Transcript:

Hey there, it’s Casey Denman from TaxSaleAcademy.com and welcome to our weekly question segment. This week’s question comes to us from Corey.

Alright, Jason’s question . . .

Ok, help me understand this. If I buy a tax deed where the liens are removed, then isn’t the tax deed free and clear? Why would I have title issues?

Jason, great question and it’s one that confuses many people.

So in most states, as long as the proper notice has been provided, outstanding lien holders will have their liens extinguished with a few exceptions such as governmental liens. This means that the liens are not your responsibility.

Now, with that said, there are very specific procedures that must be done according to the state statutes – so there’s a chance something wasn’t done 100% accurate, especially when you factor in that it’s often a county employees handling tax foreclosure in bulk. There are also instances where former owners and lienholders can bring suit to overturn a tax sale. So, while the law provides that liens are extinguished there are still some potential issues.

Now, a clouded title doesn’t impact much for tax sale investors until it’s time to get title insurance. This title insurance will provide a guarantee that there is absolutely nothing wrong or potentially wrong with the property, otherwise the title company will take care of it up to the cost of the property in many situations. So what happens is that these title companies, who are private companies that have full discretion on whether to insure a property or not, will see the tax foreclosure which raises red flags for potential issues, albeit rare, that could occur. Subsequently, they won’t issue title insurance without additional action such as a suit to quiet title or tax foreclosure certification.

So while the liens are extinguished in nearly all situations, the title still has the potential to have an issue or two so title companies won’t insure it. That’s the reason we need to clear out titles IF we want to sell with title insurance.

Hopefully this answered your questions Jason.

Thanks so much for watching. And as always, check out TaxSaleAcademy.com to grab a copy of your free book or if you’d like to take advantage of the most detailed and step by step training we offer through The Tax Sale academy. See ya next time!