Tax sale houses. Learn from my most recent trouble :)

Tax sale houses. Learn from my most recent trouble :)

Investor · Granger, IN · Member since 2015 · 195 posts · 129 votes

So we participate in tax sales.  We have done several states but right now spend 99% of our time in Indiana and Michigan.  As you may or may not know, when you buy a property on tax sale, you do not get a warranted deed.  You get a tax deed which is really like a quit claim deed (I am not a lawyer there could be some subtle differences).  Without a warranted deed, you can generally not get title insurance and consequently cannot sell the house to someone getting a loan for the property.  In order to rectify that, you need to quiet the title.  We have done so both in Michigan and in Indiana.  In all of our Indiana retail sales we have used attorneys.  We have been aware that some title companies also offer this service and have used one successfully in Michigan to quiet a title.  Here is where one of our current sales went off the rails.  We chose a national title company to quiet the title.  When we use attorneys they follow the rule of Indiana law which requires that all people with a possible interest in the property be contacted.  How do they contact those people?  The requirement is to see what is recorded at the local recorders office and send letters to those people and to also post ads in the paper of record for the area.  What the title company chose to do is hunt down the previous owner who had abandoned the property and moved to another state.  The house had $28,000 owed on taxes and penalties on a house that only had an annual tax bill of $1,340.00.  The roof had failed and the house had been empty for years.  But wouldn't you know it, when the overzealous title company found the old owner, he saw a way to make some money so has now announced that he will be suing us and the county for "wrongfully taking his house."  Here is the thing.  the title company promised a 15 day quiet and has made a mess of this.  We will win the suit, but it could take months, and the buyer who has already had appliances installed will have to get them out and continue renting until this is ironed out.  I share some of the blame for presuming the title company would follow Indiana law and for not having this done prior to listing.  I am sure by the Fall this will be in the rearview mirror.  I am posting it just to give a heads up to the rest of you so you might avoid this in your own businesses.

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Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
7y

Sounds like your Quiet Title just got noisy

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  • South Bend, IN · Member since 2014 · 318 posts · 156 votes
    7y

    @Greg Carrier

    Ahem, ...."We chose a national title company.....".....I think I can deduce which one but obviously you did not name the Company for a reason. Are you willing to name names?

    Is the title company going to pay for your defense as I think they should in the suit since it was their fault or do you pay out of pocket for the lawsuit?

  • Rental Property Investor · Oakland County · Member since 2018 · 151 posts · 97 votes
    7y

    @Greg Carrier sorry about this hard time and thanks for sharing it with the community. I'm not familiar with tax sales, so this was an interesting read.

  • Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    Sounds like your Quiet Title just got noisy

  • South Bend, IN · Member since 2014 · 318 posts · 156 votes
    7y

    @Bob B.

    Ha, ha ha. Quiet Title.....noisy...took a few seconds but lol!

  • Lender · Troy, MI · Member since 2019 · 432 posts · 147 votes
    7y

    @Greg Carrier

    Thanks for sharing the experience.

    For my better understanding "You bought on tax sale; then you fixed with new roof etc.  That is when the original owner wanted to make some money out?"

    Your suggestion from this outcome; is to complete Quiet Title; before starting any renovation; am I correct?

  • Investor · Granger, IN · Member since 2015 · 195 posts · 129 votes
    7y

    @Saravanan Saravanan. We do not quiet titles on any houses that we wholesale or houses that we keep for rentals. We only quiet for houses that are flipped and sold at retail through the MLS. If you are going to flip a house to eventually sell, you should do the quiet title earlier rather than later. I always debate on what to do with houses and almost always end up quieting near the end of the work we do rather than up front. Overall I would just recommend using attorneys to do the work not a title company. Also attorneys should be a little less expensive.

    Good Luck!

  • Lender · Troy, MI · Member since 2019 · 432 posts · 147 votes
    7y

    @Greg Carrier

    Understood very clearly now.

    Thanks for sharing your experience and lessons learnt

  • Investor · Granger, IN · Member since 2015 · 195 posts · 129 votes
    7y

    @Account Closed  It stars with an M and ends with an N.  We are filing for quiet title so I am imagining this goes one of a couple of different ways.  1.  The old owner doesn't actually file a lawsuit and the quiet title just goes through, or 2.  The old owner files and we get really delayed but eventually prevail as the rules are pretty cut and dry.  I think the odds of my getting the title company to pay is about zero and that is because they are not actually quieting, they are doing what they think is necessary to provide title insurance and not have a claim.

    That's my nonlegal background opinion though :)

  • South Bend, IN · Member since 2014 · 318 posts · 156 votes
    7y

    @Greg Carrier

    Can I buy a couple vowels or consonants? There are two that start with M and end with N, ha, ha.

  • Investor · Granger, IN · Member since 2015 · 195 posts · 129 votes
    7y

    @Account Closed I know, I think only one markets this service though I could be wrong :)

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