Episode Transcript
[00:00:00] Speaker A: There's no way to know if they were properly noticed unless you did a deep review of the file.
[00:00:04] Speaker B: What I'm hearing from you is that the tax sale process is designed to extinguish prior claims.
[00:00:10] Speaker A: The underwriters require you to do the quiet title action because they want to know that everybody was properly noticed because it was done through the court. If everybody was notified properly, then why would you want to go poke those bears one more time and somebody then might raise their hand? Highlight insurance. It's a risk averse business, but again, it shows our value that we do know so much about the tax deed process.
[00:00:35] Speaker B: Quick note before we continue. Nothing we discuss in this podcast should be considered legal, financial or investment advice. Tax lien laws vary significantly by state and every property situation and investor is unique. Always consult with qualified legal and financial professionals in your jurisdiction before making any investment decisions.
Now let's get back to the show.
Welcome back to the Innovative Investor Podcast, the show where we break down what it actually takes to to invest in delinquent property debt like the pros without being one. I'm Steven Morrell, CEO and founder of jurisdeed, and today we're going deep on a topic that is near and dear to my heart and frankly, close to my survival as an entrepreneur, which is title insurance. Not the boring closing table kind, the creative strategic underwriter relationship kind where you're convincing a skeptical national underwriter to take a risk that no one else wants to touch. My guest has built a national business doing exactly that for tax deeds. Brenda Flatter is the Vice President of National Sales for US Tax Deed Solutions and Executive Director for Title and Abstract Agencies of America. She spent 12 years, over 12 years at Meridian Title building the REO and tax lien divisions from scratch.
Brenda, welcome to the Innovative Investor Podcast. I have a feeling this conversation is going to feel very, very familiar to both of us.
[00:01:59] Speaker A: Thank you very much. I'm excited to be here.
[00:02:02] Speaker B: Cool.
[00:02:03] Speaker A: And it's nice to geek out and talk about taxes.
[00:02:05] Speaker B: I know, I know, you can't do it with everybody.
That's a great segue into the first question. So I want to start with your version of your story. Most people haven't heard, not the elevator pitch, but the moment you realized that title insurance was the choke point in the tax deed market and your place in it, what did that, when did that click for you and what did that look like?
[00:02:29] Speaker A: Yeah, so I had actually stumbled into a law firm here in my local market. I stumbled into a law firm. I been I had just started My career in the title industry was trying to strum up business and stepped into a law office and ended up finding out that they needed title reports.
The was in the state of Indiana, and in Indiana, there are 92 counties and two counties do their own noticing like much of the rest of the country. But the other 90 counties, it's up to the purchaser to do the noticing. And this law firm that was their specialty in assisting tax deed purchasers with the noticing and then performing the quiet title action invite.
That was my introduction into that selling title reports. That's what we did for a couple years. Well, then we.
The title company that I was working at was also had ownership of an underwriter, and that allowed us to work with the underwriter and going through some of the pain points that we've been hearing in order to then create a product that we call tax certification that allows us to ensure the tax deed without the quiet title action.
So it was really cool to be a part of that. Groundbreaking. You know, there was a. There was a couple companies that had been doing it prior, but we really wanted to kind of shore it up and improve the processes and some of the pain points that we heard the, that the customers were having with the, the current vendors that were providing that service.
And, and that's kind of. I walked in and I was like, it was it, like then it was tax deeds and tax liens and learning, you know, all about that. And then it is just, like I said, it started in Indiana and then it's just grown and from there and to where I handle it nationally.
[00:04:19] Speaker B: That's great. Was there a. Was there an event that you encountered like, like a particular closing or something that that kind of made you think, there's got to be a better way? I mean, this is just crazy. Like, what?
[00:04:34] Speaker A: Yeah, so.
Well, it was kind of like attending a couple conferences and having some conversations with, you know, tax lien funds, you know, finding out, you know, why, what is this issue? Why. Why is, you know, why will underwriters not do this? Because historically, if somebody purchased a tax deed or had a property with a tax deed in the chain of title, you walk into any title company and they're going to tell you you have to do the quiet title action.
Well, the quiet title action is in essence, one more go around of noticing to everybody that had an interest in the sale.
