do NOT solve existing problems. Especially after you have already bought a house at a sheriff auction. That is why I agreed that buying a title insurance after a sheriff auction do not make any sense.
What I want to know is for those people who DO buy title insurance after a sheriff auction, why do you do so?
And if you don't buy title insurance after a Sheriff sale, how do you mitigate the risk ? besides running title searches.
You buy title insurance after acquiring at a sheriff sale for the same reasons you buy title insurance on any purchase, for unseen problems.....heirs that pop up that weren't properly dealt with in prior probates, forged deeds/signatures, etc., etc. The only way to mitigate risks before buying is by doing a title search.
thank you for your feedback @Wayne Brooks
Just to confirm once you win at the auction, you immediately buy title insurance for that house. Not wait until you get the deed to the house ?