Quitclaim, title issues + back taxes, should I run or buy?

[Aja McClanahan]

I am looking to buy in a specific area and wrote letters to a few people. One guy, a supposed developer, called back and ask for an offer on the property I mentioned.

I made one and we settled on a price. My realtor wasn't interested in going along for the ride b/c we would do an FHA 203k for rehab and he thought it was a lot of work for the small commission and long time line to close. Fine, my lawyer and I can handle.

I start researching the property on the recorder website and I find that there is a break in the chain of title and there is no record anywhere that this guy or his company owns the property at all. 

The property was in foreclosure as of 2012 then there are no other records since that time. I asked the purported current owner who comes up with this story:

• The mortgage was forgiven on the foreclosure for the previous owner (he showed me the document via email, but it's not recorded at the County recorder office)
• The previous owner did a quit claim deed to the current  owner a couple of years ago (showed that document as well, but this transaction is NOT recorded at the recorder's office either)
• The forgiven mortgage letter is with an ENTIRELY DIFFERENT servicer than what is listed on the county recorder site under the foreclosure proceedings in 2012. Both banks are still around with neither being acquired by another. (two mortgages out there? IDK)

Also, the 2015 taxes have been sold and 2016 taxes not yet paid. 

The "owner" tells me he will redeem the taxes and file the updates to the deeds at the recorder's office before closing and not to worry on these things. 

I am looking to do a 203k rehab loan on this property, but I am getting more and more concerned about what seem to be potential title issues. 

I know my lawyer can check into all of this, but before I get the clock running and get bills for her time, what are the chances that this would be a problematic transaction if I choose to pursue it? Would the bank take issue with all these outstanding problems on the property? Could we still get title insurance if all these problems are apparent?

The deal is just ok to me. I like the property but I think it should be priced lower. 

Wondering if I should run or research it more. 

Thoughts?

[Brian Ploszay]

I live in Chicago as well.  If you are buying in Illinois, then my advice will be correct.    Your attorney can easily protect you on this.  When you buy a property, you get title insurance.  This mandates that all the defects on your title will be fixed, including the back taxes.  It is not abnormal to get involved with a seller who has some back taxes.

This story might make sense, but he will have to get a release on title for the forgiven mortgage.  A letter will not suffice, it must be recorded as a release.  

I am experienced, but find looking at title reports to be confusing.  Your attorney can help you out.

A quit claim seems to be a red flag.  This usually means that he is giving you his rights to the property without perfecting the title.   

If this is too much headache, walk away from the property.  If it is a tremendous deal, see if your attorney can find a way to perfect the title.