Tax claim deed/title insurance

[Jeanni Prescan]

I purchased a home at Judicial tax sale over 2 years ago and have a standard Tax Claim Deed. 

Now I am selling the house and the settlement company is requiring an action to quiet title, which I am told is going to delay closing.

I am wondering if anyone here has experience with this?  The former owners are both deceased and all the proper channels were followed with notices of the sale, etc.

Also, has anyone found a faster way to get this done? Maybe a particular company that specializes in it and can move it along faster than my attorney, who is always so swamped.

Will be looking forward to your replies.  Thank you in advance.

[David Krulac]

@Rick H.  @Chris K. @Jeanni Prescan

The problem is not so much with the law but the execution of same.  In PA. there is no redemption period and it is a deed state, which means as of the date of the auction you are the owner, essentially.  Court challenges to tax sales are almost always challenges to notification.  If the former owner is not notified, they there is a technical flaw in the title that can only be corrected by a Quiet Title Action or a Quit Claim Deed from the former owner.  Obviously the second choice does not work in the case of a deceased former owner.  Notice is a big problem.  The law requires 3 separate notices, if not all 3 can be proved, the notice is deficient.  Years ago the law only required 1 notice, but people rightly complained that seizure of ones property was a severe remedy for missing a single tax bill payment.  There were cases where people lost $200,000 houses for $12 or some such very low amount.  The law was tightened up to provide for more notices before property forfeiture.  A consequence was that the notice requirements are harder to comply with.  

One of the notices is by certified mail.  Most people realize that certified mail bring no good news, so they simply refuse to go to the post office to claim their certified mail.  The notice is deficient and provides the basis for overturning the tax sale.  One attorney in Pittsburgh, who does a lot of tax sale work, has said that every tax sale is flawed and subject to court challenges.  One case I looked at was challenges on the ground that the notice was addressed as "last name first name" without a comma between.  The judge ruled in favor of the former owner and tax delinquent and overturned the sale.  Other cases also turned on seemingly insignificant facts, and many judges are unwilling to take people's property away from them.  In one court room where I was present, but not a party to the suit, the appellant had a novice and ineffectual council.  The judge actually instructed the attorney on what he should say to win his case.  It was only comical, because I was NOT a party to the case.  For these reasons and many more the title Insurance companies have been burn in the past and for the most part refuse to issue policies. 

Title Insurance is the only insurance that insures past events, it is highly profitable and should be a slam dunk.  But you add these wild card to the array, and these companies who expect to never pay any claims, get real nervous when they lose a couple big cases.  And for that reason, burnt once, twice shy.  

Property prices will never compare to coastal or sunbelt areas, for a number of reasons including the industrial, manufacturing base.  Those problems are not confined to PA borders and include many other nearby states.  In West Virginia the 3 biggest industries traditionally are: coal, timber, and railroads.  While in PA, many people think of the steel industry, the number 1 industry in PA is farming.  In Pittsburgh the top current industries are education and medical, its not your steel mill town any more.  In Pittsburgh they developed the polio vaccine, heart transplants and 7 organ transplants;  they didn't do that at the Bessemer furnace.

I've said it countless times on Bigger Pockets and other places that "Tax Sales are the most hazardous method of buying real estate."  Most people don't believe me.  

In PA. unless you do a Quiet Title Action or have a Quit Claim Deed from the former owners, you essential can't finance, refinance or sell a property with title insurance.  We can have a long discussion on title insurance another time.  There is a third alternative method and that's Adverse Possession, but in PA that takes a minimum of 21 years by law.  Talk about a long term horizon!

But I know investors who have bought property at Tax Sale, paid cash, never financed, and rented the property for the next 21 years with no problem, then were able to sell without QTA or QC Deed, by using the principles of Adverse Possession.