Philly Tax Lien Sales are back…Don’t Forget Title Insurance
It’s July 2024 and Philly Tax Sales are back!
Philly is starved for tax revenue and housing units. The restart of Tax Lien Sales can help if conducted with fairness and transparency.
As an investor, make sure you incorporate getting clear title as part of Tax Lien investments. Here’s a quick, easy refresher on why you should get title insurance.
Two different paths for title insurance on Sheriff Sale properties
But getting title insurance for Sheriff’s Sales is not the same process as a regular real estate purchase. To make things more complicated, in Philly the process is different for Mortgage Foreclosure sales vs. Tax Lien sales. You should get title insurance in both cases, but the process is different. Which means the cost and risk profile is different. Here’s what I suggest you keep in mind based on my years of experience purchasing both kinds:
- For Mortgage Foreclosure Sheriff Sales, you can potentially obtain title insurance around the time of settling on the property. If the title has no clouds, you should be able to run your search with your title company and be good to go – most likely right after you settle up with the Sheriff. (The window to settle up with the Sheriff is very short, so unless you have a title company – and a property with such a straightforward history – that makes this as easy as slipping on oil, it’s unlikely to be complete before the settlement.)
- For Tax Lien Sheriff Sales, it’s a lengthier and more unpredictable process, and thus has more risk. Because property owners have a right of redemption for 9 months, title insurance companies won’t issue a policy until the 1 year mark has passed. Further, most title companies do not even engage in tax lien properties. But don’t despair – here are 2 good Philly title companies I’ve worked with who do engage in Tax Lien properties: Philadelphia Closing Company and Assurance Abstract.
Other extra costs
In either scenario, the deal could go sideways. For example, there’s at least 1 year’s worth of holding costs for the Tax Lien property. Prudent investors will be thoughtful before investing any further dollars into it. Legal costs will grow if clouds on the title are found. Consider also that the clouds may not be removable.
Like I said, the restart of these sales is forward progress if done properly. Just make recognizing potential title issues part of your calculations and getting title insurance a top priority!
Speaking of fairness and transparency, here is a link to the Philly website to help homeowners.