It’s no secret investing takes some outside of the box thinking. Where to find your next deal and how to structure your next deal are common questions investors must ask themselves. Estate transactions are a way in which investors can find deals. The issue with these type deals is the true owner of the property may not be known or there could be a cloud on title due to an old lien. If you find yourself with these issues, it does not mean you cannot proceed with the deal. It does mean you may have to contact an attorney to assist you with a quiet title action. A quiet title action is a lawsuit filed to establish ownership of a property or clear a cloud against the property.
The issue with these estate transactions is missing heirs or liens that you simply do not have information on. You must have consent of all the heirs in order to properly convey title. If you are unable to locate all of them, the property will need to go through a quiet title action. Same can be said if there is a lien on title. Even if you have all the heirs to a property, they may not have the information on a loan Aunt Sally took out 20 years ago. This process can be timely and costly. Be sure to sure to discuss the process with your attorney and your real estate agent so you can add the fees associated with a quiet title action into your costs and set a realistic timeline for closing.
Another reason an investor would use a quiet title would be when purchasing property at tax sale. Most title companies shy away from title insuring tax sale transactions. There is no definite way to prove the previous owner was properly noticed to the sale. Do not expect a property to be title insurable for 12 to 24 month unless a quiet title action was completed. Consult an attorney prior to heading out to the tax auctions and find out what your options are. Keep in mind that unlike acquisition through a deed, a quiet title action will give the party seeking such relief no cause of action against previous owners of the property. The exception is the plaintiff in the quiet title action who acquired its interest through a warranty deed and had to bring the action to settle the defects that existed when the warranty deed was delivered.
Quiet title actions do not completely “clear title”. They can only clear a particular known claim or title defect. Make sure you have a knowledgeable attorney who can assist and advise you on quiet title action suits. You need to be sure you are following all of the rules in order to ensure you are making sound business investments and not putting your business at risk. If you have partnered up with a great Title Company and knowledgeable Escrow Officer, give them a call too. While your Escrow Officer is not an attorney and cannot provide any legal advice, they can refer you to a couple real estate attorneys who can. Doing these type deals again is not impossible; you just have to have the right tools, knowledge, and experience to get them done.
As the largest title company in the nation and a Fortune 300 company, Chicago Title is committed to protecting you and providing resources to do just that. Please don’t hesitate to contact us with any questions you have!
By Jill Bright AVP/Sr. Acc’t. Manager Sales and Marketing
Chicago Title Agency