Title Insurance vs. Quiet Title
Birmingham, AL · Member since 2020 · 11 posts · 0 votes
Hi, everyone. Does title insurance sort of serve the same purpose as a quiet title action? Would a quiet title really be necessary if you have a tax deed and the tax sale is valid? I had purchased a course and it came with some really helpful templates to file the quiet title, but I'm not sure if I really need to.
Hi, everyone. Does title insurance sort of serve the same purpose as a quiet title action? Would a quiet title really be necessary if you have a tax deed and the tax sale is valid? I had purchased a course and it came with some really helpful templates to file the quiet title, but I'm not sure if I really need to.
Hi Brittany,
I assume you are asking regarding an Alabama property. Tax sales are very different by state and you need to get state specific answers. Best person for Alabama is @Denise Evans She can give you the best answers.
In general terms, Quiet Title and Title Insurance serve two different purposes. Quiet Title is a process (usually via the courts) that works to remove claims that others may have on the property. In Alabama Tax Sales it is necessary to remove any claim the previous owner may have to redeem or reclaim the property. It is usually required before any company will issue Title Insurance which is a company's warrant that they have inspected the title and believe it to be good and will pay up to the policy amount if there are any successful claims against the title, subject to their limitations.
As an investor, you need to get Quite Title so that you have uncontestable ownership. You would not usually get Title Insurance until you sell or borrow against that property.
Hi, everyone. Does title insurance sort of serve the same purpose as a quiet title action? Would a quiet title really be necessary if you have a tax deed and the tax sale is valid? I had purchased a course and it came with some really helpful templates to file the quiet title, but I'm not sure if I really need to.
Hi Brittany,
I assume you are asking regarding an Alabama property. Tax sales are very different by state and you need to get state specific answers. Best person for Alabama is @Denise Evans She can give you the best answers.
In general terms, Quiet Title and Title Insurance serve two different purposes. Quiet Title is a process (usually via the courts) that works to remove claims that others may have on the property. In Alabama Tax Sales it is necessary to remove any claim the previous owner may have to redeem or reclaim the property. It is usually required before any company will issue Title Insurance which is a company's warrant that they have inspected the title and believe it to be good and will pay up to the policy amount if there are any successful claims against the title, subject to their limitations.
As an investor, you need to get Quite Title so that you have uncontestable ownership. You would not usually get Title Insurance until you sell or borrow against that property.
@Brittany Wilkerson, Roy's answer above is correct.
Title insurance is always a good idea. It is required by any lender to get a loan so generally you need title insureance to sell or finance a property. However there is no legal requirement for title insureance.
Now a quiet title action may be required in order to get title insurance for certain tax sales. That depends on specific state laws and the title insurers.
Weighing in for everybody's benefit reading this. @Roy Oliphant is right with his answer. I called Brittany (who is a customer of mine already) and explained it all to her. But, I didn't want to slight the people reading this by not providing answer. Thanks, Roy, for the shout out, by the way.
One recent wrinkle in Alabama. We are running into a large number of title insurance companies refusing to issue title insurance even with a final and non-appealable quiet title order. Non-appealable means enough time has passed after the court's order that any appeal rights have expired.
The issue with the title companies vs. investors is a change in the statutes several years ago. They now say that if someone wants to redeem, they need to do it within 3 years of when the investor was entitled to possession, or lose those redemption rights forever.
The investor is entitled to possession when it gets a tax certificate. So, shortly after the tax deed issues, as long as the investor is in possession and has been for some period of time, the investor can quiet title. The rules about quieting title say you MUST be in possession first. They don't say how long. In a case down in Mobile County, the investor took possession in the morning and filed quiet title in the afternoon and the court said that was too short. But, no court has ever expanded on that.
Despite the law change, and despite a lawful order from a court quieting title, the title insurance companies are saying you can't quiet title until you've had a tax deed for at least three years. They say the judge is wrong if he gives a quiet title order and it's been less than three years after the tax deed.
That is INSANE. If the judge was wrong, the former owner could appeal. If he did not appeal, then the judge is legally right as between the parties to the lawsuit, and nobody can ever say he was wrong. In other words, the judge is allowed to be wrong but everybody has to treat it as if he is right for purposes of that particular lawsuit and that particular property, because nobody appealed. The former owner has no redemption rights. There are no claims against the property. There is no reason to refuse to issue title insurance. Yet, the companies continue to balk.
