Construction Loan on a Tax Sale Home

[Clayton Miller]

I've got a problem.  I bought a house from a wholesale company about 3 months ago.  They bought the house at a tax sale and then sold us the deed, "free and clear" a week later.  So my partner and I began work on the home all the while filing for a construction loan to fix it up.  We've made it through the majority of the steps and now the underwriter says that the company we bought it from missed a step.  They are asking for a quiet title suit or a deed from the tax debtor.  Can someone explain to me how they were able to buy and sell this house without going through all of these steps and then tell me what in the world to do?

I'm a little worried that we got ripped off.  Is that possible?  I have the deed with all of the correct signatures so I don't understand what has happened.  

thanks for the help,

[Wayne Brooks]

You need to talk to a local real estate attorney, so you understand what the laws/procedures are for obtaining clear title on tax deed type properties.  A quiet title action is also what's required here.  Unfortunately, you didn't seek a title co. when buying.  And yes, unfortunately you were a bit of a sucker here, I see guys trying to resell these "clouded title" property to people all the time here.  Hope that you prevail in the quiet title action (that the county did all the proper notifications) as if you don't and someone is allowed to "redeem" the property, you will likely only get your purchase price back.  Perhaps important: what type of deed did you receive, QCD, Special Warranty, General Warranty, etc.? I suspect one of the first two, which implies no guarantees.