Pennsylvania Tax Sale

[Jeanni Prescan]

I'm trying to sell a house that I purchased at Pennsylvania Judicial tax sale in 2014.  Title is telling me that back taxes for the city are showing as open and due for years that I didn't own the house, in a very large amount.   I was under the impression that judicial tax sale wipes out all liens except federal liens.   Has anyone had this experience?

[Chris K.]

@Jeanni Prescan

Did you go through a "judicial sale" (often called free and clear sale)?  If so, such taxes sales should --- in theory --- get rid of most liens. If it was an upset sale or something else, then that may not be the case. Now one problem with a judicial sale is that the entity handling the tax sale process often make mistakes and thus the liens do not get wiped out. For example, judicial tax sales could theoretically wipe out a federal tax lien. But I can't say I recall seeing a judicial tax sale where they correctly followed the procedure. With all that in mind, it's really hard to say what exactly happened without seeing all the paperwork.

The other important item to note is that getting title insurance for a property that you bought at a tax sale can be difficult. In my area, for example, virtually all title companies require the owner to bring a quiet-title action unless you can meet some burdensome steps. So in some cases, the title company would mark a tax or fee as an existing lien despite the fact that all the parties have 99.9% confidence that it got wiped out at the judicial sale. The basic thought process is that since you are going to have to bring a quiet-title action anyways, why not just deal with all the liens? 

For example, I had to bring a quiet-title action that the purchases bought at a judicial sale. The title report had something like 50 exceptions. I was able to deal with 95% of that upon filing the complaint and just negotiating it out with the parties. I just got a default judgment against the last few. 

Overall, getting title insurance on judicial sale properties are not the easiest. Many title companies don't want to touch it.  

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information