Originally posted by @Troy Zsofka:
@Troy Welch:
I'm not a real estate attorney, but this is what title insurance is for.
It is possible that your grandfather took the transfer as a quit claim deed as @Wayne Brooks mentioned, which means that no warranties were given as to the title being clear, and the transfer could have proceeded with the lien in place; as a quit claim deed simply grants the seller's claims on the property to the buyer and says nothing about other claims or liens. However, your grandfather still should have gotten an owner's title insurance policy; which should step in to handle to this up to the policy limit (typically the purchase price).
If he bought it all cash and decided to forego owner's title insurance, you may be out of luck.
Again, I'm no expert on this and I always retain a third party real estate attorney to handle title, and I purchase an owner's title insurance policy on all my acquisitions.
At this point, if you can find the docs from when your grandfather originally purchased the property, you can see if there is an owner's policy amongst the paperwork. At the very least you can identify the title company or attorney that handled the transaction and reach out to them. Otherwise, your best course of action is probably to engage a quality attorney to guide you on this.
Good luck
Just to add what you have correctly stated, there are a couple of valid reasons to occasionally use Quit Claim Deeds but there are serious pitfalls:
1. I can give you a Quit Claim Deed (QCD) for the Brooklyn Bridge (or for any house, even the house you own) for the amount of money you will give me. A QCD has the legal effect of saying "I give you any interest I may have in the bridge/house/property". That does Not Guarantee I Ever Even Had an interest in the Bridge/House/Property. Since I am not guaranteeing you anything, when you sue me you will lose, if an attorney will even take the case.
2. Most Title Insurance companies are very wary about Quit Claim Deeds and might not issue Title Insurance on a property transferred by QCD.
3. Since it was transferred by QCD you don't know what other family, friends, relatives, or others might have a right to the property and pop up later. Then you've got a lawsuit on your hands.
4. If you buy using a QCD, and the person selling the property doesn't have the right to sell, when the rightful owner finds out, you can be charged with fraud, forgery (they will claim you forged the signature), bank fraud (if there is a loan on the property), mail fraud, and various other items, none of which further your investing career. The loan can also be called on the Due on Sale Clause causing a mess for the true owner. Then you can be sued by the owner for Fraudulent Schemes and Artifices.
5. I explained all of this because I like using big words (and as an aside keeping people out of trouble.) ;-)
