If you’ve recently purchased a property through a tax deed sale, congratulations! But your work isn’t finished yet. One of the most important steps for tax deed investors is clearing the title so you can secure title insurance and protect your investment. Two common ways to do this are Quiet Title Action (QTA) or a Certification.

Understanding the differences can save you time, money, and headaches down the line.

What is a Quiet Title Action (QTA)?
A Quiet Title Action is a legal process used to resolve disputes over property ownership. It “quiets” competing claims and establishes a clear title.

When is QTA used?

• To remove clouds on the title caused by the tax sale process
• To meet title insurance underwriting requirements (not always legally required)
• When there are potential competing claims from previous owners or lien holders

How it works:

• File a lawsuit in the appropriate court
• Notify all interested parties
• Complete court proceedings and address responses
• Receive a final judgment

Once complete, the judgment is recorded in the chain-of-title, creating a permanent public record. This ensures future buyers and title companies can see that the title is clear. QTA also allows your property to qualify for full title insurance coverage without exceptions for liens or encumbrances extinguished by the tax sale.

What is a Certification?
A certification is a faster, non-judicial alternative to QTA. It provides an administrative review of your tax deed to verify that the sale followed proper legal procedures and all parties received notice.

Key benefits:

• Confirms the validity of the tax sale
• Meets title insurance underwriting requirements
• Streamlined process without going to court

Unlike a QTA, a certification is not recorded publicly. Instead, the certification is submitted directly to the insuring title agent, providing confidential documentation that satisfies underwriters. Many title companies accept a certification from US Tax Deed Solutions, giving tax deed investors flexibility and potential cost and time savings.

Comparing QTA and USTDS Certification

Investing in the real estate industry comes with a variety of options. Two such options that have gained significant attention among investors are Tax Lien Certificates and Tax Deeds. We aim to shed light on these two concepts and help tax deed investors make informed decisions. 

Understanding Tax Lien Certificates 
A Tax Lien Certificate is essentially a claim against a property due to unpaid property taxes. When property taxes become delinquent, the government auctions off a lien certificate to the highest bidder. This certificate gives the investor the right to collect interest on the delinquent property taxes. In essence, the investor is loaning money to the property owner to pay their tax debt. Over time, this investment could potentially become a superior lien, taking precedence over other liens placed on the property after the tax sale. 

Delving into Tax Deeds 
On the other hand, a Tax Deed allows an investor to purchase a property outright. This method is typically used as a means to profit from tax-delinquent real estate. When a property owner fails to pay their taxes, the government can sell the property itself, rather than just the lien. The investor then pays the delinquent taxes and, in return, receives the property deed. This method transfers the ownership of the property with delinquent taxes to the new owner. 

Tax Lien Certificates vs Tax Deeds: A Comparison 
While both Tax Lien Certificates and Tax Deeds offer lucrative opportunities for real estate investors, they come with different risks and rewards. Tax Lien Certificates typically involve less risk as the investor does not own the property but has the right to collect the delinquent taxes along with interest. However, the process can be lengthy, and the investor does not have control over the property. 
In contrast, Tax Deeds offer the investor direct control over the property, as they become the new owner once the deed is purchased. Although this comes with a higher risk, it also allows for greater potential profits, especially if the property's value increases over time. 

Conclusion 
In the end, the decision between investing in Tax Lien Certificates and Tax Deeds depends on the individual's risk tolerance, investment goals, and market knowledge. Both offer unique opportunities to profit from the real estate market and, with careful consideration and due diligence, can form a part of a well-diversified investment portfolio. As always, it's recommended to seek professional advice when venturing into new investment territories. ​