Purchasing a Tax Deed Property
Hello Everyone, i'm quite new to RE and i'm looking at my 3rd deal which is a duplex. The owner acquired the property through tax lien foreclosure over 2 years ago and has been renting it out. We've been in the negotiation process and he told me that i should call my bank first to see if they're ok with Tax Deed Title. The owner told me that if i purchase the property, the title company has to do extensive title search and convert the "Tax Deed" into a "Warranty Deed". I'm not so familiar with this and i'm wondering if there are anything else or other risks i should be aware of? Thanks
-Nathan
Hello EquityNCashFlow,
There are a few items to beware of (no reflection on the Tax Deed Holder/Owner).
First, you can do a little research on your own by making sure that the owner is the actual owner of Record. The County Courthouse will have the information on file for you. There should be a Tax Deed in the records bearing the name of the Deed Purchaser/Current Owner.
Next, basically the Tax Deed Holder did not bother to Clear the Title after acquriing the property from the Tax Sale for a future sales transaction, which requires Title Insurance/Warranty Deed to transfer it to you as the new owner. This is particularly important if you are financing the property through a Bank/Credit Union; so, since you are now expressing interest in buying it, a Title Search has to been done by a reputable Title Company in order to receive a Warranty Deed. You should be able to get Title Insurance IF title clears.
Finally, I strongly encourage you to either get a Title Search Done first and make sure you keep your Closing Attorney in the loop about your every step. You may want to at least let him/her know about the deal before you lock yourself into a contract (with respect to Earnest Money).
Note: If the Tax Deed Holder/Owner had done the title search/ensured that he could get Title Insurance (Warranty Deed) a while back, then he could do a simple purchase and sale agreement/deal with you; however, at this point, you definitely want to see your Attorney-at-Law to protect your interest. Again, no reflection on the Tax Deed Holder. Let's give him some credit because he did ask you to check with your Bank first. (A Good Start)!
Best Regards & Much Success As You Invest,
MoneyMakers,
Yeah that's a good point. Always do a property title search in order to find out if any liens are already on the property and other important information is noted there before bidding.
Hi Nathan,
I believe that you will be able to get title insurance now. In Oklahoma, the previous owner who lost the property through a county tax deed had 2 years after the tax deed to go to court and contest the foreclosure. Those two years have now passed, and, I see no reason why a title company won't provide title insurance.
If February, I had a contract to sell a shack and two residential lots in Arcadia, Oklahoma, to a neighbor of the lots. I had acquired the property in September 2010 by foreclosing on a tax lien certificate. I assumed the buyer was going to pay all cash (the price was only $6,500). When I found out he was borrowing money and the lender required title insurance, I told him "let's put the deal on hold until September, because the title company won't give you title insurance now".
Please give us an update about the title company says in your case. Specially if they contradict what I said in my first paragraph.
Abdenour