Tax Deed Quiet Title Questions

13 Replies

I am looking for a little advice regarding a tax sale property in Missouri.  I realize any advice given is not to be considered legal advice.  I have this in front of my attorney for review, but I am looking for some additional color on the situation from those that are in the know on this process....

Prior to the financial crisis, I sold a house to an individual.  The buyer obtained a 90% first mortgage and I took back a 10% second.  In the years following the buyer went delinquent on the first mortgage/second mortgage and stopped paying the real estate taxes.  In 2015 I was contacted to participate in a short sale as the second lien holder, but the agent could never get the deal done. 

Fast forward to 2020 and someone purchases the tax deed on the property.  I never receive any redemption notification or other notices regarding the sale of the tax deed.  Last week I was served with a quiet title as I am still showing as a deed of trust on the property.  For some reason the first mortgage is not showing at all on the quiet title suit which is strange (I'm not sure what happened to it....but I appear to be in a first position now??).

What are my options on it?  Any chance of getting some type of payoff to release the lien?  Any chance I could "redeem," payoff the tax deed purchaser and take title to the property? 

Not an expert in tax sales/deeds so any info would be greatly appreciated.  

 

If you have a recorded mortgage and the county did not properly notify you about the tax sale, then the tax deed can legally be voided.

I would get a copy of the tax collectors file and see if there is any mention of your recorded mortgage.

I would talk to the tax collector and see what the story is and then inform your attorney. This will save you many billable hours from your attorney.

@William Jenkins The response from @John Underwood is dead on. You cannot be wiped out without Due Process. You need to be served.

You have (at least) two potential ways to get compensated. The exact details would depend on your state's laws and court precedents. A good attorney familiar with tax sale in your area would be needed for specific advice.

1) If you were not served, then your position may still be valid. However you may have limited time to make a claim. My guess is it would be based on the statue of limitations which in my area is three years. It could be less.  You were probably put on notice by a legal ad in the newspaper, language similar to "anyone else who has an interest in (XYZ property)"

Now service can be a tricky situation. In Maryland, if no one is at the address on record, then simply serving the, Sate Department Of Assessments and Taxation, is considered legal service. In other words if you do not keep the state up to date on the proper place to serve you, you may never know that you received service by operation of law.  People try to dodge the service processors all the time, but it may not be an effective strategy based on your state laws.

Now, in spite of what I said above, it may be a fight that is not worth fighting. My crude understanding of constitutional law tells me, that many states have tax sale laws that would not hold up to a serious federal (or even state) constitutional challenge.An important court precedent here is the "Menonite" case. But who is going to spend the time and money to fight that battle?

2) The other more practical alternative is you may be entitled to any surplus bid above the amount of the taxes due. (This would depend on the specific laws for your area I am not familiar with Missouri law)

This might help a bit:
https://www.nolo.com/legal-encyclopedia/getting-your-home-back-after-property-tax-sale-missouri.html#:~:text=General%20Right%20to%20Redeem,Stat.

Thank you all.....  

@Ned Carey - I've never been served until now with the quiet title suit. The property has been delinquent on taxes for years now and advertised accordingly. The county could have easily found me by simply visiting the secretary of state, looking up the LLC registered agent, and then contacting me accordingly (sending certified letter or personally serving me).

Question you may know more about..... When I sold the house I took back a 10% second.  The 90% first was financed conventionally.  In the quiet title I didn't see anything about the first..... Almost like it no longer exists.  Is there any reason why this would be? 

If the first still exists in some form then I am wiped out (which is ok) but if not then I still may have a play.  

The first was extinguished. The second was apparently not given notice... hence the QT action.

It’s time to foreclose the lien and force a payoff. Somebody didn’t do their research. 

@Tom Gimer - That makes complete sense.  I completely wrote this note off some time ago, but looks like this could now be found money.  This is completely going to ruin this investors day, but good for me.  

