Article - Auctions
Colonial Beach Realtor
a division of Treck Realty
Navigating the complexities of real estate investment requires a keen understanding of the various avenues through which properties can be acquired. However, among these methods, buying properties at tax sales and auctions stands out as particularly fraught with risk. Let me share some cautionary tales that underscore the importance of due diligence in these scenarios.
Case #1: A client's mother purchased a property at an escheat tax sale from the state 30 years ago. Escheat sales occur when a property owner dies without heirs, causing the property to revert to the state, which then auctions it off. Upon her passing, her children inherited the property and sought to sell it last year. However, when the title company conducted a title search, they discovered the escheat origin and refused to issue title insurance. Despite attempts with three major title insurance companies, all declined due to the unresolved title issues, illustrating the perpetual cloud that can hang over such properties.
Case #2: A friend purchased a home at a courthouse auction, a process that often attracts investors due to the potential for below-market prices. The property was advertised as sitting on three lots. However, post-purchase, it was revealed that the foreclosure and subsequent auction only included one of these lots. The remaining two lots remained under the ownership of the original family, who, feeling wronged by the bank's foreclosure process, refused to sell the additional land and initiated legal action for encroachment against my friend.
These examples highlight the potential pitfalls of acquiring property through tax sales and auctions. The allure of a good deal can often mask the underlying complexities and risks associated with these transactions. My intention in sharing these stories is not to deter you from exploring such opportunities but to advocate for informed decision-making. An understanding of the potential for title issues, property discrepancies, and legal entanglements is crucial.
I am committed to educating the public on real estate matters, challenging the misinformation that can lead unsuspecting buyers into precarious situations. While some may dispute or criticize the insights I offer, my resolve to provide valuable knowledge remains unwavering. Remember, the foundation of successful real estate investment lies in thorough research, due diligence, and, when necessary, the guidance of experienced professionals.
Article by Jamie Cook, Treck Realty