Transcript:
Hey there, it’s Casey Denman from TaxSaleAcademy.com and today we’re answering Becca question which was “What is the purpose of a QT Lawsuit?” And by QT, she’s talking about a Quiet Title Lawsuit.
I told the story last week about the first auction I attended and someone asked me if I was going to do a Quiet Title Lawsuit. I remember thinking it was a quiet lawsuit of sorts and had no idea what the heck that meant, besides it’s something we quietly file and hope no one finds out about? I was clueless.
So, back to your question Becca, a Quiet Title Lawsuit isn’t done quietly and in fact it’s the exact opposite of filing something so no one knows as you’ll soon see. First off, I’m not an attorney and not offering legal advice, so there’s my disclaimer.
A Quiet Title Lawsuit of Suit to Quiet Title depending on who’s discussing it is a lawsuit to establish complete ownership of a parcel of real estate. When you research the history of a parcel of real estate you have something called a chain of title. Essentially you have one owner who sells it to another who sells it to another. In the perfect world every one signs like they’re supposed to and all the docs have the correct information. Title insurance is an insurance policy issued to protect a buyer or lender against any defects in the chain of title, so keep that in mind.
That’s the simple side. What happens though is that this isn’t the perfect world. There are liens, encumbrances, lawsuits, foreclosures, forgotten people, missing people and dead people among other stuff that really complicates everything.
There are numerous ways to apply it in a non tax sale related manner. But since this is a channel for Tax Sale Investing, let’s look at it from that perspective:
When a property goes through tax foreclosure, the chain of title is broken by that foreclosure. Tax foreclosures must go through a special process as required by state statute. This is a complicated process, so what happens is most title companies see tax defaulted real estate as being too risky to insure. So, they won’t issue title insurance for it right out of the gate.
There are a few different ways to deal with this issue, but since you asked about Quiet Title Suits, we’ll take that angle.
What you would do is bring a Quiet Title Suit, which should be handled by an attorney, against the property and ANYONE who could claim an ownership interest. So in this case, the defaulting tax payer, any of their heirs if they’re deceased, any liens holders . . . literally anyone who could claim any sort of ownership in the property. They would be served notice, along with a chance to argue their case and the judge would make a decision. It’s important to note that in most states, it’s just a formality to offer the chance for a response since overturning a tax sale can be highly unlikely. After all of this is complete, the judge will sign off on the final judgement.
When successful, once that judge signs, he is granting you, the investor or plaintiff in the quiet title suit sole and complete ownership. This allows you to get title insurance, sell the property or do whatever else you want with it such as refinance.
So that’s a quiet title suit in a nutshell. There are obviously lots of other things that are involved, but hopefully this has provided some help in learning about these suits. Depending on your comfort level, it might be a good idea to sit down with a local RE attorney and simply sitting down asking about tax sale, suit to quiet titles and everything else involved. While it won’t likely help from an investment perspective, it will definitely help you to get a grasp on the legal side of things.
Again, hope this helps. IF you have another question or anyone else has a question feel free to leave a comment below and we might just answer it in a video like this one.
For more information on tax sale investing just head on over to TaxSaleAcademy.com. Take care!