Tax sale purchase clear of title defects?

[Skip Rivera]

I'm looking at a property in Riverside county CALIFORNIA that is coming up for tax sale. The county guarantees that the successful bidder will get the property free of all encumbrances. My problem is that I know a former would-be purchser who got a preliminary title report from Chicago Title that read the owner--and three prior title holders--never had any legal interest in the property. His deal fell out of escrow I Dr the issue. So do tax sale purchases clear all clouds from title, making them marketable? I hope someone will give their views on this.

Skip

[Richard Bastar]

I'm not sure @Skip Rivera but I know someone who might, or may have connections; @Joe Homs

Good luck!

[Bruce Lynn]

I have no idea how this works in CA, but I don't see any way that the state can guarantee there are no encumbrances.  For example if there is an IRS tax lien....I don't think they can just get rid of it.

The second issue I would see is there is a difference between what the state says and what a title company might say/do.  So the state may say there are no encumbrances, but the title company may not be willing to issue title insurance where they think there could be a question.

[Carletta Grier]

@Skip Rivera - Check out this from CA State Controller website, http://www.sco.ca.gov/ardtax_tcs_pubauction_bidder...

Hope this helps some. You may want to talk to a real estate attorney or title company and see if you will be able to obtain title insurance.  I only know how things work in Maryland and DC. 

[Leonard L.]

Tax sales just wipe out junior encumbrances, they do not guarantee clean title.  I have looked at tax auctions where there is a tax assessor number, so you think good conveyable lot.  But legal description contained phrase "one half of lot [x]..." which is a dead give away that this is not a legal lot under the Subdivision Map Act.  That means it is a crime to convey later, although the government gets immunity for selling it to you, of course.   This often happens when the assessor office creates a separate lot for tax purposes but the larger lot of which it is part was not legally subdivided.

Also, as pointed out above, tax liens, weed abatement charges, HOA, etc all usually survive. Plus even if title squeaky clean, most title companies will require that you hold it for a year before they will insure a subsequent transfer.

Caveat emptor.

[Josh Carr]

@Skip Rivera You can make sure that the title is marketable by doing a quiet title with a lawyer. This will cost a little bit approximately 1500. Once the title has been quieted all clouds will be removed. An IRS lien, code violations (weed abatement, grass cutting, boarding windows-doors, and demolition costs), HOA fees, water- sewer bills all go along with the property providing the property has any of these. You could do a title search which would be a good idea if you are going to acquire the property. Usually an IRS lien and any other encumbrance will be available to you with the treasurer/tax collector of the county. If you cannot find any of these you could go to the recorder's office and get a record of anything against the property. This may also have a small fee but so does a title search. If it is not recorded it cannot be used against the property.

[James McGovern]

Quote from @Skip Rivera:

I'm looking at a property in Riverside county CALIFORNIA that is coming up for tax sale. The county guarantees that the successful bidder will get the property free of all encumbrances. 

Skip

The challenge is ordering preliminary title searches. The county government will make good on the promise of providing clean title but often this occurs at closing, not before which creates a challenge for those who have lenders who need to know everything upfront.