Warning About Improperly Written Alabama Deeds

[Denise Evans]

Thanks to my friend, Alabama tax sales attorney Greg Stanley, who alerted me to this issue. He and his colleagues are seeing a number of improperly written deeds prepared by non-lawyers, that are causing major headaches and financial losses. Please pay attention to the following issues:

• If all the deed language is on one page, and only the signature line and notary attestation is on the last page, then it makes it easy for someone to substitute pages after the fact and change important language on earlier pages. If you are not using an attorney to close a deal, require that every single page be signed by the grantor. Not just initials, which are easy to forge, but a full signature somewhere at the bottom of every page.
• If there are large blank spaces in a deed, cross through them with a giant "X" and sign your name there, as well as on the signature page. That way, new material cannot be added later.
• A quitclaim deed that contains certain magic words such as "fee simple" buried down at the bottom in stuff you consider boilerplate, or other legalese you don't think is important, might transform your quitclaim deed into a full warranty deed. You can then be sued if the title is not perfect. Was that what you intended when you signed something that said "Quitclaim Deed" at the top? Of course not. We don't go to three years of law school just to buy an extra three years before we have to start paying off student loans. There are tens of thousands of technicalities that make differences in things.
• If you are selling tax sale properties, MAKE SURE you disclose in writing that the property might be subject to redemption rights, and make any buyer sign that disclosure in full, not just initials.
• If you are buying tax sale properties, even tax deeds, MAKE SURE you calculate the redemption price tag without any additions for improvements. See if you are okay with the risk involved in paying a seller's price that could be more than the redemption amount, and taking the risk you could lose the difference between those two numbers. We all take risks, otherwise we'd invest in Treasuries, not real estate. But make a calculated decision about how much risk you are taking, instead of doing it blindly.
• If someone tells you that you can pay more than the redemption price for tax deed or tax certificate properties in Alabama because you can immediately take possession, make preservation improvements, and make it too expensive for the owner to redeem, they are TECHNICALLY telling you the right thing. The "rest of the story" as Paul Harvey used to say, is that you must first take "peaceable possession." That can be done in only three ways. (1) The person who lost it at the tax sale (or all of their heirs) tell you they have no intention of ever redeeming and the property is abandoned. Property that has been vacant and neglected, even for a long time, is not legally abandoned. Legal abandonment depends on the owner's intentions, not what things look like on the ground. (2) The person who lost it at the tax sale surrenders possession to you, preferably in writing so they can't change their mind and lie about it later. (3) You have an ejectment order from a judge. Without those things, a tax assessed owner can claim you were not in peaceable possession, you are not entitled to be paid for any improvements at all, and by the way you should have to pay them actual and punitive damages. Courts are doing this, and not just an isolated few!

There is a lot of money to be made in Alabama tax sale investing. But, you have to know what you are doing and be skeptical of things that seem too good to be true. Do your research. Ask questions here in Bigger Pockets. I usually get notification of things that contain the words Alabama and tax sale, and make an effort to respond as quickly as possible. Other members are good about responding. You are a member of this community for a reason. Take advantage of it!