I've done what the buyer of this tax deed is doing almost exactly except the second was a finance company that failed during the GFC and was absorbed by a mega bank. I bought a tax deed at auction where I knew there was a second mortgage. My attorney did the QT hoping the file was lost in the shuffle. Fortunately for me the bank didn't even respond to the QT and it was successful. However in your case, yeah you've got some found money coming.

@Dana Whicker and @Tom Gimer - My attorney confirmed everything you both said to the letter.  I don't really post questions much on BP, but I'm really thankful and impressed with the quality of the responses here.  Yours included. 

I just found out the tax deed buyer fully rehabbed and rented the property.  Its has new floors, kitchen, bathrooms, etc.... It looks better than the day I sold it.  I can't believe they would have spent all of that money without having clear title.  Unbelievable really, but I guess that is just the current state of the market and the players in it.  

@William Jenkins it sounds like you are in a pretty good position. lucky you.

       
Unbelievable really, but I guess that is just the current state of the market and the players in it.

This may sound cold, but I am all for people who take risks without having a clue, suffering the consequences of their own choices. 

Originally posted by @William Jenkins :

@Dana Whicker and @Tom Gimer - My attorney confirmed everything you both said to the letter.  I don't really post questions much on BP, but I'm really thankful and impressed with the quality of the responses here.  Yours included. 

I just found out the tax deed buyer fully rehabbed and rented the property.  Its has new floors, kitchen, bathrooms, etc.... It looks better than the day I sold it.  I can't believe they would have spent all of that money without having clear title.  Unbelievable really, but I guess that is just the current state of the market and the players in it.  

 It is amazing what people will do with out spending a few minutes to do a good title search.

When it comes to property tax sales the laws for each state vary great. However, laws for giving proper notice is pretty universal (google:  mennonite board of missions v adams ).

You didn't receive proper notice of the tax sale and you had an interest in the property as a mortgage holder.  The notice you just received of the suit to quiet title will tell you how much time you have to respond. Not sure how different the process is where you are but in Louisiana you would then sue to annual the tax sale for lack of notice.  But before you got to that point you would likely settle with the tax sale buyer and negotiate an amount he can pay you for you to provide him with a quit claim to extinguish your interest in the property.

I've never gone through the process of having a tax sale annulled especially after improvements have been made to the land and the exact way it is handled will varies from state to state so your attorney can find out for sure how this impacts you if you were to go that right but it could be messy.  If the tax sale is annulled, the tax sale buyer would still get back the money he spent on taxes and very likely for the cost of the improvements. Since you weren't the owner and never foreclosed how you factor into this, where is the original owner is this, etc. It could get very complex.  Negotiating with him for him to basically pay you and the mortgage to go away will be your best bet.


Let us know how it works out.

Originally posted by @Ned Carey :

@William Jenkins it sounds like you are in a pretty good position. lucky you.

       
Unbelievable really, but I guess that is just the current state of the market and the players in it.

This may sound cold, but I am all for people who take risks without having a clue, suffering the consequences of their own choices. 

 The price some people pay for "education" is a lot higher than it is for others.  The people who fail to invest time to learn the right way to do something will often have to pay a lot of money to learn the wrong way of doing it.   Some mistakes, and learning from them can be costly.

@Will Sifert I have "invested" a lot of money in my education simply by making mistakes. 


Since we learn from our mistakes, anyone can be a genius just by making more mistakes. 

Originally posted by @Ned Carey :

@Will Sifert I have "invested" a lot of money in my education simply by making mistakes. 


Since we learn from our mistakes, anyone can be a genius just by making more mistakes. 

 Same here.  I have learned from more than a few mistakes a long the way. Thankfully those mistakes haven't been catastrophic or too costly. It is impossible for us to know everything. But it is our responsibility, if we want to be a successful investor to try to educate ourselves as much as possible.

I see so many new people at tax sale auctions or posting on here that purchased at a tax sale without doing any research or having a clue how it worked. You usually don't see them or hear from them again.