Selling Your Tax Deed Property

Selling Your Tax Deed Property
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Understanding Four Types of Deeds is CRITICAL to Selling Tax Deed Properties!

If you’ve acquired tax deed properties before, you’ll understand that it’s not always the easiest process to actually sell the property.

  • Title companies are wary to issue title insurance.
  • There may be unpaid liens, taxes and other encumbrances on the property.
  • The property might be occupied with a renter or former owner and you want to avoid eviction.

All of these issues and more might prohibit you from selling your tax deed property thru traditional channels.  You can, however, still sell the property, with or without using a title company or your tax lien attorney.  There are investors willing to take properties without completely clear title.  You’ll most likely get less for the property, but in may be your only option. 

If this is the case, you must understand the different types of deeds that you can convey to your investor/buyer.  Providing the wrong type could leave you open to future liabilities. (The specific name of the deed may vary from state-to-state)

Quitclaim Deed

This is the most common manner to sell tax deed properties to investors and the most protective for the seller.  A Quitclaim Deed simply conveys the seller’s interest in the property to the buyer.  It provides no warranties to title or even representations that you own the property.  It simply states that whatever ownership or interest you had in the tax deed property, is now the buyer’s.

Why would a buyer take a Quitclaim Deed?  Usually, they are sophisticated enough that they can do their own title research and understand the risks involved.  You can also use this type of deed if you’re selling the property back to the former owner or relative.

Bargain and Sale Deed

This deed is the least used but I’ve found it to be pretty applicable to tax deeded properties.  The Bargain and Sale Deed provides the new buyer no warranties as to any encumbrances or liens on the property; however, it does state that the seller does own the property or have transferrable interest in the property.  Often times, an investor may be a little wary of just receiving a Quitclaim Deed because they have no recourse if it turns out you do not own the property.

Special Warranty Deed

This is the most common type of deed issued when you do have clear title to a property or have gone thru a judicial tax lien foreclosure or quiet title.  You are specifically providing a warranty that you own the property and that there are no encumbrances (liens, etc) on the property since you took ownership of it.  You are not, however, providing any representations of what occurred prior to your ownership.

The Special Warranty Deed is used quite often in commercial real estate transactions.  Title insurance can be issued with this type of deed and it generally protects the tax deed holder from any issues not found in the title search from before you were issued the tax deed.

General Warranty Deed

This is the most common type of deed in normal, residential sales.  When you bought your personal home, this is most likely the deed that you received.  However, it’s not the best deed to provide if you’re selling a property you acquired thru a tax lien sale and foreclosure (or any other type of foreclosure/ tax deed issuance). 

You are providing clear title to the property from today all the way back to the property’s origins.  Any title issues from the past that come up will be your responsibility or the responsibility of the title insurance policy.

No matter what type of deed or transaction you are presenting, make sure you’ve discussed your options with a tax lien attorney or real estate attorney familiar with tax deeds.  And, make sure your buyer knows what type of deed to expect and don’t forget to put it in the contract!

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