Can a Quiet Title Action solve this scenario?

Question

Scenario: Elderly owner dies and HOA forecloses on the property. The property has no mortgage lien and owes at least 2 years of real estate taxes. If I bid and win this foreclosure auction, pay off the taxes, would it be safe to say the property is now mine to sell to another, or would a quiet title action make it more sure?

Frank Chin · Answer

@Elizabeth C.

If it's not specifically stated sold free and clear, then it's not. As to liens, you can check down at the county clerks office, and nowadays, public records are available online. Quiet title action does not obliterate current liens, it's usually for very old liens where releases are not file, and lienholders cannot be found.  Reasons are the lienholder died, if it is a person, or the company or the bank no longer exists.

For condos, check the CC&R's to see if you plan to rent it out, if the HOA allows it, and what the rule's for that are.

Often, there is a reserve price, if you do not meet it, the bid is rejected. If it's an absolute auction, the lowest bidder by default wins, though lender banks can go in and place bids if bids are too low and below the mortgage. There was an auction for a condo unit where $125K units sold at auction for $40K which is what I got it for but one time they held an auction for a foreclosed unit where there is no reserve price indicated, was poorly advertised, and no one showed up except the owner and his twin brother. The owners twin brother realizing what happened, place a bid for something like $3K to $4K, because that's what he had available on his credit card, and it's the winning bid. Everyone was upset that a $125K condo sold at $3K and the HOA had a rule passed where they can match such bids in the future.

Frank Chin · Answer

What would you need a title action for? Did a title search turn up old liens?

I purchase properties at auctions, some are sold free and clear and some not. If they don't say free and clear, you would pay the back taxes, and old liens. Seems there are some unpaid HOA fees and you'll have to contact the HOA on how to handle.

Elizabeth C. · Answer

Thank you for the reply! The foreclosure auctions here don't inform you if title is free and clear unfortunately. I have to do the research or pay for title search to do it for me. The books say to always do a quiet title action just to be sure anything found cloudy is cleared, especially if you want to sell the property in the near future, but I wasn't sure if quiet title action also applies to this scenario. But I think I understand now. You're saying a quiet title action is only used if there are other old liens on the property. So basically if there are no liens on the property and only the HOA is foreclosing and I win that auction the property is now 100% mine to do anything with? Wow! This will be my first foreclosure investment so I want to be sure I'm doing it right.