Latest Blog Post
If you are interested in buying a home through tax deed, you should be sure that all liens on that property are cleared. All liens meaning including the mortgage lien as before the title may be passed to you, all the liens must be released. The very first step to clear a lien is for you to satisfy the debt that secures it.
1.) Find the lienholder
Visit the county recorder to get a copy of the lien. You should be able to find the recorder in the county where you have bought the property from. Oftentimes, the recorder is called the deed recorder of the county clerk. Request for the records of the property. You can find significant details about the property on the file you have requested, including outstanding liens if there are any. File the lien release here once it has been secured.
2.) Verify the Release
To have the lien removed, prove that the debt has already been paid or foreclosed and then get the lienholder’s official statement to prove it. This is known as lien release. Contact the company or the lienholder that is stated on the lien and then introduce yourself as the new buyer and explain that for you to secure a clear title, you will need a lien release. Note that securing a lien release may take weeks and even months. If it was foreclosure, the lien would be eliminated. If the lienholder doesn’t exist, you have to contact the title company and explain it to them. The title company will write a letter that will state that the lien is not valid as the entity who issued it doesn’t exist anymore.
3.) Obtain the Lien Release
Once you have proved to the lender that the debt was already paid off or that the property was a foreclosure, the lienholder needs to provide a lien release that will permit the title to be passed on to you. This release can be sent to the county recorder or the title company and you need to verify with the recorder that the lien has indeed been removed. When it is, give a lien release copy to your title company.
4.) Get a Title Insurance
It is advisable to buy a title insurance once the property’s title has already been passed to you. Though this title insurance is not required if you don’t have mortgage, this will still protect you against any defects or problems in the title.
By now, you must be familiar with quitclaim deeds, or deeds that are without guarantees. They are only utilized in certain instances for instance, removing the title’s cloud during the tax deed sales or a transfer has occurred between the family members, significantly during a divorce. Now, quitclaim deeds actually have tax advantages, mostly occurs when properties are given of as gifts.
Quitclaim deeds do not warranty ownership and the interests and rights of the grantor in the property are not stated definitively. These deeds are different from the common warranty deeds which have many guarantees including protection against title defects.
When you quitclaim a deed to someone, you will no longer be accountable to pay for the property’s annual taxes. The receiver will then have to be the one to pay off the property’s taxes.
If you quitclaim a deed to someone without receiving any money for the deed, you will be known as the donor or the grantor and the transfer will then considered as a gift. If your gift (how much the property is worth) is less than the federal per person per year limit, you will be exempted and you don’t have to worry on paying for the gift’s tax.
However, if your gift is more than the limit, you may still be exempted to pay for the gift’s tax through federal lifetime exception which is up to $1million. So if the property is worth than $13,000 and you have not given gifts more than $1million and the property value is also less than 1 million, then you will not have to pay for the gift’s federal tax. But once you have given 1 gift or many gifts that already totaled $1million, you will then have to pay for the gift.
Also, you have to consider that the quitclaim deed transfers your rights or interests and it does not always mean that you will be free from any liens that are associated with the property.
Do you know the difference between a redeemable deed and a tax lien? Well, let us clarify.
Tax lien happens when the property owner hasn’t paid off the taxes long enough thus becoming delinquent. Note that the owner also needs to pay off the penalties and the interest fees of the delinquent taxes. If the taxes are still delinquent, the property can be foreclosed. The period varies state by state but the rules may differ county by county.
Now, the laws of the state administer the public notification process of the tax sales. The counties publish the delinquent property list and the tax sale auctions are then conducted after several weeks. Oftentimes, county tax sales are held annually on a specific month while notices are being published 3-4 weeks prior to the sale.
Take note that redemption deeds do not actually mean the actual title to land. As a purchaser, you will receive the exact rights to the delinquent taxes of the property that are held by the county. The property owner can reclaim by paying all off the delinquent taxes with interest and penalty fees during the redemption period. Note that states may differ in redemption periods.
We know that local governments issue tax deeds at the tax sales though they are not all clear titles. So how do we get a clear title?
1.) Do a search for tax deeds in places that you are interested in investing in. While you can get some information that is free of charge, there are also sites that require you to pay to subscribe for property lists. You can also get details in local newspapers as some counties publish legal notices.
2.) Select the properties that you are interested in investing among the list. It is advisable to choose more than one as there may be canceled sales due to owners paying off delinquent taxes prior to the sale.
3.) Contact the local county office to learn which of the officials that would administer the sale. Usually, it is the county clerk, property tax assessor, or the court clerk.
4.) Contact the tax sale administrator and get more details regarding the bidding process, rules, registration, property’s tax appraisal value, and the unpaid tax lien amount.
5.) Do a comparison on the amount of the delinquent tax lien and the tax appraisal value. The unpaid tax lien amount may be the property’s minimum bid. Choose properties which have appraisal value that would exceed the tax lien value.
6.) Look for a real estate lawyer that would do title search on the properties that you plan on bidding. Remove properties on the list if they have outstanding liens or mortgages as you may have to pay these off for you to get a clear title. Also remove those properties that may be subject to disputes.
7.) When ready with the reports, register for the tax sales and pay off the deposit amounts. You can also register for property auctions online depending on the county.
8.) Get your cash ready as there are tax sale auctions that may need you to pay immediately after the bid has been accepted.
Click Here To Get Your Free Tax Lien Training System ($77 Value)
- Exactly How To Start Buying Tax Liens Today
- Tips For Tax Lien Auction Success
- How To Avoid The Mistakes New Tax Lien Investors Make
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011