I have been helping clients buy and sell foreclosure properties for over 11 years, but my recent experience with a Tax Foreclosure re-sale in Oregon was eye-opening, to say the least!
Just last week, a listing of mine received an offer and after a few small negotiations, the ratified contract was sent off to escrow. What neither the Seller or I were prepared for was the response from the title company, the property could not be insured for almost eight years! Evidently, the property, purchased over a year ago at a County Tax Foreclosure Sale, is not deemed to have been foreclosed on in such a manner that the title would be free from encumbrance from heirs, creditors or parties with a former interest until a period of 10 years has passed from the date of sale to the county. The harsh reality is that you cannot get financing for a property that cannot be insured, and do you really want to improve a property someone else can exert a claim to? Bottom line, the inability to insure the title makes it hard if not impossible to sell until that period has passed or you clear the title.
The good news, there are a few possible solutions to clear title on a tax foreclosure. If the Tax Assessor’s office has all of the servicing records and can show that the owner(s) of the property and record lien holders were notified and acknowledge service, title insurance may possibly be issued. What makes this difficult, is the statutory time for record keeping (in Oregon) at the Assessor’s office is 6 years; it takes approximate 7 years for a property to go from default to foreclosure, then through a 2 year redemption period and finally to a public tax sale. The 10 year period is from the time the property is deeded to the county at the end of the redemptive period and transfer to county ownership; not from the time of the foreclosure. If the purchaser of a tax sale property is unaware of the insurability issue until they are ready to sell their property, it is entirely possible that a portion of if not all of the records required for clearing the hold on the issuance of Title Insurance have been destroyed making any resolution via the tax assessor records impossible.
The best resolution to a tax deed sale and clear title is likely a “Suit to Quiet Title” through an attorney. Again, the timeline here is important as Oregon Statute 312.230 stipulates that “Every action, suit or proceeding, commenced for the purpose of determining the validity of a sale of real property on foreclosure for delinquent taxes, or to quiet title against such sale, or to remove the cloud thereof, or to recover possession of the property, shall be commenced within two years from the date of the judgment of foreclosure and sale to the county.” Apparently, timing is everything.
What I love about Real Estate, even after 24 years in this business, I am still constantly learning. There is just no substitute for experience! Experience, however, does not always equate to success in the form of a closed transaction. Buying a tax foreclosure in Oregon? My best advice is to seek professional assistance before you buy, there are some good bargains to be had, but nothing is ever as easy as it appears! Always put knowledge and experience on your side. A good Broker can direct you to the right resources (Title experts, attorneys, etc.) and help you avoid the pitfalls or at least be aware of them!
(Just a quick disclaimer, Cat Zwicker is a licensed Real Estate Broker in Oregon, she is not an attorney or title examiner and is in no way attempting to offer legal advice or assistance through the content of this blog.)