Transcript:
Hey guys, it’s Casey Denman here from Tax Sale Academy.com
Thanks so much for joining me on today’s livestream here on Facebook. As always, at the conclusion of this livestream, if you’re looking to learn more about investing in tax defaulted real estate head to taxsaleacademy.com, that’s taxsaleacademy.com.
Alright, today we’re talking tax sales and title insurance. It’s admittedly not one of the most exciting subjects I’ve ever discussed, but the truth is that it’s an extremely important topic.
Let’s take a look at the basics, first. In a typical real estate transaction when you’re the seller you’re guaranteeing that the title is marketable, doesn’t have any clouds, liens or encumbrances. You’re basically saying you actually own what you say you own and you don’t owe any money for that property and you don’t have any unresolved issues with that property.
Along with that promise you’re providing a title insurance policy that benefits the buyer guaranteeing this and essentially insuring your promises. This insurance policy is backed by a nationally recognized and strong insurance company and is issued after the title company has performed an extensive analysis of the history of the title.
Title insurance benefits the buyer because if they ever have any issues with the title, they have an insurance policy in place to fall back on. It benefits the seller because if the person they sell it to ever has an issue, the buyer can go after the title insurance company instead of them. It’s the typical way to protect everyone involved. And it’s also going to be required if the buyer is using a loan to acquire the property.
With that said, when a property goes through the tax foreclosure process and you buy it at a tax sale the title to that property will be considered clouded and it is not generally going to be insurable immediately. In other words, the title companies will not issue title insurance against tax defaulted real estate and because of this you can’t have a typical real estate transaction. The end result is that the value of that property is affected and it can become more difficult to sell a tax defaulted property.
So, what’s next, how do you solve this?
You basically have three different options:
The first option that you have is called a suit to quiet title. A suit to quiet title is the most popular method of dealing with clouded titles. In this process, which is typically handled by an attorney, there is a judicial action or lawsuit taken against that property’s title, to forever quiet anyone else’s potential claims to or interest in that property. Anyone that could hold a potential interest in that property is notified of the action and a judge will eventually sign off on the judgement which will clear the title of all clouds. This is the simplest way to clear the title, since once a judge signs off, you’re good to go.
However, because it does involve judicial action, there are set time requirements and time windows that must be met. Court dockets can also get backed up. In short, it just takes time to get a suit to quiet title finalized in many areas. It can also be pricey depending on the specific attorney you’re using. My suggestion is to call around and get the timeline and costs of a few different area attorneys and go from there.
The second option is called a tax foreclosure certification. This is a process where a specialized tax title company certifies that the tax foreclosure process was performed correctly. They’ll research and analyze the tax foreclosure action, notifications and everything else involved in the tax foreclosure action and if they are satisfied that it was performed properly, they’ll offer the ability to insure the title through one of the title companies they partner with. There are only a few companies that offer this service, although it’ll likely become more and more popular. They are usually faster than suit to quiet titles. The two most popular are tax title services and clear to sell.
The third method is really, to not do anything at all. This means that you’d resell the property as-is, using a deed that doesn’t guarantee clear title, known as a quit claim deed. So you aren’t taking the time or expense to clear the title to the property. In exchange for not clearing the title and not be able to provide title insurance you are going to be selling the property for significantly less money than if the title was cleared and title insurance was issued.
If you’re selling a $1500 vacant lot, this approach might work fine. If it’s a $250,000 home, it’ll be difficult to find a buyer for the property without title insurance. It’s also important to note that when you sell a property without title insurance, you won’t be using realtors, title companies or banks as it’s too risky for all of them. But again, I’ve used this strategy many many times, and it has can definitely work.
So, there it is. Tax sales and title insurance. Now, if you want more details on this topic, go ahead and browse my channel on youtube and it’s a topic I’ve discussed a few times before.
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And of course these livestreams and videos are only just the beginning when it comes to the training we offer. If you’d like to take advantage of our more advanced training, be sure to head to TaxSaleAcademy.com. That’s taxsaleacademy.com.
That’s it for today guys. Make it a successful day.
Take care. Bye bye!