Well, we kind of looked at that and said, well, wait, if everybody was notified properly, then why would you want to go poke those bears one more time and somebody then might raise their hand, you know, and it's a costly process nationally. It's between 1500 and $5000 nationally for just the attorney fees, plus you have the court docket and the due process where it could take six to nine months. And our product, we could get it, we could get a closing done in probably under 60 days with the review and the closing. And that just kind of became the moment where I was like, wait, we can do this, we can do this faster. And here's the process, here's the procedure, pitched it to the underwriter. And that's one of the things that, that I encourage all the funds and the people that I work with. The reason why the underwriters require that extra step of the quiet title action in a non judicial state is because that's just, that's the key factor. Nothing judicial was done. It was all done by notification, publication and auction. You know, there was nothing done through the court. But the quiet title action is. And then that what gives them the comfort level because they view these as high risk properties.
[00:06:17] Speaker B: Right, right.
So for, for investors who know tax liens, and a lot of our of our listeners are in the tax lien space and haven't yet crossed in the deeds, but, or maybe they kind of have tried to sell them off or whatever.
Walk us through what, like the fundamental title problem. Like why does a tax deed which is supposed to, supposed to wipe out all prior interest usually as at a, as a state law matter, you know, why, why does the tax deed actually create a cloud on title rather than clearing it? Why is there still something left to be done here? Like what's the big, what's the big hurdle to overcome?
[00:06:56] Speaker A: Right. So again, it goes back to being a judicial process. So when you have, when a tax deed is issued, then if everyone was properly noticed, then all of those liens, judgments, mechanics, liens, helocs, mortgages, should all get extinguished if everyone was properly noticed. And that's, that's the thing, there's no way to know if they were properly noticed unless you, you know, did a deep review of the file.
And that's why the underwriters require you to do the quiet title action because they want to know that everybody was properly noticed because it was done through the court.
And if they're not properly noticed, then they still could raise their hand and say, hey, I was notified, I have an interest. And they could come back and challenge the tax sale that happens with anybody and an interest in the property during the redemption period.
Then once the redemption period has expired, then Only the owner of record then has a statutory period of time where they can then challenge the tax sale. And that again is what makes underwriters nervous because depending on the state, you know, that time frame is different. For example, in Florida, the prior owner has four years to challenge the sale. In Arkansas, they have 15.
You know what I mean? So it, it varies. And again, if you do that quiet title action, which is the judicial process, then it satisfies all the underwriters.
But with again, with our product being able to bypass that requirement because we've had that, those conversations with the underwriters, we have those relationships. They've seen our process, they've seen under the curtain. Got to get in the weeds with us to see what we do when we are reviewing and examining the property to determine if we're willing to take that risk.
[00:08:40] Speaker B: Yeah, yeah. And this isn't just any kind of notice like a nice to have notice, like, hey, you're late on your bill here. This is fundamentally a due process issue. Right? This is, this is the threat of taking away property rights without being notified that they have.
[00:08:55] Speaker A: Yes.
[00:08:55] Speaker B: Okay. And, and so, yeah, and the other
[00:08:58] Speaker A: thing too, with the tax deed, it only issue, it only addresses half of the process because it's going to go up against the real estate. But then government liens survive the tax sale. So if there is, you know, back taxes obviously get paid and made current, if there is any kind of code enforcements per permits and cases that are opened up, trash bill, water bill, those survive the tax sale. Now you just mentioned a great word, IRS and federal, state tax.
[00:09:27] Speaker B: I never said it was great. I just said the word
[00:09:31] Speaker A: true, true, true. So federal and state tax warrants survive 120 days after the date of the recorded tax deed.
If you are a tax deed purchaser and you do happen to purchase something with an IRS lien or tax warrant on it, you just have to hold on to it for 120 days and then you can proceed with tax certification. You know, you can proceed with the, you know, disposing of the property. Same thing with the foreclosure property. Like if it's a sheriff sale action, any, any type of foreclosure, they have a 120 day shelf life.
[00:10:04] Speaker B: So. Okay, for, for the, and I understand every word you said. You explained it very, very well. But for everyone who might not quite, you know, be there in plain English, what I'm hearing from you is that the tax sale process is designed to extinguish prior claims. It's designed that way. But because underwriters can't independently verify that every prior interest holder actually received notice. They treat that tax deed like a ticking time bomb. Is that about right?
[00:10:31] Speaker A: Yes.
