Obtaining Title Ins after Tax Sale in SD

[Matt Selland]

I purchased some farmland in SD at an IRS tax sale in January of 2021, the previous owners owed the IRS 1.8 million so the IRS siezed and sold 3 tracts of land in an attempt to collect their debt. The sale was hardly advertised at all just a small write up in the local paper about two weeks prior to the sale, I was interested and did as much research as I could, there was one other lien besides the IRS on the property which was manageable but my biggest problem was getting finacing arranged on such short notice. I have acces to beginning farmer loans through FSA which I had utilized in the past and intended to utilize here, however some time was needed to set one up. The bank I deal with made a short term loan to my Dad and my Uncle so they could purchase the property with the intent to sell it to me once I had financing arranged (typically takes 3-4 months with FSA). After the sale I applied for and was approved for the loan however we were of course unable to obtain title insurance. After settling the lien that we knew about and dealing with some issues of the IRS lien release and almost two years later we still cant get insurance. We have tried many different title insurance companies and they all tell us that the risk of the previous owner suing to reclaim the property is too high. I suspect a quiet title action is what's needed here but my attorney has advised against it as he beleives as do I that the previous owners will contest it as they are very litigous. I think the chances of them succesfully contesting a quiet title action is low however I don't really want to take the risk while my Dad and Uncle own the property, that is to say I would rather purchase it from them without title insurance and then attemp quiet title so they dont have to be involved. After the sale we were issued a quit claim deed by the IRS. I asked them for help with my issues getting title insurance, they did help some but apparently not enough. To make matters worse the FSA loan was approved with a rate of 1.5%, since then interest has quadrupled. I still have the FSA loan approval but they wont hold the funds forever and I am at a loss as of what to do. My current plan is to find a lender that will make me a laon without FSA to purchase the property from my Dad and Uncle and then worry about clearing up the title over time (this would mean paying current interest rates and giving up the 1.5% loan). Any input or advise to the situation would be greatly appreciated.