Title Problems With Tax Auction Properties

When it comes to tax foreclosures real estate investor can find some great buys.  However often investors go in blind and don’t find out about a major pitfall with tax sales until they go to resell the home.  In a previous post we did about the tax auction we explain the basic process of how to acquire one of these properties and with the sale right around the corner (Aug. 18, 2014) it time to hear the rest of the story.

Check out the video below where we interviewed some people who know first hand what’s involved with passing clear title.

Most of the times a property purchased at the auction will have a clouded title.  The basic problem is that when the property is resold the title company won’t insure it and therefor the buyers lender won’t lend on it.  This is because the county didn’t notice the previous owners property, well they did according to their rules, but not enough to get the title company comfortable issuing insurance.  The county is only required to mail out a notice, rather than have the previous owners actually sign acknowledging they received it.  So its possible to have someone comeback years later claiming they have an ownership interest in the property.  Not good!!

So what’s the solution.  Really there are two options, if the county is willing to help, the investor can deed the property back to the county and the county can go in front of a judge and have things cleared (this takes about a month).  The other option if the investor doesn’t want to hand the property back over the the county is to hire an attorney and private investigator to properly notice the former owners.  Assuming they don’t make a claim the investor can get clear title.

At the end of the day none of this is all that big of a deal as long as the investor does all this upfront.  Investors should do the following:

  1. Budget for these expenses it can cost $1,200 to $2,000 to get clear title.
  2. Start the process right away – don’t wait till the house is fixed up and you have a buyer to start what could be a 3 month process.  Start it immediately after purchasing the property.
  3. Do your homework – many title companies can help determine what steps will be necessary before you purchase the home.  So if you are drooling over a particular property talk to your local title company about it prior to the auction.

Check out our interview with Mary Balkema (Kalamazoo County Tresurer), Curt Dinkelmyer (head of Devon Title Company),  Jeremy Cole (Tax Auction Investor), & Martha Wilbur (home buyer).

To view properties for sale at auctions in Michigan visit www.tax-sale.info

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Working with home buyers searching for a new primary residence is a totally different game compared to working with investors and rental property.  Sure, there are similarities, but what want-to-be home owners care about is different than what an investor cares about.  Frankly, for an investor, it’s all about the money and it should be.  When someone purchases a rental property they are essentially running a business.  If we can help them run a successful business and turn a profit they will likely come back and buy more properties.

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