Roger,
My apologies for any mix-up in our communication process. I do take alot of time to get back to everyone who has questions. I am sorry that your questions were not answered. I have had a higher than normal number of emails coming from students and new investors over the last 6 months. In some instances I found that some emails where getting sent back due to the volume (I presume). I have since cleared this up with my account provider and have not heard otherwise.
My course was actually one of the first to let people know about the title insurance issues which can face tax sale investors. When I began investing in Texas tax sales, I read everyone’s product and no one mentioned that the Suit to Quiet Title may be needed. I learned from my own investments and real estate law practice that it should be done if your ‘buyer’ seeks traditional financing. Title insurance is not legally required in order to have a complete real estate transaction, however if your purchaser intends to borrow money from a lending institution (i.e. a bank) it is needed. The Suit to Quiet Title is used to help you attain title insurance. Keep in mind that the Suit to Quiet Title and/or title insurance is not absolutely needed if you want to utilize a: 1) lease option, 2) owner carried financing, or 3) landlord-tenant situation.
As an attorney I can tell you a few things about the Suit to Quiet Title process. I will give you an overview, then if you have questions go ahead and email me again at taxenterprises@yahoo.com.
The Suit to Quiet Title is brought because the title company wants to make sure that any heirs, claimants, or creditors will not make any claims against the property. Their biggest fear is that the sheriff or constable’s office has not properly carried out due process requirements. In such an event someone with an interest in the property might try to come back and say they were not notified, and then the title company would have to pay for the cost to clear up the dispute. The title company believes that if 2 to 3 years pass (after redemption) and no one brings up a claim, then it is likely no one ever will. As a result it is less risky for them to issue an insurance policy on the property. Obtaining title insurance is an area that may result in some difficulty during the first 2 to 3 years of property ownership. The usual challenge will be brought by someone who has lost their interest due to the foreclosure. Let’s think about who stands to lose when the tax defaulted property is foreclosed. The typical parties who will try to raise a challenge are typically:
-the delinquent property owner;
-an heir (someone who may have an inheritance right under a will or state intestacy inheritance scheme);
-someone who holds a court judgment which had attached to the property; and/or;
-a creditor
All of these parties may argue that foreclosure proceeding itself was not legal. The most common area of attack deals with notice. The most common attack on a tax deed typically comes from a creditor or the delinquent property owner who claims they were not properly notified. For example, they may argue that the notice itself was ineffective and never reached them. Another area of attack is the property description. If the description of the property was not exact then it can be argued that they were not really put on notice.
From the outset let me be very clear: The quiet title lawsuit is a formal court proceeding. Before you begin to cringe again about having to hire an attorney once again recall that you are in a very favorable financial position at this point. First, recall that since redemption has not occured then you stand to make a good deal of profit on the deal. Remember if your research has been accurate, the value you receive from the real estate should far exceed any of your costs.
At this point let’s assume you have hired an attorney: I want to walk you through the steps that he/she will take to execute the quiet title lawsuit for you. The attorney will first file a lawsuit in the county where the property is located. The attorney must then perform adequate and careful research to determine who held a potential claim on the property. This could include the same parties discussed above:
-the delinquent property owner;
-an heir (someone who may have an inheritance right under a will or state intestacy inheritance scheme);
-someone who holds a court judgment which had attached to the property; and/or;
-a creditor
The quiet title lawsuit allows you prove the validity of your title to the rest of the world. The successful quiet title action will provide more certainty to potential purchasers and insurers of the property. In the world of real estate financing you typically will be dealing with commercial lenders such as banks. Banks will typically not issue a loan on a property without title insurance. Title insurance companies are usually not willing to issue a title policy, unless they can make sure that any heirs, claimants, or creditors will not make any claims against the property.
Remember: The Suit to Quiet Title is not needed if you simply want to rent out the property, sell it via a lease option or carry the note for your buyer. It is typically only needed when the seller seeks traditional financing. The cost of the suit can range from $800 to $1200 dollars. Not a bad deal if you make alot of money on the deal.
If anyone has any questions please send me an email. Once again I apologize for any mix-up.
Darius M. Barazandeh, Attorney at Law
