Deed Tax Sales

Sunday, August 06, 2006

All property owners are required to pay property taxes within a certain timeframe. If property owners do not pay their real estate taxes on time, governmental agencies might use one of two types of sales to collect the money owed. These two types of sales are called tax deed sales and tax lien sales.

In a tax deed sale, the property owner and any interested mortgage companies are informed and then the property is sold at a public auction. The lowest bid allowed is usually the cost of the taxes owed plus interest and the cost of selling the property.

The winner of the auction is usually only given a quitclaim deed. This means that the seller is only selling their own interest in the property; it does not guarantee that other people do not have an interest in the property. Since a quitclaim deed usually is not sufficient for title insurance, the owner must go to court and file a quiet title action.

A quiet title action is a lawsuit to "quiet" any challenges or claims to the title. The owner is named as the plaintiff and anyone who may have interest in the title are named as defendants. All of the defendants must be notified by publication. If the court decides the plaintiff owns the title, a quiet title judgment will be granted, and the owner can get an insurable title. Quiet title actions are a common example of what is called "friendly" lawsuits, because often there is no opposition.

In some jurisdictions, when a property is sold through a tax deed sale the former owner of the property is allowed to reclaim the property if they pay all the taxes, interest, and costs of selling the property. This is called a redemption period. If there is a redemption period, people who buy properties from tax deed sales are warned not to make major improvements on the property until the redemption period ends.

In most cases, valuable property is burdened a mortgage. In most jurisdictions, a mortgage would be wiped out at a tax sale, so usually before a tax deed sale the mortgage company will pay all the taxes owed and make its money back from the mortgagee. This removes the property from the sale, so usually the properties being sold are not very valuable.

Sometimes so-called tax deed sale experts will claim to have insider knowledge on how to obtain valuable properties, and sell them to gullible people at inflated prices. They usually do not explain the pitfalls of tax deed sales.

For details about tax deed sales in a certain area, you can contact the local tax collector's office.