Archives for posts with tag: Deed

Foreclosure Rates

Buying Property at Foreclosure Sales: a Deal or a Dud?

If you ever watch late night television, then you have seen those infomercials touting the ability to make you an overnight millionaire by purchasing financially distressed real estate.  There are many individuals and companies who have built successful lives and businesses through the acquisition of financially distressed real estate.  However, unless the process is fully understood and the risks are knowingly accepted, the purchase of financially distressed property at a foreclosure sale is not necessarily for the cash rich novice.  The following legal and practical issues should be considered prior to acquiring property at a non-judicial foreclosure sale held under a Texas deed of trust.[1]

A deed of trust is the document that a borrower gives to a lender to secure the repayment of a loan with real estate.  In a typical Texas mortgage, the parties involved are the borrower, the lender, the trustee, and the owner of the real estate pledged as collateral (“mortgagor”).  The borrower is the party responsible for the repayment of the loan.  The lender is the party who funded the loan and is the beneficiary of the pledged real estate.  In Texas, a trustee performs the duties and responsibilities contained in the deed of trust when the borrower defaults on the loan.  The mortgagor is the party pledging the property as collateral for the loan.[2]

It should be noted that non-judicial foreclosures in Texas are generally governed by (i) Chapter 51 of the Texas Property Code, and (ii) the documented agreements between the lender and borrower [3] contained within the loan documents.  Certain publicly filed documents which should be reviewed are the deed of trust, renewals/ extensions of the deed of trust, Notice of Trustee’s/Substitute Trustee’s Sale, and any other document affecting title to a mortgaged property (such as easements, leases, liens, restrictions, covenants, estates, and mineral interests, just to mention a few).  Unless a purchaser is adept at researching property titles, it is advisable to purchase an abstractor’s certificate from a title company.

There may be other issues which will affect title to the property being foreclosed which do not appear in the public real property records.  Some of these issues include encroachments, protrusions, overlapping improvements, set-backs, zoning, platting, building ordinances, flood zones, drainage, utilities, bankruptcy filings, lawsuits, and probate records.  Issues which are located on the ground can be addressed by ordering a current survey of the property.  However, permission from the current owner must be obtained before legally entering the property to conduct a survey.  This can be very difficult, if not impossible.  Other issues may be addressed through inquiries of public officials and employees.   While information obtained through governmental offices can be valuable, such information may not be completely reliable, and the persons supplying it are typically not liable for inaccuracies.

Except for warranties of title contained in the foreclosure Deed (from the mortgagor not the Trustee/Substitute Trustee), property purchased at a foreclosure sale is sold “AS IS” without any other warranties and at the purchaser’s own risk.  The purchaser will acquire the property subject to all physical and title conditions which exist on the date of the foreclosure.  Any tenants or occupants of the property on the date of the foreclosure sale may also have rights as parties in possession of the property.  Even if the purchaser acquires a meaningful warranty in the foreclosure Deed, enforcing such warranty may be impractical since the mortgagor is usually in dire financial straits.

A foreclosure sale may be set aside for various reasons within four years of the date of the sale under state law and within two years under federal bankruptcy law.  Any title insurance policy acquired by the purchaser will usually exclude any defects associated with the foreclosure process and any liens or encumbrances which were not removed by the foreclosure sale.  A purchaser at a foreclosure sale is also not a “consumer” relating to the protections afforded by the Texas Deceptive Trade Practices – Consumer Protection Act.

A purchaser should identify these issues, determine acceptability or cost to resolve, and calculate a  purchase price accordingly.  Resolving an unidentified issue post-purchase may cost tens of thousands of dollars.[4]

Purchasing distressed property at foreclosure typically requires a high degree of risk tolerance.  Anyone willing to accept those risks may also want to consider going to Vegas.  At least in Vegas, the drinks are free.

[1] As opposed to foreclosure sales by Court order or for unpaid ad valorem taxes which may have different considerations.

[2] While the borrower and the mortgagor are typically the same party, it is not necessary that they are the same.

[3] The third-party mortgagor’s agreements should also be considered, where the borrower and mortgagor are not the same.

[4] Legal fees necessary to clear up a contested title matter can sometimes exceed $100,000.00.

Scott Alagood is Board Certified in Commercial and Residential Real Estate Law by the Texas Board of Legal Specialization and may be reached at or

<a href=””>Google</a&gt;

To establish a claim by adverse possession, a claimant must enter the land with a claim of right inconsistent and hostile with that of another person.  Tex. Civ. Prac. & Rem. Code Section 16.021(1).  A “claim of right” is defined as the claimant’s intention to appropriate or claim the land as his or her own.  Such claim of right may be established by a public declaration of the claim or by visible and apparent acts.  The verbal assertion of a claim is not necessary.

The claimant need not understand or maintain that the claim of right he or she is relying upon is actually adverse to that of the record title holder.  However, a mistake as to whom actually holds record title is not sufficient to establish adverse possession where the land is shared.

If the appropriation and possession of the land was done through permission or with the consent of the record title holder, then such will not suffice to establish adverse possession.

