TAX DEEDS - Bibbidi Bobbidi OOPS!

Tax Deed sales are a good way to pick up property at a low purchase price.  Plus, wave a Tax Deed over a piece of property, and certain things disappear:

• Mechanics Liens – Poof!

• Mortgage Liens – Poof!

• IRS Liens – Poof!

• Homeowners Association Liens – Poof!

But certain things don’t go away with a Tax Deed, even if you sprinkle them with fairy dust:  

• Covenants and Restrictions

• Zoning

• Comprehensive Land Plan

• Easements

• Conservation Easements

These things are in Public Record, and an investor has the opportunity to know about them before the sale.  The finery unravels, however, if there’s an unpaid Municipal Bill lurking unrecorded, casting an evil spell on your investment.  That’s where the magic ends.  

What if the water bill was left running?  

Or the city had to demolish a haunted house on the property?  

Most of the time the municipality is looking for the issue to be resolved.  If the issue goes away, normally a municipality will negotiate down the fines, but there could be hard costs that don’t budge, with an invisible wall of fines piling up daily.  

If the municipality didn’t record the issue in Public Records, the Tax Deed buyer has no idea the debt they’ve just taken on.  The buyer then goes to get a permit to build or to sell, and that’s when they find the $100,000 bill.  It doesn’t take an enchanted mirror to tell you this is NOT the fairest deal in the land.  

Buyer beware on Tax Deed sales, this is an emerging trend, and not a good one.  

It’s better to be lucky than smart, but smart don’t hurt.  The smart move with a Tax Deed is to have Land Title of America review the property before the sale to advise you of Covenants and Restrictions, Zoning, Comprehensive Land Plan, Easements, and Conservation Easements, and (of course) any title issues.  Then once you win the auction, get Title Insurance for protection against the challenge of validity of the tax sale.  (Remember, title underwriters sue everyone who’s ever held title, even if you only held it for thirty seconds.)  Armor yourself with as much good information as you can to build the risks and liabilities into your business model, and then cover that model with Title Insurance.  

From Land Title Talk Podcast

July 23, 2025

Written by Stephen Collins and CJ Godwin