Wholesale without quiet Title?

[Lamar Washington]

Hey Biggerpockets family, I've got a property under contract in Alabama at a price that works for me and my end buyers. After running the title search, the title company informed me that the seller does not own the title to the property, he only owns the deed because he acquired the property through a tax delinquent sale (Which he did not tell me). The owner has owned the deed for 6 years which makes him eligibly to get the title to the property now, but in order to get the title he has to go through the "Quiet Title process" which can take up to a year to complete and costs around $3,500 in lawyer fees. If I purchase the property myself I would only receive the tax deed and have to pay the taxes for an additional 3-4 year before I would be eligibly to start the quiet title process.

Should I try to assign the tax deed to an end buyer?

Should I tell the seller to start the quiet process himself, pay the $3,500 in lawyer fees on the front end for the seller out of my own pocket, and close on the property at the agreed upon price a year from now once quiet title is received?

Should I close on the property myself and receive the tax deed, continue to pay the taxes for 3-4 years, get the quit title in my name and then resell the property as a flip/wholetail? 

[Denise Evans]

The person you are buying from is the owner. BUT, the former owner and any lien holders might still have redemption rights, or have claims that the original tax sale was void and ownership should go back to the former owner. The quiet title lawsuit should ideally result in a decision that nobody else has any potential claims to get the property back. At that point, sellers and buyers and lenders will be able to get title insurance, but not before.

The "clock" depends on three years of lawful, exclusive and continuous possession starting with the date that is three years after the auction.  If the investor does not take possession until four years after the auction, then it will be 7 years after the auction before anybody can quiet title. If the investor takes possession and then sells the property and the new owner takes possession, the time periods are "tacked" together. The new owner does not have to start all over.

Quieting title can cost as little as $1,000 of you can find the former owner or heirs and serve lawsuit papers on them. It can cost upwards of $5,000 if there are unknown or unfindable parties or heirs.  That number starts at $3,500+ for your lawyer, and another $1,500+ for the guardian ad litem the court will appoint to represent the unknown parties.

If it has been more than 6 years from the auction and nobody has taken lawful, exclusive and continuous possession (such as by using the property as a residence or business or renting it to somebody else) then a little-known statute of limitations could allow the former owner to get it back without paying anything at all.

The law is tricky, and like no laws anywhere else in the entire United States. Please get advice from Alabama experts before deciding what to do.