Dean Graziosi Real Estate Blog

One of the axioms of investing that is usually quite true is that the profit begins with a “good buy” strategy.  If you start with a poor purchase, you’re playing catch-up, with the final return on investment suffering accordingly.  With this in mind, real estate investors are continually watching for bargains, and many have a niche strategy that they have honed to the point they can make true bargain buys.  One of these strategies is buying properties with a problem in their chain of title.  The goal of this strategy is to get a bargain because of the problem, correct it after purchase, and realize a substantial profit from the creation of a clean title history.

It’s true that there are properties out there, particularly those held in families for generations, that have some cloud on the title.  Many times, especially in inheritance situations, there isn’t a great desire on the part of the heirs to correct these problems.  They would rather just sell the property and split the proceeds.

In this situation, or in others where there are problems with the chain of title, many times these issues can be corrected.  If doing so would significantly increase the value of the property, then our “clouded title” buyer strategy would produce a good investment.  What might some of these title problems be?

·  Federal, state or local tax liens

·  Liens for work done on the property

·  Missing heirs with possible claims on the property

·  Boundary or survey disputes

·  Other claims on ownership

The first two items are easier to quantify, as they are mostly just money due, and getting them paid will remove the liens.  It becomes a numbers analysis to see if the value increase justifies the costs, with penalties and interest.  Sometimes using an attorney who specializes in tax liens can result in a settlement for “pennies on the dollar” and a great return on your investment.

The other items are more complicated, and they carry the risk that you will be unable to correct them.  Missing heirs, or potential heirs, may have passed away, requiring only death certificates to clear title.  For these disputes and other issues, you can undertake a “Quiet Title” action.  This goes through the court system, with required public publishing of the action and a waiting period to see if any claimants surface.  If not, or if you prevail in the action, the judge can quiet the title.  This clears it up, and you’ve accomplished your mission.

Just be certain to consult experts and attorneys before making the assumption that clearing title problems is possible on the property.

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