As the title insurance industry continues to see a decline in transactions, particularly in refinancing, savvy underwriters and title companies will begin exploring other opportunities for revenue.
One such opportunity is to offer title insurance policies on tax sale properties.
With an average yearly volume of ~$8.6 Billion in real estate sold at tax sale auctions, it’s a small fraction of the real estate industry, but a potential lucrative slice of the market as other opportunities dry up.
Tax Sale Industry Overview
Tax sales occur when a property owner fails to pay their property taxes, and the local government places a tax lien on the property. The exact process and rights vary from state to state, but in general the winning bidder at the tax sale auction receives one of the following:
- A tax lien certificate, which gives them the right to collect the unpaid taxes plus interest. If that tax lien is never redeemed, the winning bidder can eventually start a foreclosure process and potentially end up with ownership rights.
- A tax deed, which gives them ownership rights to the property.
In both cases the resulting ownership often involves properties with unclear or disputed titles, which can make it difficult for buyers to obtain clear title to the property.
The absence of clear title is one of the primary reasons why most real estate investors avoid tax sale properties in the first place.
However, in a recession as the overall quantity of real estate transactions declines, the quantity of tax sales actually increases along with the potential profit margin for investors.
The requirements to issue title insurance on tax sale properties are not simple, but by having a process in place for offering policies on tax sale properties can be particularly valuable for investors. That value can result in highly repetitive business opportunities with those investors.
Understanding the Challenges and Risks
While offering title insurance policies for tax sale properties can be a lucrative opportunity for title companies, it is important to note that there are also unique challenges and risks associated with these transactions.
Tax sale properties may have unpaid liens or mortgages, outstanding taxes, or other issues that can complicate the title search process.
Title companies must be diligent in their research and due diligence to ensure that the buyer is protected and that the title is clear.
Where to Start
For title companies looking to learn more about tax sales, one resource that can be particularly valuable is Tax Sale Resources.
Tax Sale Resources’ online ecosystem of solutions provides investors and service providers nationwide tax sale information and tools to assist in the tax sale lifecycle.
Tax Sale Resources also offers a range of educational resources including white papers and interviews with attorneys in several states that specialize in the tax sale process.
These resources can be valuable for title companies looking to expand their services and expertise in the tax sale market and want to learn more about the process.
About Tax Sale Resources
Tax Sale Resources specializes in making accurate tax sale information and premier resources easily accessible to investors and other tax sale industry professionals. Services include:
- Research - Tax sale calendar, property data and research platform.
- Management - Tax lien and REO asset management software.
- Financing - Unique funding solutions before insurable title.
For more information, go to https://www.taxsaleresources.com/