Is a quiet title necessary?

Question

So my fiancé and I have found a repository property in PA that we are considering purchasing. Knowing that most times it's required to have a "quie title" established in order to get insurance on it, I had a question. Is it possible/likely to be able to sell the property/house to an investor at a discount without a quiet title if the investor intends to flip the property? For example, if the house is purchased for $5,000 and is worth $200,000, is it possible to sell it to an investor at a price of $75,000-80,000 without a quiet title?

thanks for any input and advice.

Chris K. · Answer

@Jared Hettler

The reason you need a quiet title is that you cannot get a title insurance. If you cannot get a title insurance, you do not have a marketable title. If you do not have a marketable title, you cannot sell it at its maximum value nor can you get a lender to lend on the property.

If you can find a $200k property for $5k, then sure --- someone will buy it from you without a marketable title. But the chances of you getting such a deal is very unlikely.

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.

Chris K. · Answer

@Jared Hettler

In Pennsylvania, the two main tax sales you deal with are upset sales and judicial sales. Upset sales only divest the ownership of the property. So you buy everything subject to all other interests. Judicial sales can theoretically divest all other interests in the property. In practice, that doesn't always happen.

Repository sales refer to properties that do not sell at a judicial sale. Properties that do not sell at an upset sale can be purchased at what the statute calls a "Private Sale."

Again, I would stress that judicial sales (and by extension repository sales) can divest the other liens. But the fact that they can doesn't mean that THEY WILL.

I'm not sure what you are referring to when you say commissioner's sale. The tax sale laws have a mechanism where county commissioners can purchase the property at a tax sale. After such sale, the commissioners could sell it. But I haven't really dealt with that in the past.

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.

Ned Carey · Answer

@Jared Hettler as said; without a quiet title action it is hard if not impossible to get title insurance***. Without title insurance it is virtually impossible to get financing.

It is certainly possible to sell without title insurance but not to someone who will need financing. In your example above, yes you could sell at a significant discount to get someone to pay cash and take the risk of a title issue.

Another alternative is to sell with owner financing. This works with deals with big spreads like you mention. You can take a modest size deposit like $5k which covers your cost and finance the rest.

Now if you were into that property for $160 and it is worth $200k that is a different situation. (it is also a MUCH more likely situation.). Since you are into the property for $160, someone has to put down a $160k deposit for you to get your original investment back out of the deal.  In this second scenario not only have you limited your pool of buyers the owner financing offers much less incentive to the buyer.

*** This assumes a tax DEED, most tax deed areas require a quiet title action to get insurance. This is not necessarily so with a tax LIEN foreclosure.

Alex Deacon · Answer

@Jared Hettler if you are buying at Sheriffs sale please do your due diligence. There is a lot to research and there are many traps that you can fall into. Get to know and hire a good real estate attorney who specialized in RE investments. I have bought hundreds of properties at Sheriffs sale over the past 6 years and we have made a good profit and we have also lost our shirts on quite a few.

Chris K. · Answer

@Jared Hettler

Not sure. Can't say I am familiar with that term in this particular context. Could be a local terminology.

As for why they don't "snatch" up judicial sales, it's because they are one of the riskiest way to buy real estate in Pennsylvania. If there is a defect during the sale process (which is common), the court will protect everyone else before the buyer. The price thus reflects this risk/uncertainty.

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.

Jared Hettler · Answer

@Chris k

Yes, I do recall hearing about the Judicial and Upset sales. I wasn't aware that the repository properties are after the Judicial, so that's interesting. If some of these are divested of liens at the Judicial sale why do think they aren't purchased and then are sent to the repository list? I can't imagine why someone wouldn't snatch them up.

Also, maybe the "Commissioner's List" is just another name for the Upset sale? I know in Schuylkill County they have the Commissioner's List. I know that from what I asked the courthouse employees that the buyer of Commissioner's List properties are responsible for any liens on the property, which is the same as the Upset Sale you explained.

Sorry for any confusion and thanks for the response, Chris.

Jared Hettler · Answer

@Wayne Brooks

I've gone to a law firm about one of these properties to inquire as to whether or not I would be responsible for paying any liens or hidden costs and was told no. My understanding of it is that commissioners sales are sales in which the buyer is responsible for all liens/debts attached to the property, but the repository sale is free and clear.

Jared Hettler · Answer

@Ned Carey

I see. I still feel as though the list of each county's repository properties is too good to be true. And as they say, if it sounds too good to be true it probably is. But I went to a law firm and inquired about this list and a specific property from this list (it was a property with an extremely old house built in the 1880s in bad shape, in a not-great location,) and was told the property was free and clear. On this list, I have seen plenty of properties for prices under $10,000 and the strange thing is that they are on there because they were not sold at the commissioner's sale which is sale in which the property is sold with liens attached after it is repossessed for tax delinquency, and it is also fair game for counter offers. This repository list however is apparently first come first serve, whoever goes to the county courthouse and offers to buy it gets it. The strangest occurance I've seen was a property listed for $2,300... it sold 9 months prior for $289,000. I never had the chance to drive out to look at the property. The only way I can imagine such a deal would not have been snatched up the second it was up for grabs is if the house is burnt to the ground.

Jared Hettler · Answer

@Alex Deacon

I believe the repository sale is different than a Sheriff Sale. I'm not entirely familiar with Sheriff Sales so I could be wrong but I believe the repository sale is a sale in which the property is tax delinquent, taken away by the county, put up for a commissioner's sale (I believe that is NOT a free and clear sale) and then once it is not sold there, it goes onto the repository list, which is to my understanding, free and clear and is on a first come, first serve basis in terms of offers. In comparison, the commissioner sale is published in the newspaper and is up for counter offers and I believe it comes with any liens owed.

Jared Hettler · Answer

@steve Morris

I've gone to a law firm about one of these properties to inquire as to whether or not I would be responsible for paying any liens or hidden costs and was told no. My understanding of it is that commissioners sales are sales in which the buyer is responsible for all liens/debts attached to the property, but the repository sale is free and clear.

Is a quiet title necessary?

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