From an email, “Hi Denise. Does a quitclaim deed from the former owner give me good title to a tax sale property?”
There are several issues involved in answering this question.
(1) A quitclaim deed transfers all real estate rights from the grantor to the grantee. It does not make any warranties (promises) about whether the grantor actually owns anything at all, or the existence of redemption rights. The taxpayer might have already sold the property to somebody else. A creditor might have executed on their rights. If the taxpayer does not have good title, you will not have it just because you receive a quitclaim deed.
(2) If the investor has a tax deed, it is now the technical owner of the property. A quitclaim deed from former owners will remove title defects by destroying redemption rights and any other claims former owners might have.
(3) If the investor has only a tax certificate, then a quitclaim deed from owners might be dangerous. To understand this, you need to think about the fact that a tax auction trumps virtually all liens except those by local government. They have redemption rights, but they can’t just foreclose and take the property away from the investor. If the taxpayer redeems, all those liens come right back. If a taxpayer quitclaims his rights during the first three years, then the investor does not yet have his own deed. His only route to deed ownership is because of the taxpayer’s quitclaim. I think that the quitclaim carries with it all the baggage of the liens, just the same as if the taxpayer had redeemed. But, if the investor already has a tax deed, then the quitclaim deed just wipes out the redemption rights. That is because the investor already has ownership, he doesn’t need the quitclaim deed to obtain ownership, just to get rid of redemption rights. Be careful about this. If you have only a tax certificate, you might want to obtain a release of redemption rights, not a quitclaim deed.
(4) If the taxpayer has died, you need to make sure you obtain quitclaim deeds from ALL heirs. Usually you need an affidavit from a relative describing who was alive at the time the taxpayer died. Was there a spouse? Children and/or grandchildren? Stepchildren? Parents, aunts, uncles, cousins, nieces or nephews? Download our free article about “Who is the Heir if Someone Dies Without a Will” to then figure out whose signatures you need. Not everybody who claims to be a heir, really is. Some people are heirs and don’t yet realize it. Until you spend money on a property. Then they’ll come out of the wood work. Getting heirs’ signatures is not hard, but you have to make sure you do it right.
(5) If you can get quitclaims from only some heirs, then you are a co-owner with the other heirs. That is not all bad. You can make improvements, buy insurance and pay taxes, but they are obligated for their proportionate share. If they show up and cause problems, you can make them pay their share and, if they don’t, you can foreclose on them. But it also means that any rents you collected have to shared, too. My advice: If you can’t get signatures from ALL the heirs, then get the ones you can, and file a quiet title lawsuit against the rest.
(6) Make sure you use the right form. This might not be so important if you are receiving the quitclaim deed, but it is critically important if you are giving one. Not every document with the words “Quitclaim Deed” at the top do the job correctly. If the wrong language is in the legalese, then it might really be a warranty deed. Use a lawyer, or use a form from a reputable source.
(7) Comply with the recordation requirements for your jurisdiction so you can record it in the real estate records. There are some local variations. Tuscaloosa County, for example, wants you to list the Source of Title at the top of all deeds. In other words, what was the book and page number of the last recorded instrument related to your deed? If it was a tax sale, then you’ll also need to put the book and page number of the instrument by which the taxpayer originally gained title to the property. For all counties, you will need to state in the deed whether parties are married or single. At the top, you will need to have the name and address of the person who prepared the deed. You will also need the name and address of the person who should receive tax notices. Signatures will have to be notarized. You cannot make any handwritten changes on the deed.
(8) Finally, remember this: When someone makes a decision to sign a quitclaim deed, the faster you get it signed the less risk they will change their mind. I recommend taking the deed and a notary public to the person signing, and getting it done right away. You can notarize a quitclaim deed to yourself. For more information on how to become a notary, check out Jefferson County’s website, HERE. All counties are very similar. It is an easy process with very minimal expense.