[00:10:32] Speaker B: Okay. All right.
Because they're in the business of taking insurance premiums and not paying claims, right?
[00:10:37] Speaker A: Right. Oh yeah.
[00:10:38] Speaker B: I mean, okay, that's fine.
[00:10:39] Speaker A: Title insurance is, it's a risk averse business, you know what I mean? But again, it shows our value.
Know that we do know so much about the tax deed process and how it works with each state and the statutes in order to be able to allow someone to either obtain clear and marketable title or convey clear and marketable title.
[00:10:57] Speaker B: Right, right.
Okay. So let's talk about what US Tax deed Solutions does because this is the pretty unique thing, right? This is the alternative to the traditional quiet title.
Go, you know, go the route of the traditional underwriting route which takes, you know, so the standard answer has always been go get a quiet title judgment. Like you just said numerous times. Right. Three to six months if you're lucky, tons of legal fees and court dockets and your, then now there's your alternative. What does US Tax Deed Solutions do that a quiet title action does? And what does it do that it doesn't do?
[00:11:36] Speaker A: Sure.
The so US Tax Seed Solutions offers a product called tax certification where it bypasses the requirement for the quiet title action to be completed in order to provide title insurance. We fast track tax deeds to insurability. We're less expensive than the quiet title action. We're faster than the quiet title action. And again it's, it's a self, it's a proprietary product. We're self insuring it know, so we're the ones that are assuming the risk. We don't have to notify, you know, anybody else like they do through the quiet title action and we can remove that requirement and then allow them to proceed with a real estate closing where we would then clear up any other title defects in order to issue the title policy.
The quiet title action is one and done. It's recorded and any title company anywhere is going to find it and you're going to get title insurance.
Our product is not recorded, but it is transferable.
So for example, you buy a property, vacant land at a tax sale, you're going to then sell it to Jack and Jack is buys it, let's say for $10,000 and then he's going to build a house on it and then it's going to be valued at 200,000.
Well, we'll certify the property and issue the title insurance from you to Jack for $10,000 and then when he goes and builds and now has a $200,000 property, we can amend the certification, giving him a credit and then allowing him to then continue with tax certification and keep his property clear and marketable.
Now at any time until that deed, statutory seasons, we can continue to do that or the, the person then that the current owner could choose to do the quiet title action if they didn't want to proceed with tax certification. Okay, so the tax certification is the same end result as the quiet title action. It allows you the ability to obtain title insurance.
[00:13:30] Speaker B: Okay, and then what happens if, if in your analogy that, you know, Jack wants to sell it to somebody else? In a lot of states, the, the buyer picks the title company and they're not going through, you know, your, your, your First American or whatever, somebody else. And, and, and you know what happens there? Do they, do they, are they able to write over? Are they able to adopt what you have or are they getting pushed back or how does that work?
[00:13:54] Speaker A: Sure. Well, we always hope that they have a good experience with us and they want to come back to use us. But in the event that, you know, somebody has a relationship where somebody wants to, you know, needs to close at a different title office, if they, if they have common underwriters, because we currently are with three underwriters right now, if they have the common underwriter, then we can go ahead and assist them in issuing them the cert, the certification.
And if not, then we just let them know, hey, you can come back to us and we'll take care of it. This, and just to be clear too, the certification is issued to the title company or actually to the underwriter to remove the requirement. It's not issued to the buyer or to the seller. It's issued to the underwriter to remove that qa.
[00:14:35] Speaker B: Makes sense. Makes sense. Well, that's a good segue into the next, the next thing I want to talk about because it seems like this is very much a relationship driven business here, both in two fronts, right? You have your customers, but you also have your underwriters that if you didn't have that, you wouldn't have a product.
So, so the deep question here this. But I've done something very similar in Louisiana with what we call the adjudicated properties in Louisiana. Those are the ones that didn't sell at the tax sale. And the taxing authority, that jurisdiction eventually takes it back and is able to sell them as real estate years later through a very, very rigorous process.
These were the bottom of the barrel ones and for so long nothing was done with them. So they were the oldest ones and had the, probably the most littered titles you can imagine.
That's for some reason, because I'm diabolical. That's the ones I decided to start it with in this journey, the worst ones possible.
