tax deeds and quit claims

14 Replies

A Tax deed is considered to have a cloud on the title. So to sell quickly you would not be able to warranty the deed and would need to use a Quit Claim Deed. If there are no other liens, defects or mortgages, and the deed is otherwise clean then you can get a QCD from the previous owners to remove the cloud and then you can get title insurance and sell with a general warranty deed. I did this last year. The buyers attorney didn't understand at first and he had to talk to my attorney to get educated. Then the sale went through with a general warranty when I had received a Tax Deed. I had to get a QCD from the previous owners and  a mortgage release from a previous mortgage on the property.

Thanks, @John Underwood   I'm looking in the Florida market. I now understand in order to warranty the property a quit claim needs to be filed.  So basically if I buy a property from a tax deed auction it doesn't automatically wipe out all liens or mortgages, and I would have to do a title search before or after the sale to find out? If there are any liens would I be responsible?

Originally posted by @Greg Levi :

Thanks, @John Underwood  I'm looking in the Florida market. I now understand in order to warranty the property a quit claim needs to be filed.  So basically if I buy a property from a tax deed auction it doesn't automatically wipe out all liens or mortgages, and I would have to do a title search before or after the sale to find out? If there are any liens would I be responsible?

 A tax deed does wipe out most liens and mortgages as long as the county properly notified the lienholder. Exceptions are State and Federal liens such as the IRS.

The cloud exists because someone may not have been properly notified. If you get a QCD from these people in question or a mortgage release then you remove this cloud. Their could also be an instance where the owners are deceased and did the heirs get notified?

For the most part if I get a tax deed I keep the property fix it up and rent it and I am confident in my ownership of the property.

Are you sure about IRS liens? these would be superior as far as I am aware.

I sincerely question how enforceable they would be however. 

Originally posted by @Mark Fries :
@Greg Levi @John Underwood

tax deed in florida does wipe out state and IRS liens, if they were properly notified. doing one right now..of course they fight a little but they have no recourse if they were notified properly.

Hi All,

What about California? I am currently bidding on tax lien property, and I have done my due diligences as far as looking to see if there were any liens on the property. Can the IRS or a mortgage company have liens on the homes? How can I tell if the property has a mortgage? Also, the grantor is a trust company.

Originally posted by @Deborah Gray :

Hi All,

What about California? I am currently bidding on tax lien property, and I have done my due diligences as far as looking to see if there were any liens on the property. Can the IRS or a mortgage company have liens on the homes? How can I tell if the property has a mortgage? Also, the grantor is a trust company.

 Hi Deborah,

In California, a tax sale does not eliminate an IRS lien.  The property owner have five years to redeem and if they do not redeem within that time period, the property is sold on a tax deed not a tax lien certificate.  The mortgage holder is notified of the defaulted taxes, the upcoming sale of the property and will have an opportunity to redeem the property prior to it being sold publically.  If the mortgage holder does not redeem, then the mortgage lien is wiped out.   However, if you purchase a tax sale property the owner has one year to come back and say there was an error (for example, a typo or tax bill going to the wrong address).  It is recommened in the tax sale guidelines that you make no major repairs or alterations to the property for at least one year.  I would recommend reviewing all the guidelines for the county in which you are bidding and to also review the California Tax Sale laws before proceeding to ensure you have a clear picture of your limitations.  I hope this is helpful. Thanks!

Originally posted by @Deborah Gray :

Hi All,

What about California? I am currently bidding on tax lien property, and I have done my due diligences as far as looking to see if there were any liens on the property. Can the IRS or a mortgage company have liens on the homes? How can I tell if the property has a mortgage? Also, the grantor is a trust company.

 To be particular, California is a Tax Deed state, not a Tax Lien state. So you are bidding on acquiring the deed vs. acquiring a lien against the property. I just saw the previous post answered this too.  

Also, I recommend using Tax Title Services. They offer services that can replace the lengthy process of filing quiet title. They offer tax title certifications and work directly with title companies willing to provide title insurance. However, that does not mean most buyers/agents/wholesalers/investors will understand the value of proof of marketable title even if you put it in front of their eyes.