Title insurance for property obtained after tax lien foreclosure.

[John Byrley]

In March of this year, we acquired title to a property in St. Mary's county, Maryland, through a tax lien foreclosure, paying about $40K.  The prior owner, a mentally-challenged man, had died in 2018 while in long term care.  Maryland Dept of Health placed a lien on the property in 2018 for the costs of the care, totaling about $90K.  The property had sat vacant and neglected since then, rapidly deteriorating and becoming an eyesore to the neighborhood.   During the foreclosure process, we were not able to locate any heirs to serve, despite contacting several friends of the deceased, doing an estate search, obituary search, Radaris search, etc.  We were told by several people that the decedent had no heirs.  (We did not use a professional heir search service).  We did serve the State of Maryland.  The State did not respond to the foreclosure complaint.   The judge ordered foreclosure and we obtained the deed from the county.  We are now trying to sell the property.  We had one offer for $100K but that fell through due to refusal of the title company to insure title.  We are searching for a title company in Maryland who would be willing to insure a title like this.  As an alternative, we are considering Tax Title Services or a Quite Title if necessary.  Any advice or guidance anyone would give would be much appreciated.   

[Patrick Roberts]

I believe there is only a handful of title companies that will issue policies on tax lien foreclosures. If I remember correctly, Civic Source is an auction service that operates in the tax lien foreclosure space and they own/bought a title insurer to issue policies on the properties they sell. Might be worth exploring - I can't say for certain, though - my experience is limited here.

[Russell Brazil]

I think there is like literally 1 title company that will insurance the title on a tax sale in Maryland. @Ned Carey works with them a lot. 

[Ned Carey]

@Russell Brazil Thanks for the shout out.

@John Byrley I have several I work with in the Baltimore area for tax sales. Whether they will settle one in Saint Mary's county I dont know. Try Dulaney TItle in towson, Clearview Settlement, New Word Title in timoium or Crown TItle in Catonsville. Those are ones off the top of my head that we use a lot. 

[Tom Gimer]

The fact pattern is missing WHY they would not insure. Nobody can answer the question as written.

Was the foreclosure completed without representation by an experienced local tax sale attorney?

[Peter Walther]

I noticed there isn't a mention of a guardian ad litem being appointed to represent the unknown heirs.

[Ned Carey]

As @Tom Gimer and @Peter Walther write, why wouldn't they isure is a vital question. 

Some title insurers simply don't insure tax sales period. Some do but the tax sale has to be done properly and title otherwise good. Getting a foreclosure judgement is different than getting one that will withstand a challange and be insureable. 

[John Byrley]

Thanks to all for the replies.  More specifics - the main issue is failure to include the lien holder in the foreclosure suit (the State of Maryland was named, but not the MD Dept of Health).  A secondary issue is related to the unknown heirs - no guardian ad litem was appointed (though I'm not sure how commonly that's required in Maryland as opposed to Florida for example), and no professional  heir search service was utilized.  Someone I spoke to today mentioned the possibility of reopening the foreclosure to include the MDH and possibly resolving the unknown heirs issue - but from my understand that's rather difficult to get done, but if possible it might be the most straightforward thing to do.  The problem of course is that we already paid off the county so I'm not sure what would prevent MDH from simply redeeming the lien and then we're in the same position.  Anyway, my realtor did text me earlier and said the buyers found an insurer who will do it - they just have to "clear it with the State" - so we'll see.  

[Justin Summers]

Clearing it with the state means they will only do it if the state signs off they release the lein.. They won't ..   I strongly suggestion going with Tax Title services.   It's like $900 for them to do all the research and give you a decision within 45 days.. Well worth the money.

[Rick H.]

One of the better, cogent discussions on BP. 
I’ve worked the probate and trust section of real estate for many decades and concluded years ago that it’s easiest to think of probate as mostly a title issue. 
Title underwriters are wired differently and see risk that’s either invisible to us (due process noticing, etc.) or non-existent (odds of an heir born in 1850 objecting to a petition in open court). 
I’ve met with founder of tax & title service several times and convinced that the appetite for risk is based on economics of risk and return. Better chance if you’re a big, profitable customer.
Gotta ask the ATO what a file would require for them to be comfortable writing policy to pass title.
 If they cannot state what they need, move on. 

[Peter Walther]

Quote from @Rick H.:

One of the better, cogent discussions on BP. 
I’ve worked the probate and trust section of real estate for many decades and concluded years ago that it’s easiest to think of probate as mostly a title issue. 
Title underwriters are wired differently and see risk that’s either invisible to us (due process noticing, etc.) or non-existent (odds of an heir born in 1850 objecting to a petition in open court). 
I’ve met with founder of tax & title service several times and convinced that the appetite for risk is based on economics of risk and return. Better chance if you’re a big, profitable customer.
Gotta ask the ATO what a file would require for them to be comfortable writing policy to pass title.
 If they cannot state what they need, move on. 

The problem with ignoring the interest of an heir born in 1850, is that the heir's interest would pass down to his/her heirs or beneficiaries including as a last resort, the state.  The interest does not simply evaporate.  Now many states that I'm familiar with have statutes that cut off ancient claims and interests.  For example, Florida has the Marketable Records Title Act (F.S. 712) which provides that an unchallenged deed of record for 30 years becomes a new root title extinguishing prior interests.  There are some excepted interests.