Has this ever happened to anyone? House sold to 2 people at once

Question

Hi Guys,

I purchased a property 2 weeks ago - purchased as in went to settlement, paid the title company, received keys from the seller- and I received a call today from the title clerk stating that she was contacted by the County tax collector who told her that the property that I purchased has already been sold a month ago at a tax sale and that they were returning my money!

Here are the details:

-The sellers are the children of the deceased owners.  They have owned the property for a few years and let it sit while not paying the taxes.  The didnt sell it right away because they needed to clear some things up with their attorney regarding the estate.  Once things were straightened out, we put it under contract and scheduled settlement.

-Settlement was postponed a few times due to a rivalry between the siblings and some additional things that had to be cleared up by their attorney.

-Apparently a letter was sent to the (vacant) property via certified mail (but there was no signature) stating that if the taxes were not paid within 30 days, the house was going up for Sheriff's sale.  No one rec'd the letter so no one knew about it.  The house did go up for Sheriff Sale.  Then they sent another letter (that no one rec'd) stating that the house was sold and they had 30 days to challenge it.

-Shortly after those 30 days had passed, I made settlement on the property.  Title searches were done and nothing came up.

So now, as we stand, the delinquent taxes were paid to the County by the funds of the Sheriff Sale buyer.  My funds were denied by the County because the taxes had already been paid.  The 30 day period that the seller had to take back the house has passed and the Sheriff Sale buyer is in the clear.  But I also purchased the property and have been in it for the past two weeks with contractors etc, cleaning it out, started demo etc.  and now they are basically telling me that I need to take my refund and be on my way....

David Krulac · Answer

@Nicole Clemens

The Tax Sale happened before your sale, so it takes precedence.  There is no redemption for most tax sales in PA.  And the notice of Tax Sale is to go to the record owner at the last known address, even if in this case it was to a deceased owner at a vacant address.

There's a lot of blame to go around.  the heirs should have been on top of the pending Tax Sale and even if they didn't get the notice sent to the house, should have followed up with the Sheriff's Office to see when the sale was scheduled.  You did say whether the Tax Sale purchase price was lower or higher than your purchase price.  If lower the sellers lost money also.

The title company should have in their search seen that there was a pending Tax Sale which was going to happen before your purchase date and brought that to your attention before settlement.

Also if you knew there were delinquent taxes you should have as part of your due diligence found out when the sale was scheduled and bought the property before the Tax Sale, paid the taxes first and prevented it from being sold at Tax Sale.

The overage will be given to the estate.  Since your purchase was unwound you would have no standing for overage funds if any.  The County keeps the funds available for 3 years then it goes to the county treasury.  During that 3 years they make no efforts to locate the owner, they usually send out a letter (would go to the house address) right after the sale saying you MAY have funds to claim.

Since there is no redemption in PA, almost all Tax Sales are overturned on notice, as @Ned Carey says.  If the estate were getting more proceeds from the sale to you they could file a Common Pleas case to overturn the sale.  It would take their willingness to spend money including attorney fees to unravel the Tax Sale.  This would not be a case for district justice (where evictions are heard) and there is no "Small Claims Court" in PA.  If the Tax Sale netted the estate more proceeds there would be no reason for them to go through the time and expense to overturn the Tax Sale.

It could get worse the Tax Sale buyer could sue you for damaging their house.

It is a mess.

But as I ALWAYS say and have said on this forum many times, "Tax Sales are the most hazardous way to buy real estate"

Ned Carey · Answer

I do not know PA tax sale law (@David Krulac).  I find it pretty hard to believe that they can lose a property without any recourse if they were not personally served.

The heirs may have a right of redemption or the right to challenge the tax foreclosure. One fact which may be important; was an estate opened? It sounds like one was but the sellers got some very bad legal advice and service.

You may actually have a claim against the title company and or the heirs attorney for damages however that is a tough case to win and to determine damages.It sounds like some very bad legal work from three different parties.

There is a case "Menonite" which doesn't exactly apply here that says you shouldn't loose a property without actual notice.

JD Martin · Answer

I would look to the title company for reimbursement. They are supposed to discover these types of issues. They are also insured in case they screw up, separately from your title insurance.

David Krulac · Answer

Each state has different rules and procedures.  I've seen bidders and even national banks assume that there is a redemption period, for example, when there clearly is none.  I've been warning people for a very long time not to bid at the sales unless:

1. you know the rules

2. do your due diligence

3. physically see the property

At one sale a person from another country didn't know the difference from "free and clear" and "clouded title".  That person should not be bidding at Tax Sale.

Jay Hinrichs · Answer

@David Krulac  tax sale   foreclosure out your way is SOOOO much more complicated than what we deal with on the west coast... ONe really needs to be in all points on these deals and not just trust the closer or attorney.. Once an expert though then your probably good... casual buyer not so good

Jay Hinrichs · Answer

they should have done a date down prior to recording your deal.. this is a title company issue  but it sounds like they need to unravel it. hopefully you used a substantial attorney firm if you indeed closed with one of those and not a national title company

Nicole Clemens · Answer

@Jd Martin   The title company is going to reimburse me, but I put a lot of time and effort into obtaining this property...coming up with the funds, etc.  I've contracted roofers, plumbers, etc to start work.  I have everything all laid out.   I just feel like they shouldnt be able to just be like 'oh. here's your money back.' and that's the end of it.

Michaela G. · Answer

In fact, maybe since you bought the house from the estate, maybe that would be enough to claim the overage? So, even though they didn't own the house to sell to you, maybe there's language in the documents that allows you ownership of whatever else is owned in regards to the house. Sort of like a quit claim deed, they don't need to own anything, but they say that whatever rights they have in regards to that property, they are giving/selling to you.

So, check if there's some overage and take it from there.

Michaela G. · Answer

Also, what was the property sold for and was there any overage (amount above the owed taxes)? They would sit  in the name of the deceased owner and the estate should be able to claim them. (But don't tell them, yet)

Can you take an estate to small claims court for the funds of the renovation? If you can and you get a judgement, you could then take that judgement and proof of the estate being the successor or the deceased owner and claim your judgment from the overage. ;-)

Rick H. · Answer

Seller did not have title. Hence, no sale.

Unless you (or title insurer/settlement agent) can mitigate the conflict with tax sale buyer, then your only recourse is a financial settlement for damages from your idiot escrow officer.

Has this ever happened to anyone? House sold to 2 people at once

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