Question in regards to QC deeds & liens

[Allie Nasatowicz]

Okay first I want to layout the situation I have questions about, questions at the end. Sorry if its long, those that read it all and respond, I thank you in advance! 

My husband and I have always been interested in buying and selling real estate but financially there was never a viable way to "safely" consider doing so until more recently. A friend of his owns a property that had been town acquired for back taxes, he had then purchased on auction from the town with a QC deed and got the taxes paid current. Originally a friend of his was going to stay there and just pay him enough monthly in "rent" to cover the yearly property taxes but the friend never paid anything and only stayed there for a few months leaving my husbands friend a property he is paying taxes on but has zero use for and lacks the time/money to do the repairs to fetch a decent price; so he has been trying to simply sell for what he paid and let it go. We looked at it, had many quotes given on work that's needed that we can't complete (mostly what is driving the price way down and also the most costly repair is that it needs a well installed, it was previously on a community well but a neighbors septic install compromised that properties connection to it so it has no water) but ultimately we told him we would buy it given the title was clear. The other properties he has purchased from the town gave him no issues so he wasn't expecting any but we went ahead and got a lawyer to handle the title search and closing in Aug of 2020. They found a couple issues with the title so he got his own lawyer to sort them out so he can sell it and he has been working it for some months now. To the best of my knowledge, there was something wrong with the deed he had recieved from the town, or it had to be corrected some how, and he also had to find the previous owner and have them sign something essentially saying they didn't want the option to buy it or claim it(i believe). He found the previous owner actually works with his mother (I love small towns, haha) so getting that out of the way was easy and she was happy to sign it away. He got the corrected deed from the town after but that leaves one more cloud in the form of a lien found in the title search, which he was much unimpressed to learn the property had. Just in the last couple weeks he got in direct contact with the lien holder who had no record the property was acquired by the town, let alone QC deeded out to him, so now he is trying to sort those things out with the lien holder.

Essentially, I am wondering if we should really continue waiting for this property or if we should just begin searching for a different opportunity. I know nothing in real estate is ever speedy, and we aren't opposed to waiting it out but I'm not sure if he will even be able to resolve the lien or how long it will take just to get the paperwork straightened out and up to date. 

Second question, could/should we consider buying the property with the lien? How would that work if its possible? Ultimately goal would be to sell the property, so taking responsibility of the lien we would have to pay off the amount and have it clear before we could sell with a clean, insurable title, right? We have the chance to purchase at a really low price which is really tempting and leaves us a really great margin to work with but taking on a lien with it would cut into that margin greatly and that makes me worry more that it may not be as worth it in the end.

Being that it would be our first delve into the real estate world I'm not sure if we'd be taking on more than we want or can handle. Anyone have stories about buying properties with liens and how it all works? I am beginning to think we should take this experience of his friends to learn to never buy a property without first having the title checked! I would really hate to be in his position and I'm extremely glad we decided to get a professional title search before just buying it from him 😅 

[Charlie MacPherson]

@Allie Nasatowicz  You should talk to an attorney about the liens and whether they're still in effect. 

As far as a quitclaim deed, that is an instrument that's used to transfer all rights and interest that an owner has in a property to another party.  A warranty deed is much stronger.  In that case, the seller "warrants" that the title is free from clouds.

Here in Maine, most properties transfer with warranty deeds.  In my former state of Massachusetts I never saw anything but quitclaim deeds.

The real key is title insurance.  An "insurable" deed, is one where the title insurance company sees some sort of issue with the chain of title, but thinks that the risk is minimal.  Far stronger is a "marketable" title.  There the insurer thinks that the title is completely free from clouds.

Having only an insurable title may have some impact on your ability to sell later.  In my opinion, it's worth getting the seller to clear the old liens before you take title.  When you sell later on, your buyer and their attorney/title company will be raising the very same questions.

No matter what you do, spend the money on title insurance.  It's like life insurance - you don't need it until you do.  But then it's too late to get it.