I'm working on a solution, but I'm not there yet. Roy, call me if you want to discuss.
Weighing in for everybody's benefit reading this. @Roy Oliphant is right with his answer. I called Brittany (who is a customer of mine already) and explained it all to her. But, I didn't want to slight the people reading this by not providing answer. Thanks, Roy, for the shout out, by the way.
One recent wrinkle in Alabama. We are running into a large number of title insurance companies refusing to issue title insurance even with a final and non-appealable quiet title order. Non-appealable means enough time has passed after the court's order that any appeal rights have expired.
The issue with the title companies vs. investors is a change in the statutes several years ago. They now say that if someone wants to redeem, they need to do it within 3 years of when the investor was entitled to possession, or lose those redemption rights forever.
The investor is entitled to possession when it gets a tax certificate. So, shortly after the tax deed issues, as long as the investor is in possession and has been for some period of time, the investor can quiet title. The rules about quieting title say you MUST be in possession first. They don't say how long. In a case down in Mobile County, the investor took possession in the morning and filed quiet title in the afternoon and the court said that was too short. But, no court has ever expanded on that.
Despite the law change, and despite a lawful order from a court quieting title, the title insurance companies are saying you can't quiet title until you've had a tax deed for at least three years. They say the judge is wrong if he gives a quiet title order and it's been less than three years after the tax deed.
That is INSANE. If the judge was wrong, the former owner could appeal. If he did not appeal, then the judge is legally right as between the parties to the lawsuit, and nobody can ever say he was wrong. In other words, the judge is allowed to be wrong but everybody has to treat it as if he is right for purposes of that particular lawsuit and that particular property, because nobody appealed. The former owner has no redemption rights. There are no claims against the property. There is no reason to refuse to issue title insurance. Yet, the companies continue to balk.
I'm working on a solution, but I'm not there yet. Roy, call me if you want to discuss.
We have been dealing with title insurance issues since I started in 2009, not sure how far back beyond that it goes. In Louisiana you can confirm your tax sale, receive a judgement with quiet title and wait for years and all the big national title insurance companies wont touch it. Thankfully we have a local company (LA/MS) USNTI US National Title insurance that was created specially for tax sale properties. It's a more expensive policy but at least we have an option. They have been around for 10+ years now and more and more closing companies will write through them and the majority of the banks will accept them when someone is buying and getting a mortgage.
There are 2 ways we can get a traditional title insurance company to write a policy on a tax sale property. (1) if the owner signed the green card from certified mail that was sent BEFORE the tax sale or (2) you track the original owner(s) down after you quiet title and have them sign a quit claim. I have received traditional title insurance on tax sales properties from both ways. If it's not one of those two, it ain't happening. We have good faith acquisitive prescription at 10 years and I don't think they would write a policy even after that.
A short answer to the original poster's question..... Quiet title is legal process for you to legally become the owner (extinguish the ownership rights /interest of everyone else.) title insurance has nothing to do with legal ownership and is a higher burden. The title insurance companies do not want to pay out claims so they don't want to write a policy unless they feel there is no risk of something trying to pop up and over turn it at a later date. Tax sale laws change and can be funky from state to state so most just avoid them. They see a very small amount of business as being a larger risk than most everything else they deal with.
@Denise Evans, @Roy Oliphant, @Brittany Wilkerson You all probably understand this but for others reading along.
As Denise' post above points out, you can be legaly right and still get the wrong result. Title insurance companies aren't intersted in being right, they are intereted in avoiding claims against them and having the cost to defend against those claims. That is true even when the title company know they will win.
Ther are ALWAYS twist and turns of hyper technical issues that can be brought up. In Denise' post she mentions that "The investor is entitled to possession when it gets a tax certificate". But the right of posession is diferent than actually having possesion. I don't know if this is an issue here but I use it as an example of they typs of thing that can cause problems where none are expected.
Anyway, I agree that fact that a title company won't insure when there has been a quiet title action is pretty absurd. One wonders if a complaint to the insurace commision in AL would be helpful