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Phil Wang
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What would you not buy from a tax deed sale

Phil Wang
Posted Jan 17 2024, 13:41

Hey experts, I am from Tennessee and recently started to learn the tax sale. It looks like our county has a list of 400 tax sale properties and I just did a little bit search on their titles.

Now I've seen utility lien, existing mortgages, HOA lien, tax lien(ofc), abatement lien, mechanics lien, list pendens, what not. I'm sure there's be more clouds apart from these.

I'd like to know out of all the clouds, which one is the worst to deal with when filing a quiet title and would likely cause you to walk away from the deal.

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Kevin Sobilo#3 Buying & Selling Real Estate Contributor
  • Rental Property Investor
  • Hanover Twp, PA
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Kevin Sobilo#3 Buying & Selling Real Estate Contributor
  • Rental Property Investor
  • Hanover Twp, PA
Replied Jan 19 2024, 07:03

@Phil Wang, first learn the laws of your state regarding tax sales because they will differ quite a bit and the differences can be important. 

In my state there are 2 sales. The first (Upset Sale) the liens go with the property so you inherit them. With the second (Judicial Sale) the liens are said to be wiped clean, but that isn't exactly true as state and federal liens do not go away. So, IRS tax liens and state estate tax liens stay.

In my state the most common issues to deal with are paying estate taxes as many tax sale properties ended up there because an owner died and nobody took control of the estate. So, those estate taxes were never paid to the state. This doesn't show up as a lien filed with a document but it exists anyways.  The other common issue is not notifying all interested parties correctly about the sale. So, its common to have to spend money to do a Quiet Title Action to clear up any clouds on the title after purchase.

Keep in mind MANY things can affect title that are not recorded for you to see. For example, 40 years ago 3 siblings owned the house and sold it but only 1 sibling signed the deed. So, did the other 2 siblings intend to sign over their rights at that time?!? Those kind of clouds happen and are not obvious but would prevent a present day purchaser from getting title insurance.

Out of the liens you listed the one I would be most concerned about would be a lis pendens because that is a notification that the owner is being sued and any judgement will attach to the house as a lien. The reason I say that is most concerning is because you don't know if that judgement will be for $1,000 or $100,000 or MORE as the litigation may be ongoing and remain ongoing for YEARS!