Adverse possession cannot be established where the claimant recognizes that another person holds title to the land or has offered to purchase the land from the title holder in such a way that would show that the claimant admitted that the title holder is the real owner.

In certain instances (as will be discussed in Part III), visible appropriation may be taken as evidence of a claim of right when the claim of right is not otherwise expressed.

As you can see the law of adverse possession is founded on notice.  Existing rights in land should not be lost without giving the owner an opportunity to take preventative action by taking prompt action to dispute the claim.

R. Scott Alagood is a board certified attorney in both Commercial and Residential Real Estate Law by the Texas Board of Legal Specialization.

<a href=””>Google</a&gt;

A Quitclaim Deed in Texas is a somewhat of an oxymoron.  Believe it or not, a Quitclaim Deed is really not a Deed.  To understand the reasons why, you must know a little background about the type of deeds typically used in Texas to transfer real property.

There are three basic types of Deeds in Texas which are used to convey real property*:  (1) General Warranty Deed, (2) Special Warranty Deed, and (3) Deed Without Warranty.  Each of these Deeds  primarily accomplishes the same thing.  That is, they actually convey the interests owned by the Grantor in the real property being conveyed.  The granting clause contained in each of these deeds affirmatively grants “all right, title, and interest” that the Grantor holds in the particular real property being conveyed.  The typical words of grant used in a Deed to show intent to convey are “grant, sold, and conveyed”.  However, other words, such as “transfer” or “alienate” may suffice.  Words such as “release”, “wish”, or “dedicate” have either caused confusion as to the Grantor’s intent or have been held ineffective as words of conveyance.  The use of the propert words of grant will imply that certain warranties exist by law.

There are differences between the three basic types of Deeds.  Each Deed “warrants” the grant in differing manners.  A warranty is effectively a contractual promise by the Grantor that the interest being conveyed in the Deed is the full and complete interest described.  A General Warranty Deed “warrants” the conveyed interest against any prior conveyance of an interest, not just a conveyance by the Grantor.  A Special Warranty Deed limits the warranty against any conveyance of an interest, but only if it occurs, “by, through, or under” the Grantor.  That is, the Grantor is only warranting against matters that he or she may have conveyed to others, but not mattes that someone else may have conveyed to others.  A Deed Without Warranty is just what it says it is.  There is no warranty, and thus no contractual promise by the Grantor that he or she will stand behind the promised conveyance.  However, since the Deed Without Warranty uses the “words of grant”, it is a Deed regardless of its lack of warranty and transfers the interest described therein.

To the contrary, a Quitclaim Deed under Texas law does NOT constitute a conveyance of real property.  A quitclaim conveys only the Grantor’s rights in the described property, if any.  A Quitclaim on its face conveys doubts about the Grantor’s interests in the property and a Buyer or Grantee is automatically put on notice about these doubts.  As such, a Quitclaim is not a Deed and cannot be used to establish title to a particular parcel of real estate, whether by the Grantee of the Quitclaim or anyone else claiming under him.

Also, a Quitclaim Deed does not contain any warranty of title.  As such, the Buyer or Grantee receives nothing more than a chance at title.  There are several disadvantages through the use of the Quitclaim that are not present when using a true Deed:

1.  No express warranty of title nor implied warranties of title;

2.  A person claiming under a Quitclaim cannot rely on the 5 year statute of limitations to establish title;

3.  A Buyer or Grantee claiming under a Quitclaim cannot avail themselves of the benefits of the Texas recording statutes that protects innocent purchasers against prior unrecorded Deeds; and

4.  The after-acquired title doctrine cannot be invoked by a Quitclaim Grantee to claim an interest in real property obtained by the Quitclaim Grantor after the date of the Quitclaim.

Effectively, a Quitclaim Deed only acts as an “estoppel” or defense agains the Quitclaim Grantor who is claiming an interest in the real property quitclaimed to the Quitclaim Grantee.  Therefore, the use of a Quitclaim Deed should typically be limited to situations where a Buyer or Grantee can otherwise stand on his or her own title, but needs to make sure that any other potential claimant will not have a valid claim to defeat such Grantee’s claim in the same real property.  In those instances, a Quitclaim may be used essentially as an estoppel document, rather than a tool to obtain title to or an interest in real estate.

If you are ever presented with a situation in which you are being advised to use a Quitclaim or believe a Quitclaim is adequate, you should seek legal advice from an attorney specialized in real estate transactions to make sure you are fully aware of the consequences of such actions, as well as obtaining other possible options, such as using a Deed Without Warranty.  Otherwise, you may find yourself or your heirs or assigns litigating an unintended title dispute at some point in the future.

*There are other types of deeds which deal with mineral estates in Texas real property such as mineral deed or a royalty deed.  It should be noted that unless otherwise reserved to the Grantor or through a prior transfer, the deed of a fee interest in real estate in Texas will include the mineral estate along with the surface estate.  However, the discussion of transferring an interest in only the mineral estate is beyond the scope of this discussion.

Please contact R. Scott Alagood at or

<a href=””>Google</a&gt;