Tax Deed Sale

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 What Is a Tax Deed Sale?

In general, tax deed sales refer to a concept in real property law wherein the deed to a specific property is sold to the highest bidder at a public auction. The tax deed itself is a type of legal document that transfers ownership of the property to a new buyer. 

The purpose of a tax deed sale is so that the county can recoup the amount that a homeowner failed to pay on their property taxes. Thus, the state or local government will typically set the minimum price of the property.

For example, suppose your neighbor stops paying taxes on their property. This will make them vulnerable to tax foreclosure, meaning that the local government can step in and put the house up for sale at a public auction. Once the house is sold to the highest bidder, the buyer will receive a tax deed as proof that they now own your neighbor’s house (i.e., the tax deed property). So, what is a tax deed property? It is simply the property that is sold via a tax deed. 

It is important not to confuse a tax deed sale with a tax lien. Just remember, a tax deed sale is attached to a tax deed property. A tax lien on the other hand only involves paying back taxes and interests on the property. The delinquent taxpayer will still own their property for a certain amount of time until they either pay off their debts to retain ownership or fail to and lose the house to a foreclosure action. 

Finally, it should be noted that not every state recognizes tax deed sales. Some states may only permit tax lien arrangements, while other states may only allow for tax deed sales. However, there are some counties that do recognize both terms. Thus, you will need to review the laws of your jurisdiction to find out which one applies to your property in such a situation.  

Are Tax Deed Sales Advertised?

According to the law, tax deed sales generally must be advertised in a newspaper that conducts business in the place where the tax deed property is located. 

Depending on the laws of the county or state, the tax deed sale advertisement must be published every week for at least one month up until the auction. While this information may also be made available on the internet as well, at least one paper in the county must continue circulating a physical copy of the advertisement.

Additionally, for those searching for other methods to find delinquent properties, they can check out a tax sale properties list in their county. Such lists are compiled in every jurisdiction across the country. However, the way in which a person may access this list will differ by location. For instance, some counties post a copy online, while other counties may preserve a physical copy at a county clerk’s office.

Thus, it may be useful to hire a local real estate lawyer or list provider to perform a search for these properties. Both parties will know where to find the right information and how to access it.

How Is the Title Obtained Through a Tax Deed Sale Recorded?

There are certain tasks that a purchaser will need to complete when buying a tax deed property. For one, they must record the property if they want to obtain title. In most jurisdictions, this is accomplished by recording the tax deed that the purchaser received at auction with the country clerk. Both the tax deed and the recording of the tax deed will provide written proof of the transfer of ownership as well as help to secure the chain of title. 

Also, it should be noted that tax deeds are a special form of quitclaim deeds and may sometimes be referred to as a “sheriff’s” deed. This is because it is not always certain if the original property owner was the true owner. To ensure that a tax deed belongs to the new buyer, they should perform a title search and/or file a lawsuit to quiet title. 

Lastly, if the tax deed property was not sold at the auction, then title may revert back to the local governing authority. In which case, the tax deed will then be recorded and maintained at the office of the county recorder or register of deeds. This is so it can be accounted for during future title searches of that particular property.

Is the Title Obtained in a Tax Deed Sale a Marketable Title?

As discussed above, a tax deed sale may not provide the purchaser with marketable title. Therefore, it will be up to the purchaser to check the status of the title and to make sure that it is in fact marketable. For instance, if a property has an encumbrance on it (e.g., a lien, title defects, or other attachments that could expose it to litigation), then this would likely result in an unmarketable title. 

To determine whether a tax deed from a tax deed sale has marketable title, the purchaser will need to perform a thorough title search of the property. Once the property is sold at auction, a tax deed title does not come with any warranties regarding the property. Thus, the purchaser must take the property as it currently stands. Hence, why conducting a title search is so important. 

Is There a Right to Redemption?

The property owner (or another individual who has a vested interest in the tax deed property) may be entitled to a right of redemption. 

In general, a right of redemption enables an owner to repurchase the property if they are able to pay off their debts before a certain period of time expires. However, the majority of states do not allow an owner or a person with a vested interest in the property to reclaim title to that property once a tax deed sale is finalized.

In states that do permit the owner to retake title to the tax deed property, they typically must satisfy the following requirements:

  • The owner must exercise their right of redemption within a certain time frame after the sale (typically one year) or at any point before the right to redemption is foreclosed.
  • To claim a right of redemption, the owner must also:
    • Repay the amount paid for the property at the auction;
    • Pay off any remaining taxes on the property after the sale; and
    • Repay a premium of all funds paid before the redemption occurred (usually between 10% to 20%). 

Foreclosing and the Right to Redemption

As previously mentioned, the requirements for right to redemption and foreclosure actions often vary widely from state to state. Generally speaking, a purchaser of a tax deed property can prevent the true owner from reclaiming their tax delinquent property by exercising their right to foreclose on the property in question and to claim ownership. 

In such instances, however, foreclosure will only be allowed if the original owner fails to pay back all of the money that they owe by the end of the redemption period. These two requirements must be satisfied before the new owner can foreclose on the property and retain ownership of it.

Should I Contact a Real Estate Attorney?

Issues involving tax deed sales can be fairly complicated. Not only are real estate finance laws complex to begin with, but they also can vary by location. This means that just because you are in the same state does not mean that the county in which your house is located follows the same rules. Thus, if you are experiencing issues with a tax deed sale, then it may be in your best interest to contact a local real estate lawyer for further guidance. 

An experienced real estate lawyer can explain the process of a tax deed sale and can perform a thorough title search of a tax deed property before you purchase it. Your lawyer can also help you record title to a tax deed property and can make sure that the title you own is in fact marketable title. 

Finally, if you need to bring an action to quiet title or require assistance with foreclosing on an original owner’s right of redemption, your attorney will be able to help with these legal procedures as well.

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