This week’s question comes from Tommy, who wants to know what type of deed he should use for tax sale properties. If you have a question head over to www.TaxSaleAcademy.com and submit it to us!
Transcript:
Hi there! Casey Denman here with TaxSaleAcademy.com, answering your weekly question. This week’s question comes to us from Tommy. And Tommy says, “Should I use a Warranty Deed or a Quit Claim Deed?”
Tommy, great question and we do certainly appreciate you submitting it. It sounds like you just watched the Warranty Deed and the Quit Claim Deed videos that we posted last week. Now, if you haven’t had the chance to check them out, for the viewers that haven’t watched those videos yet, consider taking a moment to watch those videos. A lot of great, useful information there about Quit Claim Deeds and Warranty Deeds and the differences between the two.
Back to your question, Tommy, which one should you use? To be honest here, I’ll use a Quit Claim Deed absolutely every chance I get because it saves me time and it saves me money, and we’ll talk about that time and money savings here in just a second.
Now, from $0 to say $5,000 or so, you can usually sell a piece of property with a Quit Claim Deed without a whole lot of objection from your buyer. What you have to emphasize here is, “Listen, I’m selling you this piece of property at such a deep, deep discount that you can’t buy this property this cheap anywhere else. And if there’s any title issues, you can fix them yourself with the discount that you’re getting, the money that you’re saving buying the property from me using a Quit Claim Deed.”
Now, from $5,000 to $10,000, some people will still accept a Quit Claim Deed, but others will want a Warranty Deed. For $10,000 on, just about everybody will want a Warranty Deed. And as we know, a Warranty Deed without Title Insurance is absolutely worthless and most buyers are well-educated nowadays. They know that. They know that a Warranty Deed has to be coupled with Title Insurance.
Now as a tax sale investor, in order to get Title Insurance, we have to do a Suit to Quiet Title or we have to go through the Tax Foreclosure Certification Process. This is that time and that money that I was talking about. It can take you a lot of time. It might take you a month, two months, three months. It might take you up to six months to get the processes taken. By the time you contact the people and you submit your paperwork and the time they get it back to you, it could take a while. We’re also talking it could cost you $500 or $1,000, $2,000 for this kind of stuff. So a lot of time and a lot of money is wrapped up in a Warranty Deed.
However, with that said, on the higher price stuff, you can often build in enough of a cushion to cover those time and that cost that you had dealing with these title clouds that are brought upon because of the tax foreclosure. So what you have to do is make sure that if you’re planning on selling a piece of property that is a higher volume, higher dollar piece of property – $10,000 or more – then you have even more of a cushion to allow you the time and the money needed to invest in those services to clear that title.
But the short answer, Quit Claim Deed every chance you can get. But if the buyer requires a Warranty Deed, oblige to them as long as the piece of property has enough cushion build in for you to use one. And make sure when you buy the piece of property, you buy it correctly so you do build in that cushion automatically.
Tommy, I hope this has answered your question. If you have a follow-up question or if anybody else has any questions about tax sale investing, head on over to my website at TaxSaleAcademy.com, which you can do by clicking the blue link at the bottom of this video. Once you get there, submit your question, and it’s very possible I’ll give you a video response just like this one.
Take care, folks! Bye-bye.