IRS Auction property - How to obtain title insurance?

8 Replies

I've purchased Properties from the IRS for the last 3 years and have held them to use on Airbnb - which has been extremely profitable - however, I've found another property I'd like to buy. I'm in the middle of doing a 1031 exchange — only to find that the current title company is completely oblivious to how the IRS issues title - this skepticism will ultimately lead to the sale falling through...

Unless.....I can find a title company familiar with IRS Auctions - and the Quit Claim Deeds that are issued after the redemption period.

Has anyone purchased property in Colorado or Kansas from an IRS auction? Have you been successful in selling? If so, which title company did you use? How long did you hold property before it was sold?

Would love input from anyone!

Cheers,

Christina

Originally posted by @Christina McIntosh :

I’ve purchased Properties from the IRS for the last 3 years and have held them to use on Airbnb - which has been extremely profitable - however, I’ve found another property I’d like to buy. I’m in the middle of doing a 1031 exchange — only to find that the current title company is completely oblivious to how the IRS issues title - this skepticism will ultimately lead to the sale falling through...

Unless.....I can find a title company familiar with IRS Auctions - and the Quit Claim Deeds that are issued after the redemption period.

Has anyone purchased property in Colorado or Kansas from an IRS auction? Have you been successful in selling? If so, which title company did you use? How long did you hold property before it was sold?

Would love input from anyone!

Cheers,

Christina

Quit Claim deeds scare title companies. I'm surprised you weren't issued Special Warranty Deeds, but hey, the IRS is in it's own world. You just have to call around. You may need to talk to either a real estate attorney or an enrolled agent to get the answer.

Your paying cash from the 1031 exchange. The closing attorney or title company should just complete a Quit Claim or Limited Warranty deed. If they don't understand how to do their job, fire them and get someone who does.

Originally posted by @Christina McIntosh :

@John Underwood

The buyer of the property is using a VA loan. The title company is unable to issue a title policy because they don't understand the IRS seizure policy.

So if the IRS is only providing a QC Deed you will need to go through a Quiet Title to be able to get a mortgage. So the Title Insurance company may understand this pretty well.

 

@Christina McIntosh

The title companies DO understand IRS seizure policy, which is why they won’t insure title.

The IRS is NOT providing the normal warranties provided by most sellers, in effect they're saying that they won't defend title should there be a problem with their property seizure/foreclosure. In a warranty deed situation, the title company can sue the person providing the warranty deed if there exists a title deficiency. With a Quit Claim Deed the title company has no one to sue. Since the title company has no way of knowing if the foreclosure was handled in compliance with all pertinent statutes, doesn't know if all relevant parties were provided proper notice, and may not even know the potential claims concerning previous transfers ( many people about to lose their real property for an IRS lien begin to do a serious of title transfers to try to frustrate the process), they realize that the title policy fee is t worth the potential liability.

In the old days, there were some independent, small insurers who would take the riskier policies. I don’t think they were able to stay in business.

Quiet Title is a process by which you petition the court asking the court to determine that you are the rightful and sole owner of the subject property. Different states have different requirements, rules etc., as title is a state issue. We’re talking attorney fees, court costs, and time.

Figured it out!

Just call multiple title companies and explain the issue.

My issue was:

Bought property from IRS auction/was ready to sell property however,

The “extinguished liens” still exist

If a title company is familiar with IRS auctions they understand how to issue the policy.

I used North American Title Company in Colorado Springs - highly recommend!

I just wonder why there lien still exist after an IRS auction. As i know IRS lien is top, other lien will be wiped after the auction, and it gives a free and clear property. Am i corrected?

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