Getting a Quitclaim deed?

Question

Okay, I'm brand new here, go easy.  :wink:

I'm trying to acquire a property out in Arizona. I know there is an encumbrance against the property, is there anything special that I need to do? Or can someone perhaps walk me through the process?

My understanding of quit claim deed is simply put it's a quick and dirty to transfer property from one party to another, with all liens, encumbrances, and any other problems included "As-is".

Jon Holdman · Answer

I know little about tax deeds and tax liens.  I did a bit of research, though on AZ tax liens, and they do appear to use the term "redemption" for the time period from when a tax lien certificate (TLC) is issued until the holder of the TLC can take possession.

When this property is sold, the TLC is going to have to be paid off, with interest, in order to convey a clear title.

If you want to do this property, write a contract for purchasing the property.  Make sure the contract allows assignments.  Take it to a title company and have them do a title search or open escrow or whatever its called in AZ.  They will certainly find this tax lien.  What you're interested in is what else they find.

If they only find this lien, then move ahead with wholesaling the property.  If you find a buyer, assign the contract. Price it so the lien can be paid off at closing, you get your assignment fee and the seller gets what they want.  You have the property tied up, but no risk at all.

Getting an unrecorded quit claim deed from the owner of this property is useless, though, since the owner could turn around and sell the same useless deed to someone else.  If you really want to take ownership, you're going to have to record the deed, and the TLC is going to have to be paid off.

Jon Holdman · Answer

It would be foolish to buy real estate on any type of deed and then not record it.  If the seller asks you do to this, he's preparing to screw you.  If you don't record the deed, and the seller sells it to someone else who does record the deed, their claim on the property would override yours.  At the very best, you could fight a lawsuit with the other "owner".  You would be unlikely to take the property away from the second owner.  You might prevail in a lawsuit against the seller.  But if they're intentionally selling the same property multiple times, rest assured they won't have any assets for you to take.

If you're going to buy real estate, do the transaction at a title company with title insurance and proper recording.  The title company will do a title search and you'll really know where you stand.  If its a quit claim, then the title insurance will specify the existing liens and encumbrances as exceptions, and you will be responsible for those.

An unrecorded quit claim is useless.

If you can't afford the title insurance and doing the transaction properly with a title company, you shouldn't be buying the property.

Bill Gulley · Answer

LOL, I have not heard of a quit-claim deed being "down and dirty" but I guess that's a fair way to look at it. Think of like this, a quit-calim deed will only convey that interest in and to a property which the grantor may have, What that interest is will be subject to any other interests in the property held by others, which are of record and which may not be of record to that date. If a contractor files a material and wormens lien against the property the day after the quit-claim is made, the contractor may still have a valid lien. Use them after considerable due diligence. Bill,

Jim Wineinger · Answer

But dont forget that each year a TLC will be sold for the amount of the taxes owed.
Therefore during the redemption period of your TLC, there will be another TLC sold, unless that years taxes are paid up. 
You will more than likely be dealing with more than one tax lien.

I am not sure about AZ but some states allow the purchaser of a TLC to foreclose on the property and recieve a deed for that property, but must also then pay off all other TLC's with interest and or penalties. Some states do not allow foreclosure but require these amounts to be paid by the purchaser of the property at an property auction, ect before they can purchase the property which would mean (in some cases) that your quit claim deed can not be recorded until the TLC is paid off as it is considered a purchase contract. This is the reason that some states do not accept quit claim deeds at all.

Your best way to proceed, assuming the TLC is the only encumbrance, is to take your figure that you have in mind and subtract what it will cost you to pay off the TLC and any other TLC's, then offer that amount to the owner.
When you take that QCD to record it you will then also pay off the TLC's and your QCD will then transfer the control of the property to you free and clear (again assuming theonly encumbrance is those TLC's).

So paying a title company for a title search will be more than worth it to you if you plan to proceed.

But I would bet that you can get it cheaper by paying off all previous TLC's after you purchase (become high bidder) the next TLC issued. 
In my experience this is usually cheaper than paying the owner what they want for the property (even using a warranty deed) as you are still responsible (as new owner) to pay off any and all taxes associated with that property since property taxes are charged to the property, not with the owner.

Bill Gulley · Answer

I would do a title search, My purchase agreement would provide enough money down to pay all liens. I would require the seller to pay the liens out of closing. I would have the title company ensure all tax liens were released and any holders in interest be paid. I would have the title company insure title and obtain a warranty deed. You can't hide out from having a claim filed against the property, it's not you they are after, it's the property that is encumbered and if you have a financial interest in the property, that interest may be reduced or placed at risk. Not filing your interest in any deal only provides time for someone else to get in front of you with claims, liens or encumbrances that will not be insured against under your title policy.. Liens arising from work done or materials are issues that can arise after any sale and your protection is in the type of title transferred to you, like a warranty deed.  Bill

Jon Holdman · Answer

That's very confusing.  The redemption period starts after the property is sold at the sheriff's auction.  At that point, the previous owner no longer owns it and cannot sell it.  If the owner sells it to you at that time with a quit claim, you have given her the money for nothing.  That quit claim deed is useless.

The tax lien is probably not wiped out by the foreclosure.  Are you talking about a property tax lien or a IRS tax lien?  These is a fairly long redemption period for IRS liens, but I've heard they rarely redeem.

If there is an owner's redemption period, you could by the redemption rights from the previous owner, then redeem the property.  If you do this, you will need to be sure you know what you will have to pay to redeem. If the bank bid high (like, what they were owed), that price may be way too much.

If this did go to auction, and the bank was the winner at auction, and you "buy" the property now from the previous owner, you are buying ABSOLUTELY NOTHING.  When the redemption period ends, the bank gets the property.  Anything you pay the owner is meaningless and if you "sell" the property, that transaction is meaningless.

The tax lien is the least of your problems.  If this property has been to auction the only thing you could buy from the previous owner is the redemption rights.  If the owner is trying to sell the property, you're fixing to be screwed.

Jose Cabanero · Answer

Granted, I'm not nearly as experienced as the vast majority of you here on this forum. I think I found a lucrative opportunity, but you know what they say, "If it's too good to be true, it probably is." I'm trying to figure out why the above won't work.

Justin S. · Answer

Jose - What is your intent with the QC Deed if you do not want to record it?

Jose Cabanero · Answer

The property I'm looking at buying is currently encumbered by a tax lien. From the conversations I've had with the owner, she does not want the property anymore, and is willing to sell it to me if I offer a good price. 'Good price' is a relative term naturally. I have a price in mind, but I want to make sure that on the back end, I'm ready to get all the paperwork done.

My thinking is, if I don't record the deed, and I can't flip the property before the redemption period ends, I at least have the ability to walk away unscathed, minus the cost of acquiring the property.

Kyle King · Answer

I could not agree more with Jon.  If you get the QC signed...then get it filed ASAP.  Or it may not be worth anything.

Even if you plan on selling the home/land the next week, just sign another QC to your new buyer.

As for a lawyer, if you think you need one...then you need one.

If you can't afford one, then get a partner with some money and ....then get the lawyer. Make the partner pay his fees.

It is OK to do 'skinny' deals...but you can get 'too skinny' and cost yourself money on the older end.

Good luck Jose!

Kyle

Getting a Quitclaim deed?

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