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Tax deed interests can either be conveyed by Quitclaim Deed, Special Warranty Deed, or Warranty Deed. Among each of these deed types, there are significant differences. It is imperative that before you purchase a tax deed, you familiarize yourself with and fully understand the rights and obligations that each deed conveys to the buyer. The following is basic information regarding each type of deed. Samples of the deed types that we generally use have been posted on our web page for your review. However, the exact wording and content of each deed often differs from one property to the next based on the circumstances of each transaction.
A quitclaim deed is by far the most common type of conveyance that we use in the sale of tax deeds to third parties. So, what is a quitclaim deed? Well, the question we should ask is "what" does a quitclaim deed convey to a purchaser? A quitclaim deed transfers whatever interest the owner of the deed may have in a particular parcel and contains no covenants or warranties of title whatsoever.
In summary, if the seller of a quitclaim deed has complete ownership of and clear title to the land being quitclaimed, said deed will pass complete and unencumbered ownership to the buyer. However, if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the buyer has no recourse against the seller. More often than not, tax deeded property has encumbrances that need to be cured before the buyer has clear title.
For example, I know that you have gone to car dealerships and seen automobiles with one of two boxes checked on the sales sticker. The first one represents that the automobile is being sold with WARRANTY. That is to say that the dealer will, to a certain extent, stand behind your purchase should anything go wrong during a certain period of time. However, the other is the "AS IS, WITHOUT WARRANTY" box, which, if checked, means that short of fraud or negligent misrepresentation, the minute you purchase that automobile and drive off the lot, you assume, in most instances, 100% of the risk for whatever happens to that automobile. Why would anyone purchase an automobile under such terms? Generally for one reason-the price is right. However, even with a great price, any prudent car buyer would never purchase under these conditions until they had a qualified and objective automotive professional look it over to be sure that there were no major problems that could come back to haunt the buyer. It is much the same with tax deeds. Remember that a great price may not always be indicative of a great deal.
Therefore, given that acceptance of a quitclaim deed requires the buyer to assume all risks, independent investigation of the title to the land is imperative. In a quitclaim deed transaction, the common-law doctrine of caveat emptor ("let the buyer beware") is the rule, not the exception. When we convey a tax deed by quitclaim deed we convey it "as is," "where is" without any warranties and or covenants of any kind. So, why am I telling you all of this? It is because we believe that the only way to develop long-term relationships with buyers is to first have them fully understand the risks and rewards associated with a particular decision. By understanding the risks and making more educated decisions, purchasers become satisfied customers. It is important that you take personal responsibility for your buying decisions and make responsible and well-educated decisions.
Prior to purchasing a tax deed, we strongly recommend that you hire a qualified professional to evaluate whether the property has any physical and/or title problems
In a special warranty deed, the seller conveys title to the buyer and agrees to protect the buyer against title defects or claims asserted by the seller and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. Furthermore, the seller guarantees to the buyer that the seller, during the time he/she held title to the property, did not allow any lien(s), charge(s), or other encumbrance(s) to be placed upon the property which would adversely affect or impair the buyer's title. However, the seller does not warrant against title defects arising from conditions that existed before he/she owned the property. The exclusionary language that you might typically see in such a deed is as follows:
A warranty deed conveys not only all the seller's interests in and title to the property to the buyer, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the seller agrees to defend the title from claims of others and the buyer may hold the seller liable under seller's warranties. Although we rarely use warranty deeds in the conveyance of tax deeds, you should know that a warranty deed offers the greatest protection of any deed.
One final note about the types of deeds. I have run into those who believe that by a deed's label as a Warranty Deed, Special Warranty Deed, or Quitclaim Deed, this is sufficient to determine the rights and/or limitations of the buyer and seller. That is, at least to a certain extent true; however, you must always pay very close attention to the specific warranties, representations and/or exclusions contained in the body of a deed. I have often seen deeds labeled one way, but, in reading the body of the deed, come to discover that there are so many limitations and/or exclusions that in function, it in fact purports a much lesser interest in the property than what may have been indicated by its name.
Have you ever heard the saying, "This piece of land is good only for holding the earth together?" As a college freshman, I remember having a little money saved up to invest. I had, since early in high school been reading books about property; therefore, by default, I thought I was a real estate expert. I had always heard, "If you buy land, you just can't lose." Well, I ran out, found some land and purchased it, just like that. As a landowner, I now had bragging rights for having taken my financial future into my own hands. Yes, certainly I had joined elite group of individuals. To make a long story a bit shorter, I still own that first piece of property. I have, with no success, been trying to sell this property for the past 21 years. Simply put, it merely holds the earth together.
The lessons that I learned were three-fold. First, I learned that property ownership, in and of itself, is not always a positive item on a balance sheet. It carries with it significant responsibilities and liabilities that can far exceed both your investment in and value of a particular parcel of land. Second, I learned that a little knowledge can be a dangerous thing. What do I mean by that? Don't get in the trap of being a "shade tree" tax deed mechanic. That is to say, until you have cut your teeth on tax deeds for many years, it will be nearly impossible for an inexperienced tax deed buyer to do all of the necessary legwork in researching the property and its title. Furthermore, it's not the job of the local tax assessor, tax collector, and/or chancery clerk to do that research for you. They can help facilitate your research by pointing you in the right direction, but unless you know what you are doing, you could end up purchasing a tax deed interest that was not properly and/or fully researched and by doing so you potentially risk losing or at least minimizing any potential return. The third lesson I learned was to take personal responsibility for my own life, and to realize that it is not the seller's responsibility to look after my best interests in a property acquisition and that instead I needed to advice from experienced professionals that could offer objective counsel.
Don't forgetů When necessary, hire only the best and most experienced attorney(s) and/or property advisor(s) to assist you with your research and evaluation of a tax deed and the underlying property.
The information in this document is designed to provide only basic guidance and is not intended as legal or financial advice. Much of this information is the author's personal opinion. Due to the complexity of the subject matter, it is strongly recommended that you seek professional legal counsel before entering into any contract or agreement.
© American Public Realty, LLC-2001