This is the next article in our series on Oklahoma Tax sales and surrounding issues.  The previous post covered the topic of quiet title for properties purchased at these sales.  In this post, we aim to uncover some of the risks and realities inherent in these transactions.

Throughout the series, we also talked about the importance of retaining a knowledgeable quiet title lawyer.  A successful quiet title action clears the title by extinguishing any competing claims, including those of the previous owner.  Thereby, minimizing future ownership uncertainties and giving the buyer a clean marketable title.

Risks of purchasing property at a tax sale

A tax sale also known as tax resale or tax auction is a buyer-beware sale.  This simply means that the County does not warrant title to the property.  As a result, the tax deed may be riddled with outstanding claims and liens, or the sale process may have been procedurally defective. 

The County is required to give notice of delinquent taxes and special assessments  – by publication once a week for two (2) weeks, and by mailing to the last record owner.  68 O.S. §3106(A).  Additionally, notice of the re-sale is also required to be given – by publication once a week for four (4) consecutive weeks and by certified mail thirty (30) days prior to the resale.  68 O.S. §3127.  If the County fails to follow proper publication or notice requirement, for example, then the previous owner can sue to reclaim their property.  

Although the tax deed makes you the title owner of the property, the status of the title itself is “unmarketable.”  In the absence of a quiet title suit, the title defects may eventually be cured – but you must own it for the next 10 years.  16 O.S. §62(d).  That’s why any property that was purchased from a tax sale within the last 10 years is required to be quite titled.  Precisely the reason why title companies require a quite-title before they conduct closing on transactions that involve tax sale properties.

Likewise, a title insurance company may refuse to issue a policy for the same reasons.  As a buyer of tax sale properties, you face the risk of acquiring real estate with an unmarketable and uninsurable title.

Be cautious of the property condition

This is more relevant to properties with a house or a structure on it but relevant to all real properties.  Many of them end up in the County Treasury Sale as a result of neglect or abandonment. These properties may be in bad shape, vandalized, or in need of major repairs.  Because tax sales are buyer beware sales, due diligence and property inspection before bidding are highly advised.  But in reality, buyers often have no or limited access to these properties.  You may end up with a property that needs significant repairs or maintenance issues.  Buyer Beware!

Understand the tradeoff

Tax sale properties are essentially a tradeoff between purchasing a property below market value and accepting certain risks.  A skillful investor may land on a piece of property that is worth significantly more than what he paid for, but not without possible title issues. 

It’s vital to weigh the possible gains against all costs of defending the title.  The “gain,” which is the difference between the purchase price and the market value, may substantially be reduced by a money pit fixer-upper property or one with litigious title issues.

Legal challenges for tax sale properties

The tax sale and the tax deed can be contested.  Oklahoma law allows the previous owner a 5-year period to challenge the buyer’s interest after the sale.  During the statutory period, the previous owner or other parties may bring suit to challenge the deed.  12 O.S. §93(3).

Previous owners or anyone with an equitable or legal interest in the property may redeem the property at any time before the County executes the deed of conveyance to the new owner.  To redeem, the previous owner must pay the delinquent taxes, interests and fees.  68 O.S. §3113.  However, a minor or an incapacitated person may redeem their properties 1 (one) year after the expiration of such disability by paying the interest and penalty.  68 O.S. §3113.

During the sale process, the County may have failed to notify previous owners or interest holders.  They may argue that they weren’t properly notified of the tax delinquency, the sale, or the issuance of the tax deed.  As an investor or a buyer, you must understand the costs these legal challenges can bring.

Quiet title action for tax sale properties

So, what can a tax sale buyer do to remove title issues or challenges in the future?  If you are like most buyers, then you either plan on fixing to sell or hang on to it for appreciation.  Regardless of your investment goals and if not handled promptly, title challenges or issues may rear their ugly head in the future.

The last thing you want is for the property to turn into a bottomless money pit riddled with future challenges.  A successful quiet title action, conducted with proper notice can address any lingering or hidden liens or interests.  This extinguishes the interests of the previous owners or any other parties.  Rather than remaining vulnerable to the title challenges, “nip the issue in the bud” with a quiet title action.

Sometimes a quiet title action may not be necessary.  You may be able to achieve the same result without spending the time and money to initiate a quiet title lawsuit.  Whether your case warrants a quiet title suit ultimately depends on the facts.  It’s highly recommended that you speak to a knowledgeable lawyer for an answer that is tailored to your needs.

Quiet Title Lawyer in OKC

If you’ve recently purchased a property from a County Treasurer’s Tax Sale (also called tax auction or tax resale), and are seeking a quiet title attorney, we are here to help.  Niroula Law will give your case the attention it deserves.  We will help you navigate through the complexities of a quiet title suit from start to finish.  Contact us online or by telephone to get in touch with an OKC quiet title lawyer and discuss your Oklahoma tax sale properties.