Quiet title on a property to acquire it free & clear?

Question

Hi readers,

So an HOA here in Phoenix presented  a condo deal in great condition to me for only $10,000 ! HOA owns the property, last owner lost it to them due to lots of fees he was behind (Unpaid HOA fees). But he also owed the bank $40,000 that he stopped paying, the bank has not yet taken any foreclosure action on it, so I was told by my escrow agent that I can acquire this deal with a "Markeatable title" at this moment, but he can not insure it until I get a quiet title ? Once I get a quiet title he will be able to insure it, my questions are

-How risky is this ?

-Will the bank foreclose on me later on ?

-What is your advice on a deal like this ?

-Has anyone ran into these type of deals ?

-Will this property be able to sell without an issue ?

Wayne Brooks · Answer

BS.  Talk to a RE attorney.  A quiet title action doesn't remove a valid Mtg.  I've seen HOA'a sell properties to people here telling them the same thing, basing it on the 5 year SOL.  They lost everything they had.  If it were that simple, the HOA would do the quiet title, and sell for full market value.

David Dachtera · Answer

You know there are outstanding liens. You're not getting "clear title". The HOA is responsible for all the senior liens if they foreclosed successfully. They're trying to sell you their position - all they have they can legally offer.

This property is a huge albatross - an "alligator".

If you buy yourself into their position, you will only be able to sell what you bought, liens and all.

David J Dachtera

"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."- DJ Benedict

Nick L. · Answer

Account Closedsaid, a quick check with an attorney or title company will let you know where you stand.

Even if there is a mortgage ahead, you may still be able to negotiate a favorable payoff.

It's worth spending an hour or two checking out the situation in case there is a bargain that other investors can't see.

Nancy L. · Answer

I've heard of instances where a buyer negotiated with lien holders to pay off a reduced amount of the debts upon settlement. The cases I've heard of were in dealing with local municipalities for real estate taxes, water bills, violations etc... Is this possible with banks? If Account Closedcould pay $10K to the HOA and some reduced amount to the mortgage company, maybe that would be a good deal.

William Hochstedler · Answer

Account Closed

There are other posts out there with HOAs and foreclosures like this one.

The bank absolutely has the right to foreclose.  In the process of quiet title, the bank will be notified and block a quiet title action or begin foreclosure.

Why does your escrow officer think that quiet title is possible?

Even the best lawyers can't make mortgages just disappear ;)

Account Closed · Answer

Does anyone know of a reliable lawyer to hep me with quiet title ? How long is the process ?

Jeff Kehl · Answer

Account Closed

Laws on this likely vary by state but I have done a quiet title action so I can sort of tell you how it works. I had a piece of land I bought at tax sale with a clouded title because I only had a tax deed. I paid an attorney to file a quiet title action with the courts. They examine the title chain, do filings and other things lawyers do and the judge eventually ruled in my favor to quiet the title. I then had clear, marketable title.

This process took a couple months and about $1500 in legal fees but that would obviously depend on how easy/hard the case is to win.

Sounds like you could try this in this case but why would the bank give up their right to the property?

If you proceed I would make the purchase contract contingent on you successfully quieting the title and getting title insurance.

To find the attorney I used for this I just looked at public filings related to real estate and picked a local one that was doing that kind of thing.

Account Closed · Answer

He was lying.  I find that the professional lending people are pretty defensive.  They're regulated and have liability.  They have a hard time admitting to loan/note issues and often act like selling the note is a favor.  So different that the private seller carry back people.  Stuff happens, even if they don't want to admit it.  There's more where that note came from.  :)

Account Closed · Answer

Yeah, but.......a defunct lender (in receivership or BK or just MIA) might not answer, even if properly served.  A judge would probably come down pretty hard on the plaintiff to prove due diligence in identifying the successor in interest of the loan.  Even so, I've only seen cases where the plaintiff or heirs claim to have paid the mortgage in full, none where they were attempting to extinguish known existing debt.  Have you?

Chad U. · Answer

Worse comes to worst, rent out the property until the 1st lien lender forecloses and recoup your $10K.  If they haven't begun foreclosure proceedings yet, chances are you could get back your investment from the cashflow.

Quiet title on a property to acquire it free & clear?

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