Title Risks in Oklahoma Tax Properties - Buy Safely to Increase Profit (2024)

Quiet Title

Buyer beware! When purchasing from an Oklahoma tax sale, you should confirm title via a quiet title action. A tax property is not insurable and marketable right after the auction. Most of the time, you must do a quiet title action in order to obtain title insurance and then sell or refinance the property.This article provides critical guidance for Oklahoma tax salebuyers.

According to Oklahoma County’sguidelines for purchasing propertyfrom an Oklahoma tax auction:

“This is a BUYER BEWARE sale. A tax deed is not a warranty deed and the County does not warrant title to any property sold. The buyer assumes all responsibility and liability upon the purchase of these properties. While it is the decision of each buyer,each purchaser should give consideration to the filing of a quiet title action in District Court in order to insure a more marketable title.“

But why? You paid good money and obtained a Tax Deed from the County Treasurer. How could anyone possibly challenge your title?Unfortunately, holdingrecordtitle and holdinginsurabletitle are two different things. After you obtain a Tax Deed, you hold record title. You could immediately enter a purchase contract to sell the property. But when your prospective buyer applies for title insurance, the title insurance company will discover that you purchased from a tax auction. Being extremely risk sensitive, the title insurance company will worry about a defect in the County’s tax auction. If the defect was serious enough, such as lack of notice to the previous owner, then the previous owner could conceivably make a valid claim of ownership to the property. This would require the title insurance company to pay out on a claim! Anathema!

In other words, title insurance companies do not trust thetax auction process to completely extinguish the legal rights of owners and lenders prior the tax auction. Practically, it is unlikely that a prior owner or lender hasa valid claim of ownership. But to prevent unnecessary risk, the title insurance company will require a quiet title action against the previous owner and lender (if any). By naming the previous interest-holders in a quiet title action, the new purchaser completely extinguishes any claims of ownership from those parties. At that point, title should be fully insurable and marketable, thereby increasing property value.

Of course, investors can shortcut this processby sellingto a party willing to accept the Tax Deed without title insurance. But the pool of buyers willing to accept a property without title insurance is extremely small. So, without a quiet title action to make the property insurable, the market value of the tax property suffers dramatically due to lack of demand.

Ifa quiet title action is necessary, what is the cost, timeline, and process? An uncontested tax sale quiet title may cost between $1,500.00 and $2,500.00 in attorney fees. It may take 8-12 weeks to obtain final judgment, but you can work on rehabbing or marketing the property in the meantime. If an attorney is chargingextremely low rates for a quiet title, he may be skipping some important steps. If an attorney is charging more than $2,500.00 for an uncontested tax sale quiet title, with no special issues, heis probably feeling very special about his hourly rate.

For more detailed information about the quiet title process, review our quiet title articles below:

As a property lawyer, I focus heavily on quiet title actions, so feel free to reach out for estimates or consultations.

I'm well-versed in real estate law, particularly concerning Oklahoma tax properties and the intricacies of acquiring marketable title through quiet title actions. The risks associated with purchasing properties from Oklahoma tax sales, the need for a quiet title action to ensure insurable title, and the subsequent impact on property value are all familiar aspects of this niche.

In Oklahoma, buying properties from tax sales doesn't automatically confer insurable title. Despite obtaining a Tax Deed from the County Treasurer and having record title, issues arise when seeking title insurance for resale or refinancing purposes. These issues stem from the inherent risk sensitivity of title insurance companies regarding potential defects in the tax auction process. This discrepancy between record title and insurable title prompts the necessity for a quiet title action.

The main objective of a quiet title action in this context is to eliminate any potential claims of ownership by prior interest-holders, such as previous owners or lenders. This legal process extinguishes these claims, thereby rendering the title fully insurable and marketable, subsequently elevating the property's value.

The cost and timeline for an uncontested tax sale quiet title action typically range between $1,500.00 and $2,500.00 in attorney fees, with a duration of 8-12 weeks to obtain final judgment. It's essential to be wary of attorneys offering significantly lower rates, potentially skipping crucial steps, or those charging exorbitant fees without special case complexities.

For those delving into this realm, understanding the quiet title process, potential costs, time frames, and the viability of self-representation versus hiring an attorney is crucial. The resources provided in the article offer detailed insights into these facets:

What is a quiet title action?
Can I do a quiet title myself?
Factors to consider before hiring a quiet title attorney.
Cost breakdown of a quiet title action.
Recovery of attorney fees in a quiet title lawsuit.
Time frame for a quiet title action.

The information outlined here showcases the critical need for understanding the nuances of acquiring marketable title for tax properties in Oklahoma. As someone deeply involved in property law, particularly quiet title actions, I'm available for consultations and estimates for those navigating this intricate process.