Trust Deeds?

Question

I have a motivated seller whose property is up for a tax sale.  He claims to be the owner but he is not the owner on record with the county.  He says he is a real estate broker and that he obtained a quit claim deed from the owners on record via a Trust deed but that he did not file it with the county.

I do not know much about a trust deed.  My questions are:

1. What is a trust deed and how does it work?

2. Why didn't this guy record his deed with the county...is that illegal?

3. Can I purchase the property through him, pay off the taxes and claim the property?  Or is this guy scamming me?

4.  Wouldn't he have to record the deed before I purchase it from him?  Then, wouldn't he have to pay the taxes then?

Side note--what seems weird is he wants to stay in the house, rent it back from me, and he told me he would pay off the taxes.  Why not just pay the taxes, stay in the home and sell it for top dollar?  He did tell me he is going through a divorce and needs $$, but is this way his best option?

Thanks for any help on this one!

Account Closed · Answer

You are correct.  Something is not adding up with the story.

What state is the property located in?

To me it sounds like the owner of record has a mortgage on the property.  That is why their is a Deed of Trust.  The mortgage is in the name of the owner of record.

Most likely, he did not file the Quit Claim deed because he was a afraid the mortgage company would use the Due on Sale Clause to call the entire note due.

Not sure why he did not pay the taxes.

Tony Wooldridge · Answer

@Anthony Yannucci, I know this is an older thread but was wondering if you wouldn't mind sharing how this all turned out?  Thanks ahead of time for sharing.  I certainly hope to learn from yours and others out comes.  Thanks again, and here is to wishing you a successful 2017 in your REI ventures! Thanks for allowing me to share.

Anthony Yannucci · Answer

Thanks Wayne for the info!  The property is here in Florida.  I thought it quite odd as well that he is a broker and has not recorded the deed.  I am going to speak with the gentleman today, and tell him my info and see what he wants to do.  If I do want to go forward, I will PM you the info.  Thanks Wayne!

Anthony Yannucci · Answer

That was going to be my conversation with him--record the deed.  But then if he records it, I imagine he would have to pay the taxes which would then remove it from the tax auction block.  I think his best move is to record the deed, and sell it for top dollar because I would not even come close to offering him what he thinks it is worth.  Thanks for the advice!

Anthony Yannucci · Answer

This property is in Florida.  It so smells fishy.  Thanks for the info...I will check the records to see if the owner on record has a mortgage on file.

Anthony Yannucci · Answer

Thanks Christopher...I will definitely proceed with caution.

John Thedford · Answer

To have any legal rights, documents MUST be filed in public record. This is called "constructive notice". Failure to file a mortgage and note, quit claim deed, whatever, means -0- in a court of law. If someone has a quit claim deed, they fail to file, and then another party files a quit claim deed, the party that failed to file is out of luck! I would be more than wary of any party claiming ownership where their name does not appear in public record. Ask them to record the documents and then proceed with caution.

Wayne Brooks · Answer

@Anthony Yannucci Assuming this here in Florida, we don't use trust deeds we use mortgages, and they don't of course transfer any title.  If he has a QCD, it has to be recorded to have any effect on title.  It certainly sounds fishy, and either the guy is scamming (my guess) or he is quite confused about the process which would be odd for a "broker".  If you want to PM me the details, I'll look at it for you.

Christopher Brainard · Answer

@Anthony Yannucci

This situation seems fishy to me.

1) A deed of trust is a deed which conveys legal title to the lender as security for a mortgage. Once that mortgage is paid, the deed is reconveyed to the owner/borrower.

2) Deeds should be recorded, but some states do not require it. I'm not familiar with the laws of Florida, but I highly doubt it is Illegal - it may cloud the title and he may have a hard time proving the legitimacy of his claim. Additionally, you said he obtained a property via a Quit Claim Deed. A Quit Claim Deed provides no warranty what so ever and only transfers the interest held by the Grantor, IF he holds any interest. If the original owner didn't hold interest to the property to begin with, it is a worthless piece of paper.

3)   Based on the current information, this sounds like a bad idea. I'd have a title company and/or a lawyer look at the history of the house and determine if he can convey the property or not.

4) I would think so - I've never had an owner without a recorded deed before, so this is new territory for me.

And yes, it sounds very weird/suspicious. I would proceed with caution. With that said, some of the best deals come out of cloudy circumstances.

-Christopher