The terms “Warranty Deed” and “Tax Sale” are usually never in the same sentence! Watch this video to find out why!
Transcript:
Hey everybody! Casey Denman here with TaxSaleAcademy.com. In this video, we’re talking about Warranty Deeds and what you need to know as a tax sale investor.
So, as we already know, a Deed is an instrument used to convey a piece of property from one person to the next. It’s often recorded in county records which serves to demonstrate to the public that a piece of property has been transferred. Yes, it can be compared to a car title.
Now, a Warranty Deed is a specific type of deed where the seller provides a warranty to the buyer guaranteeing that they own the property free and clear and that the chain of title is free and clear. Additionally, most Warranty Deeds will also include a clause that says not only will they guarantee it right now. They will forever guarantee that up to that point, that title was free and clear and that they own the property free and clear.
Now, a Warranty Deed is a great, great tool to have and a great deed to receive as the buyer. However, then it becomes an issue. Let me give you a situation here. Say you buy a piece of property from John Doe for $1 million. You own the piece of property for a year, and then somebody walks up to you and says, “Listen, you need to leave my property.” You say, “No, of course not. I bought it from John Doe. He gave me a Warranty Deed.”
Then they show you some documentation from attorneys or whoever and say, “Listen, you really don’t own this piece of property, and John Doe never owned the piece of property either.” So what are you going to do? Well, obviously, you’re going to go after John Doe, right? Well, suppose John Doe has left the country or he’s dead or he’s gone bankrupt. If you’re going to sue John Doe for $1 million but you can’t find him or he has no money, it doesn’t do you a whole lot of good.
So what happens here is a Warranty Deed is typically coupled with some sort of Title Insurance. Now, Title Insurance is an insurance policy issued after a title search has been done by a title company or an attorney. And basically, what they’ll do is they’ll research the title history and they’ll say, “Yes, this property is 100% free and clear. We agree with the seller providing a Warranty Deed. Not only do we agree, we’ll also issue you an insurance policy.” This way, in that previous situation that I gave you, if you were to sue John Doe, you could also sue the title insurance company who probably has a lot more money than John Doe and who you’ll be able to find. And what they will do is they’ll give you back your $1 million if your insurance claim goes through like it should.
Now, as a tax sale investor, what do you need to know about Warranty Deeds? Well, here it is. When you buy a piece of property through a tax foreclosure auction, the property cannot be insured through a title insurance company or through an attorney without additional steps such as a tax foreclosure certification process or a Suit to Quiet Title. This means that you should not provide a Warranty Deed without having those steps done and without having Title Insurance on the piece of property.
Now, on other videos I’ve discussed different ways where you can get around this. Obviously, if you’re selling a lower value piece of property – say under $5,000 or $10,000 – just give them a Quit Claim Deed and let them deal with the title issues. Give them a deep discount on the piece of property. But, if you’re selling a piece of property for $50,000, $100,000 or $200,000, you need to take those additional steps. This way, you can provide a Warranty Deed and you can get Title Insurance on the piece of property, which in turn will be able to line your pockets with much more profits.
So, that’s all you need to know as a tax sale investor when it comes to Warranty Deeds. For more information about the very lucrative tax sale business, head on over to my website at TaxSaleAcademy.com, which you can do by clicking the blue link right here next to my head. Again, it will take you to TheTaxSaleAcademy.com. And once you’re there, download your free copy of my e-book, The Tax Sale Blueprint, and you’ll be on your way to a very successful tax sale investing career.
Take care, folks! Bye-bye.