Fixing Title Issues for Sellers

A large percentage of land owners who are willing to sell at a discount are those who lack marketable title to their property. They typically inherited the land and have been paying taxes on it but are not on the deed. The legal owner of record on the deed is deceased, sometimes recently, sometimes decades ago.

I’ve previously been passing on properties like these, but as it’s getting increasingly competitive to find deals, I’m looking to expand my skill set to solve these types of problems to win more deals. Is anyone here regularly doing deals like these? What are you typically doing? Are you paying for probate? Are you paying for a quiet title suit? Are you helping the seller file an affidavit of heirship? It would be great to hear if anyone is doing these as a large component of their business and what it typically looks like for them.

Our closing attorney ‘fixes’ simple title matters for the seller like filing probate- and charges the seller. I have found that Quiet title is difficult and expensive depending upon the situation and not worth all of the time and expense. Easier and more profitable to go on to the next deal.

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I find a lot of these kinds of title issues on the smaller, cheaper “junk” lots. The kind of stuff that people buy for cheap thrills and won’t ever do anything on. There’s definitely a market for these, but they don’t make much money and they frequently go through tax sales, which further screws up the title history.

A lot of people who end up buying these properties don’t know the first thing about title searches and how to check for a clear title. I can close with them, without a title company, and they don’t care if they get a quit claim deed.

When you consider all the different title issues that can come up, some of them are massive problems that should kill the deal, but others are very minor technicalities that are highly unlikely to cause any actual problems in the future. Even so, a title insurance underwriter will look at ALL these problems with the same level of scrutiny. If you can identify when a title issue is truly a show-stopper vs not, you’ll start to realize there are a lot of clouds on title you can selectively ignore, because nobody really cares about them other than the title company.

For example, if a property goes through a tax sale, this automatically wipes out all previous owners on title. A tax sale technically acts like a quiet title action that clears out all historical ownership, but an title insurance underwriter doesn’t see it this way. In their minds, this event causes a cloud on title, simply because they can’t verify that all previous owners were properly notified.

This is one of those “problems” that isn’t really a problem, in my opinion. I buy and sell these all the time without title insurance, without a quiet title action, and without a warranty deed, and nobody seems to care, because when they’re cheap and we’re closing in-house, a title company doesn’t need to throw their fictitious wrench in the deal just because it doesn’t fit inside their box.

Quit claim deeds are a similar issue. There’s nothing technically wrong with a quit claim deed. It transfers title from the seller to the buyer all the same as a warranty deed, it just doesn’t come with any guarantees from the seller. These guarantees are only needed if there’s reason to doubt the seller’s true ownership. Requiring a warranty deed is another one of those belt-and-suspenders requirements that are designed to protect the title insurance underwriter and upsell you on title insurance. Simply using a quit claim deed (and not having the guarantee of the seller) doesn’t do anything to mess up the chain of title. It transfers ownership the same way a warranty deed does, it just doesn’t come with the seller’s promise that the title is clear. If you have reason to doubt the seller’s true ownership, then a warranty deed is a great idea, but if you’ve done your homework and you know that it is clear, you don’t need their promise, because you’ve verified everything yourself.

My point is, a lot of these title issues aren’t really issues. If you know how to differentiate the fictitious problems from the actual problems, you’ll realize that you don’t actually need to walk away from so many deals.