Re-selling Tax Deed Properties Question
Hi again and I am sorry if this turns out to be another dumb question but I am new and I am full of them!
The high bidder at a tax deed sale receives a fee simple title with the property. This of course is not a warranty deed and there is no clear title. This sounds to me like there might be problems with trying to re-sell the property.
I am interested in purchasing vacant land at a tax deed auction and reselling it quickly, but is this possible or can this turn out to be a major headache?
Do potential buyers run-off when they hear that there is no warranty deed? 
Please help this nervous newbie!!
Adrienne
After you purchase the tax lien on the property there is a 1 year wait before you can have access to the property, or even begin the forclosure process to get a warranty deed to the property. The process to obtain the warranty deed can run a coupel of $100.00 to several $1000.00 dollars ( Attorney fees for paper work), and this can take place only after you legally contact all parties who have a mortgage, or other liens to the property. You are allowed a 20% return on investment (In Ga, check your state laws for your fees) I buy liens for the 1 yr 20% redemption fee, if you are trying to buy them to obtain free and clear title you will find it can be a long and sometimes expensive undertaking.[ Edited by scottbrown69 on Date 02/11/2004 ]
Quote:
On 2004-02-11 14:28, scottbrown69 wrote:
After you purchase the tax lien on the property there is a 1 year wait before you can have access to the property, or even begin the forclosure process to get a warranty deed to the property. The process to obtain the warranty deed can run a coupel of $100.00 to several $1000.00 dollars ( Attorney fees for paper work), and this can take place only after you legally contact all parties who have a mortgage, or other liens to the property. You are allowed a 20% return on investment (In Ga, check your state laws for your fees) I buy liens for the 1 yr 20% redemption fee, if you are trying to buy them to obtain free and clear title you will find it can be a long and sometimes expensive undertaking.
<font size=-1>[ Edited by scottbrown69 on Date 02/11/2004 ]</font>
He's not talking about the Tax Lien Certificate Sale, he's talking about the Tax Deed sale, at which time he would receive title to the property, not purchase the lien.
Since the terminology for Tax Lien Certificates and Tax Deeds are the same, there is a significant amount of confusion on the part of investors and potential investors. This is frustrating to all.
It would be refreshing if those who pose questions to this forum made sure that they are addressing the correct part of the process before asking a question. The posters to this forum should make doubley sure that the information that they are providing is accurate for the correct part of the process that they are answering.
Both tax lien certificates and tax deeds go through an auction process. At a TLC auction, the winner gets a TLC, an IOU, which is collateralized by the property. Should the property owner not pay the taxes and penalties owed within the redemption period, then a Tax Deed auction occurs. Typically, a fee simple deed is issued.
Each state and territory have different rules regarding this area, and each of about 3300 counties have even more rules that have to be observed. Talk to your county tax officials. That is where the action and the real information is; and it's FREE!
Mitchell Goldstein[ Edited by Mitchell on Date 02/11/2004 ]
Wow, I tried to be really clear when I asked my question but I think I may have caused some confusion.
I would like to try again because the answer is so very important to me.
I am not interested ( at this time) in purchasing a tax lien at an auction. No tax lien.
I am going to try to be the high bidder at a tax "deed "auction. I want to purchase the property ( vacant lot) that the tax lien holder is forclosing on. I understand that the high bidder for a tax "deed" receives a simple fee title and not a warrenty deed.
If I am the successful high bidder, this will be my first tax deed purchase.
My question is: Is it hard to sell a property that does not have a warrenty deed? I would like to sell the vacant lot as soon as possible but will I have a problem when I explain to a buyer that it doesn't have a clear title and doesn't have a warrenty deed? I was just wondering how a professional would explain this to a buyer without possibly losing the sale.
Thanks everyone and I really need your help!
Adrienne
no, it's not that difficult. most people will not care if there are liens if you disclose that they are. i never sell with a warranty deed but only with a quit claim deed. i haven't had any problems so far.
thanks
pete
Are we talking about California? I'm also newbie trying to invest on tax deed for the first time. I saw in la county auction book indicating that after 60 day or once you hold the title, you can rent out the property. So, which one is it? 60 day or 1 year.
Be very careful with this stuff.
You guys are coming to the right place to learn. But if you dont get the right answers you may just be playing Russian Roulette.
EVERY STATE IS DIFFERENT. Not only in the interest rate they pay for tax liens.
Call 3-5 local Title companies. All Florida counties do many tax deed auctions. The larger title companies, IF NOT ALL of the title companies will know what you mean.
Ask them point blank if they will write Title Insurance for properties bought at Tax Auction.
ANY PERSON ON THIS SITE THAT TELLS YOU THAT IT ISNT IMPORTANT TO GET CLEAR, MARKETABLE TITLE, SHOULD BE SHOT!!!