And I can tell you that. And I want to. Gonna ask you to chime in on your own, maybe your similar stories here, but for me, getting a national underwriter to say yes to a transaction type they've historically refused is not an exercise in email and paper. Like, that's a relationship and a risk argument. So walk me through that conversation. How do you.
What does that look like for you? You know, I don't mean you to tell me like word for word, but how did you, how do you convince a national underwriting desk to ensure something that for decades has required judicial clearance first and then you come along?
[00:16:06] Speaker A: Well, getting on my hands and knees and begging hasn't helped. So that, that, that didn't work. So, yeah, a lot of it would be that we have done just some of the information that we were able to show and share with them. Like we did memos, we did deep dive into state review. So each state would have their own memo where we really read into the statute and compare like the statute of the tax sale process with also underwriting guidelines and requirements within the title insur.
You know, we sort up a lot of that research and information that we shared with them, how we were doing deep dives into each state that we wanted to be in.
We have a checklist of a review sheet that we've set up that we go through that has, you know, those items that we were able to share with the underwriter. And then of course you, like you just said the, the proprietary information that, you know, we can't share. But we were able to be able to have conversations.
They were open to it. They, we set up, you know, two or three different meetings.
You know, some of them, you.
At the very beginning, there was a lot of no's. A lot of no's. And there's still some that are still saying no.
And then there are some that I believe are leaning into it more because I started the product 20 years ago.
So when. Yeah, so I've been. So it's not new, at least not to me. And like some people, like, they still find it. Like just yesterday I talked to somebody, I just heard about you today. And I'm like, tax certification has been around. So I think that that's the, the other, the other factor is that we've. The longevity of it and being able to understand the. Some of the objections that they would have currently had. But I think more and more leaning into it as they're seeing the tax lien or the tax deed industry grow.
[00:17:49] Speaker B: This is going to be a very insider kind of a question because I was in a very similar role many years ago. But did you get to a point with that relationship that the trust was built and the process was understood accepted to the point where you had essentially underwriting authority extended to you? Essentially like if it goes through you and that process, we don't need to look at every single file that you choose to underwrite. Just go and make sure that we don't have claims.
[00:18:19] Speaker A: Exactly. Yeah. Right. Exactly. Yeah, pretty much we do. We.
With the understanding with the underwriter, again it's kind of a twofold process. So with US Tax deed solutions, the relation, the understanding with the underwriter is that we're doing a deep dive into the tax sale, into the tax sale process. The statute, that particular property, you know, what all entailed with that flow. And then if we issue the certification, then title and abstract agency then processes the real estate closing. And that's handled just like any other traditional buy sell agreement where you go through and is are there any other title defects that need to get remedied in order then to provide a title policy?
[00:19:00] Speaker B: Great.
Now I mean, yeah, I lived those relationships for many years and I remember experiencing all the no's for a long time as well. So yeah, I remember how that went.
[00:19:11] Speaker A: Yeah, tons of those. And I can tell you just last May I had an underwriter call us and wanted to be a part of this so that I again I was like, I about fell off my chair.
[00:19:25] Speaker B: Yeah.
[00:19:26] Speaker A: Because usually we're begging them to do it. Like I said, we have.
And the other thing too that I think that has been an added benefit with obtaining the underwriter agree, you know, allowing us to do this is that we've offered this to their agents.
That's one reason why we branded ustds separately is so I can, I can brand, I have a brand that I can go and sell to other title companies and title agents that are with connected to the same three underwriters and allow them to say hey look, let us TDS do your certifications and then you guys can handle the closing piece. And I have seen that has, that has been a great pipeline of business is to be able to assist other title agents that, that we share the same underwriter and have clients that buy tax dates.
[00:20:13] Speaker B: That makes a lot of sense, especially if you're trying to. I mean, because once the transaction is done, it's out. Out there in the marketplace, and then it could happen again somewhere else down the road or a different town.
So, yeah, it makes sense.
[00:20:24] Speaker A: And we get that a lot, you know, and, you know, people, you know, buy. Have maybe had their own relationship, then they'll call and say, oh, we have a subsequent sale, you know, so we work with them on getting the certification amended to allow the insurance and the markability to continue.
[00:20:40] Speaker B: So you're in nine states right now. Are y' all 16?
Wow. Okay. See, we didn't talk at the NTLA. You've grown fast.
