Selecting the right Mortgage Title Company is imperative with Tax Sales!

Finding a Mortgage Title Company experienced in tax sale properties is crucial to being able to close the sale! Once you finally get the sale, there is nothing more frustrating than having closing problems because the Title Company simply is not experienced in closing Tax Foreclosures. This happens more often than you would think!

Remember, the Seller selects the Mortgage Title Company. Typically, a realtor will already have a relationship with a Title company and will automatically choose to use them, but in the case of a Tax Deed Property, the seller needs to specify the Title Company, and they need to have located a Title Company with experience in Tax Foreclosure properties in advance. If you do not, you may well fall into a situation similar to the following. On my first tax deed home, three weeks before closing, the title company sent the following email to my realtor:

  1. Property bought on Sheriff’s Deed in 3/2011
  2. There is a 2 year redemption period available for the heirs to come back and make a claim and reinstate themselves for the property.
  3. Seller bought the property without Title Insurance
  4. The deceased prior owners –
    • a. Mrs. XXX died in 89 her 3 children (from prior marriage) were named as her heirs to her ½ of the property. Her interest in the property was disposed of as part of the Sheriff’s Deed. They however “could” still come back within the 2 years a make a claim for ownership.
    • b. Mr. XXX’s interests were never disposed of and therefore his heirs (if any) are still in title to half the property. Mr. XXX’s heirs would need to be located provide and heirship affidavit as to who his heirs are (if any) verify that and prove that none of them lived in the property
  5. Need to verify and prove who if anyone lived in the property from the time of Mr. XXX’s death to the time of the Sheriff’s Sale and Deed. If the heirs any of them resided in the home that is their claim and could be made for up to 2 years from the sale.
  6. As the heirs have a 2 year statute to claim ownership to the property it is unlikely that the buyer would allow that to be a provision in their Owners Policy and unlikely that the lender will make the loan with that in the policy.

The Title Company that sent this response was a respected, national title company, but they got MOST EVERYTHING wrong!

  1. It is true that the property did reside in an Estate, but the property had  NO HOMESTEAD EXEMPTION. As we investors know (that have read step one and understand the property tax code), without an exemption and with the property not previously designated agricultural use land, the redemption period only lasts six months.
  2. No property bought at a Tax Sale can obtain a title policy unless a lawyer or title service company cures their title. Therefore, ninety percent of tax deed properties will not have property title insurance. However, they can still be sold.
  3. The heirs are entitled to half the proceeds of the estate each, but in this case, it would be the proceeds from the initial tax sale. Because the redemption period is ended, they have no claim on the property.

The benefits of locating and creating a relationship with a Mortgage Title Company familiar with the laws surrounding Tax Deed Sales is clear.

You do not want to be in the position of having to explain and argue the law with your Title Company. Having an existing relationship with a Tax Deed experienced Mortgage Title Company saves everyone time and headaches!