Transcript:
Hey Everybody, Casey Denman here from Tax Sale Academy.com.

Today we’ll be talking about a clearing the title to a tax sale property yourself.

Let’s talk about the context of this video first.

So when you buy a property at a tax foreclosure auction or you have a tax lien and you take it through foreclosure, the title will be clouded upon acquisition. Essentially, what this means is that there is some question about the title to the point where most title insurance companies will not issue a title insurance policy for that property, without additional effort on your part. This means that until you cure the title clouds, you will not be able to get full market value. You can sell the property, but you can’t do so with an insured title, which is customary procedure for most real estate purchases and required for purchasers using a mortgage to buy the property.

That’s a very brief overview, if you’d like to learn more on the title issues of tax defaulted real estate, specifically take a few minutes and search my channel.

The two primary ways to cure the title are through a tax foreclosure certification and a suit to quiet title. A certification requires one of a handful of companies to certify everything was done correctly. A Suit to Quiet Title is a lawsuit to quiet the claims or any potential claims of other parties and should be handled by an attorney.

From time to time I get asked if someone can just do their own suit to quiet title. And the answer is that I don’t recommend it.

One thing you can do is attempt to cure the title defect yourself by having interested parties sign over their interest in the property.

What happens is that the tax foreclosure process could leave, albeit rare, an opportunity for the former owner to challenge the foreclosure in court if everything wasn’t done perfectly. Because the rare possibility exists that there could be an issue, the title isn’t insurable. BUT, if you have that interested party sign the title over to you, then it solves that issue. So always keep in mind that your intention is to track down a former owner and get them to sign a deed into your name.

Here is the abbreviated process behind doing this. Just so you guys understand, like all of my YouTube videos, this is just an abbreviated process. There are many steps, tips and processes in addition to the ones we’re about to go over, but they’re too complex for a YouTube video.

1. Title Search
The very first thing you’ll want to do is run a title search if you don’t already have one. You can contact a local title company or attorney, order one and pay them their fee. While you can do one yourself, the best way is to hire them to do one for reasons we’ll discuss momentarily. The best way to work it is to have a title company you can build a working relationship with since you can use them to perform title searches and closings when you do sell the properties. While it might save you a few bucks here and there, it will be much easier to work through the process with someone you work with easily. You also need to be upfront with them and tell them you intend to have a former owner sign over a deed for you in hope the tax title can be insured by them, and get their opinion on the strategy. Some title companies might say they won’t do it under any circumstances, but plenty will if you follow the rest of the steps we’re about to discuss.
2. Title Consultation
Once you have that title search completed, you need to ask them what has to be done to make the title insurable. They might tell you they’ll require a Suit to Quiet title and then you’ll know you can stop at this step. It might be very simple. Especially if it’s something as easy as a vacant lot with one owner. Or they might make it sound simple, when it isn’t. For example, all you need to do is track down and get a deed from 17 heirs to an estate for the person who used to own the property, and by the way, 2 of these folks might not be alive anymore. So, be very clear with the title company with your intentions and get a step by step checklist of EXACTLY what they’ll require.
3. Check For Surplus
Once you determine exactly who would need to sign a deed to you, I ALWAYS suggest you check to see if there are any surplus funds available for that person. Surplus funds are the funds that were paid above the amount that was owed to the county. For example, if the amount owed to the county for taxes, interest, fees…everything is $5000 then that’s going to be where the bidding usually starts. If multiple bidders bid it up and it sells for $8000, then you have a $3000 surplus. Those surplus funds belong first to any lien holders, then to the property owner who lost the property. That’s a brief synopsis, obviously it can vary state to state. Anyhow, you need to check for the surplus fund. This will give you an idea of what, if anything, the person you’re about to contact has access to.
4. Contact Owners
Yep, just contact the owners. Sounds easy, right? This is MUCH harder than it sounds. Often times, properties that are lost to tax foreclosure have been owned by the delinquent tax payer for years and years before they lose it. They forget to pay taxes, don’t want the land, die, and all sorts of other stuff. They also move, very frequently. Can you imagine the frustration of tracking down a former owner through 4 or 5 moves only to find out they died the month before? Or trying to track down someone named John Smith? Long story short, find the owner, however you can, and let them know you now own the property because of the tax sale and you’d like to work with them. Best case scenario, you can assist them in claiming their surplus funds which they probably weren’t expecting. Otherwise you might need to be prepared to negotiate or let them know you’ll file suit. Obviously, you shouldn’t want to pay $5,000 for someone’s signature when you can get a suit to quiet title done for much cheaper. Be realistic, but be prepared to compensate them for their time, while factoring in the time and money you’d save.
5. Sign Deed
Once you’ve negotiated the transaction, you’ll need to get them to sign over a Quit Claim Deed. Be sure it’s prepared correctly, or your efforts might be in vein. Have them sign the deed, make payment, get it recorded and then go back to the same title company to get the title insured.

That’s it, a pretty simple process, in theory. Obviously, it can be difficult at times. Understand this entire process will ONLY work if the title company or closing attorney says it will. If there are outstanding lienholders that have an interest, multiple heirs, a property owned by an estate, or a number of other issues then this process won’t work. But, it might be worth the effort to check, just for peace of mind prior to forking out money to cure the title through other methods.

That’s it for today guys . . . if you’re looking to get more depth information on OTC purchasing, researching those properties and get all the details and strategies that we’ve learned over the last 16+ years, head to TaxSaleAcademy.com. While you’re there, you can pickup my FREE book, Tax Sale Playbook, the book itself is FREE, I bought it for you, just cover the nominal shipping cost to get it from my warehouse to your door. Another great way to start is to go to the same website, TaxSaleAcademy.com and click on our Free Webclass link!

I’ll see you guys over on the site. Take care, bye.