By being that ignorant You arent doing yourself any good, and by giving advice to others you are just downright dangerous.
Having UN-marketable title is more than just having liens that no one cares about. It isnt about writing a $100 check for the "weed abatement" or other nonsense code violation or paying off credit card bills.
EVERY TIME you get a mortgage you are going to have to get Title Insurance, so EVERY TIME you want to sell to a retail buyer you have to give him clear title.
IF YOU KEEP THE HOUSE FOREVER, and rent it out, then bad title wont matter. EVEN IF THAT WERE THE CASE, it might benefit you to clean up the title. You have the time and You dont want long lost relatives coming back in the future when You have improved the property.
hope this helps.
N.
I think the most important thing is disclosure. You have an ethical duty to relay this information to your potential buyer. Before I buy a property, I usually do a title search myself and make sure that no liens are on the title. I've never sold property with liens though. If I knew that there were medical liens, mechanic liens I feel it is my ethical duty to let them know. Although I do this, I do not guarantee title to my buyer and make sure they understand that. I do not sell on warranty deeds for fear of lawsuits and such. You must make sure that your buyer understands this. It is the same for easements also. You must declose. In CA for instance, you can do a quiet title lawsuit after a year has passed. No title insurance company will touch that property for a year but I may be wrong.
I do feel sorry for a lot of buyers that buy online because some of them are buying landlocked property. I feel even worse for those buyers that go to these auctions and buy property that is either too small, worthless, or not accessible. Most of them think they can just buy property and make profits. Remember, make it a rule to never buy property sight unseen. it does take work to be a tax deed investor, but it does pay off if you really do your due diligence. Trust me, I've leaned this the hard way!
I think Neill has some good points. If you are going to attempt to sell a property at a retail price with conventional financing you have to have clear title because no bank will lend on that property. If you are selling wholesale, clear title may not be as big an issue to a buyer. Disclosure is a big issue in both cases.
sorry i keep posting so much.
yes, if you want to hold onto the house i would get clear title too. you always want to protect yourself in the best way possible. don't forget renter's insurance and business insurance either.
My views.
"Marketable title" is just a phrase. Assuming you are the legal title owner to a property, you can sell that property to a buyer without having "marketable title," if the buyer agrees to buy it in that condition. The buyer may not be able to get title insurance, but they will have legal ownership of the property. They can use it or abuse it as they see fit.
True, no institutional lender and few private lenders will lend on a property unless they can get title insurance on their loans. Thus, if you want to sell a parcel without title insurance, your market is going to be extremely limited. You will be able to sell to people who pay all cash. Also YOU can carry the loan for the buyer. This is not the worst thing in the world, as you can earn some interest on your money and you can probably get a higher price than when you sell all cash.
Let's face reality here. Over 90% of the properties that sell at tax auction are vacant land. Many are small lots. Many of these properties are not worth a whole bunch of money. Thus, many of the properties bought at a tax sale can be sold, at a profit, for all cash. If you pay $267 for a lot and resell it for $1,340, you can make a high return and you will find buyers that can pay cash.
I own several rent houses in OK that I have bought at tax resale auctions. I have not bothered to do a quiet title action on any of them. The renters never ask "do you have marketable title for this property?" They don't even ask "are you the owner or have the legal right to rent me this property?" which I think they should do. The county still takes my property tax money even though I do not have "marketable title." The insurance company? Surprise, they take my insurance premiums even though I do not have "marketable title." The people fixing my properties somehow find it within their hearts to take my payments to them for repairs even though I would not be able to prove to them that I have "marketable title" to the properties.
Now, is there some advantages to me having "marketable title" to these properties? I suppose so. I could resell quickly if I wanted to do so, not being delayed while doing a quiet title lawsuit. I could get loans against the properties readily, again not being delayed for the quiet title lawsuits. Were I to die with the title in this condition I would be putting a burden upon my heirs to clear up the title before they could resell the properties in a conventional manner or borrow against them.
Why then have I not done the quiet title lawsuits? Because they cost money and I do not see the advantages of having marketable title as particularly important to me. I have no plans of selling the properties. I probably will never get a loan against them. My heirs? Well, sorry, there is an added burden for you. However, you are getting something of value for nothing and you will have to work a little bit to get it. Actually, if you simply continue to rent out the houses, you don't need "marketable title" either.
If one buys expensive properties and wants to resell in a conventional manner, does it make sense to get the title into "marketable" condition? Sure.
Good Investing*******Ron Starr***********
Thanks everyone!
Your response to my question has been wonderful. I have received SO MUCH information I actually feel speechless as to how to thank you enough!
Special thanks to Ron Starr, Neill and Pete. Your answers are so knowledgeble, comprehensive, precise and enlightening!
Not to mention it's just so very thoughtful of you to take the time to help a Newbie!
Thanks again!
Adrienne