Q. I am about to acquire unimproved property from Prince George's County that it got from a tax sale. I will get a quit-claim deed after the court approves the sale. I intend to record this deed myself. Should I get title insurance to protect myself or does the court action make it safe? Would the same apply to a house acquired via foreclosure?
A. More and more people are starting to acquire real estate under what has been labeled as distress-sale properties. People are giving seminars throughout the country, going on TV talk shows and writing books about buying such properties, with little or no money down. These promoters are pushing the concept that you -- the consumer -- can "make a bundle" by buying property at foreclosure sales, tax sales, or from a bank or other lending institution that wants to get rid of its real estate -- the so-called REO property. REO in financial terms means "real estate owned." Usually, the banks foreclose on real estate and then find that they cannot get rid of that property quickly.
There is but one lesson to be learned from all of this: "You usually get what you pay for." Any investor in real estate should ask one basic question first: Why am I so lucky that I am able to get such a good deal?
Let's face it. There are hundreds of investors and speculators out in the marketplace. If the deal that you are considering is so great, why hasn't someone else picked it up before you? Ask yourself why the seller of the property let it go to a tax sale. Is it because the property really does not have much value? After all, no one wants to lose valuable property. I would rather sell at a loss than let the property go by way of a tax sale or a foreclosure.
Thus, before you commit yourself to buying the so-called "distress-sale property," you must carefully analyze the entire situation. You should explore the history of the property to determine as best you can who owned it previously and why it is now available for sale. Check with local real estate brokers, and they may be able to assist you with some of these questions.
You have indicated that the county will be giving you a quit-claim deed. Basically, such a deed conveys no guarantees or warranties of title. All it means is that you get only what the seller owns. If I do not own the property in question, your interest from the quit-claim deed is no greater than mine. Such a quit-claim deed is to be compared with a general or a special warranty deed, whereby if title is defective, you can at least go back to the seller under the warranties they gave you.
I will be more than happy to give anyone a quit-claim deed to a number of valuable properties in the Washington metropolitan area, including the Pentagon, the Capitol and even the White House.
Thus, even though the tax sale may be approved by court action, the quit-claim deed should be a big red flag to you that there may be title problems. Furthermore, between the time that the court approves the sale and the actual recordation of the quit-claim deed, it is possible that new liens could be placed upon the property.
It is absolutely essential that you obtain a title search from a real estate attorney before you have the deed recorded. It would be penny wise and pound foolish not to satisfy yourself that title is clear, good of record, merchantable and insurable by a title insurance company.
My answer applies not only to tax sales but to any purchase of real estate -- whether you sign a contract to buy your single-family home or you buy a property at a foreclosure sale or from a bank. Problems do crop up on title, which could significantly affect your ability to sell that property at a later date. You may find that the nominal cost of a title search now may save you considerable cost (and aggravation) later.
It is unfortunate that the promoters of these get-rich-quick schemes seem to be making more money selling their books and seminars than they make in their real estate transactions. Make sure that you and your interest are fully protected.