A Quiet Title Action is an action filed by the court to settle the title to property. It can be used when there are competing claims of ownership and it needs to be determined who rightfully owns the property. A Quiet Title Action will usually determine if a tax deed has been properly transferred from the county, or if someone has come forward with better rights than you have (such as being an heir). So what does this mean for tax lien investors? Well, because of how tax deeds work, there is no guarantee that your title will be clear. This makes it difficult for you to get insurance on your title which means that you could end up paying more out-of-pocket costs in order to make a profit.
A defect on the title can be something like a break in title or it could be an outstanding lien which would give someone else rights over your property even if you were technically legally entitled to it due to your purchase of tax deed properties.
Many people think that they need to get a title insurance policy in order to purchase property. This is not always the case. A quiet title action will settle any potential ownership disputes and will clarify as to who is the owner of the property. It’ll also show that there are no outstanding liens, or ‘clouds,’ and that there are no defects on the title. The one thing it won’t do for you is help you sell your tax deed investment quickly.
If you are an investor, a tax lien is the perfect investment for you. When you buy a tax lien from the government at auction, it is not quite like buying stocks or bonds. You don't get any equity in the property that's being taxed and your risk of loss is very low.
You’ve just purchased a tax deed, and you want to know if you need title insurance. The answer is yes, but not for the reasons that come to mind first. Tax deeds are an intriguing way of buying property because they are extremely cheap and go very quickly in auction houses or on sites like eBay. However, due to their nature there can be some risk involved with them.
For example, it may not have been recorded properly according to state law which would mean it has a high risk of being voided without notice; it could also have liens on it from other companies who were owed money by the previous owner. A quiet title action will help resolve these issues so you can get your hands on what is rightfully yours.
This legal jargon can be confusing to many, but it’s worth understanding it as an investor. It helps to research quiet titles online or speak with an attorney about the process if you need further clarification on them. You may also want to touch bases with someone who has utilized one before and ask them about their experience!