[00:20:49] Speaker A: Did not get a chance to talk. I have. We've grown a lot. We. Yes, we actually were in 18, but two states have, with some of the recent legislation, challenges that we are facing in the industry have changed their statutes.
And so we've then pulled out of those states. So we are in 16 states and 16 with all three underwriters.
[00:21:09] Speaker B: That's. That's a perfect tee. Up to my question. So how much does the. Does the underwriting argument change state by state and where, you know, some states are, you know, more complicit, more. More permissive, and some are maybe more difficult or flat out no.
Is, you know, can this become one national program that, that. That you adapted, or are you essentially renegotiating the risk argument in every single jurisdiction you go into?
[00:21:38] Speaker A: No. Okay. So when we make the determination to go into a different jurisdiction, sometimes, first of all, it's going to be based on need, because we know how hard it is at one time, how hard it was to get an underwriter to say yes. We wanted to make sure that, hey, if we're going. Do we have, you know, is there volume there? Is there. Is there enough business there to make sense to go. To go there. And then we take a look at the statute, the process, how it's written, what challenges that we see that we may face if we did certify what kind of challenge, if people could challenge the tax sale, how that varies because all 50 states, you know, have the ability to have a tax sale, but there's. Each one of their statutes is written differently as to how that process works or how and what it looks like. As. As far as, like I mentioned, you know, redemption times, interest rate, percentages on the know for their investment, and as well as, you know, the length of time that a prior owner can challenge the tax sale. So every state is different, and some actually do a judicial foreclosure, for example, Ohio, Kentucky, you know, to where when you get a tax deed from those two states, you just go straight to insurance. You don't need us. And so that's kind of where, you know, it does make it a little bit different of a conversation. But what we've been able to really do moving forward here these last few years is if we decide to go into a state, we just, hey, let them know, give them a little information, ask the question. And it's been pretty much a yes.
We don't really. Once they've appro. Once the underwriter has onboarded us, adding another state doesn't seem to be. We don't seem to have any challenges with that.
[00:23:12] Speaker B: Right, right. Because of that relationship in the risk. Risk relationship at the underwriter level, not the state level. So.
[00:23:19] Speaker A: And. And in fact, in fact, when we added one of the newer underwriters that we added, they asked us to go into two different states that we weren't in because that's where they're. They. They saw their volume of business needing it and, you know, so. And that. So sometimes it's the ask.
[00:23:34] Speaker B: Yeah. Yeah.
Curious about the two states that y' all were in and no longer are there. What happened? Why are you no longer there?
[00:23:42] Speaker A: Sure. The first one is Alabama.
Alabama has different statutes and they're, I think, adjusting them again. And it just makes the needle too hard to. To mark where. Where what's their statute.
[00:23:59] Speaker B: You need predictability.
[00:24:02] Speaker A: They keep moving the goal line and they keep moving things and they have this way and they have this way. And I don't even know if people that are in that work at Alabama can tell you what their statute is, because we had them as guests at the NTLA and we didn't get much information. So that was one state that. It's just too hard.
You know, if it's an old enough tax deed, if it's an old enough tax sale and somebody wants to reach out and contact me, you know, there might be some endorsements that the underwriter will allow in order for us to get. Get it. Get it certified.
But I would say the tax sale or deed would have to be at least five to six years old even to call the other state New Jersey. The Supreme Court in New Jersey recently ruled that the tax deed has an indefinite shelf life.
[00:24:53] Speaker B: Means the word underwriters could never, cannot handle.
[00:24:58] Speaker A: Yeah. So that just right there says the prior owner can forever challenge that tax deed. And so we said goodbye to New Jersey. And again, it's not like people are stuck. They just have to do the quiet title action in order to get title insurance in New Jersey.
[00:25:16] Speaker B: Okay, interesting. Okay, so let me switch gears for a minute here because the current topics through the title insurance and the tax lien investing industry right now is all looking at Washington D.C.
the pun case. And we had our guest, one of my favorite guests, Matt AB of Nelson Mullins Riley from South Carolina last time. And you know, and that's the other place hat I can geek out on because I'm a former lawyer title insurance person and so great conversation. I encourage everybody that's listening to this to please go check out that, that other episode. It's, it's, it's linked in the show notes down below.
[00:25:58] Speaker A: There's nobody more knowledgeable on, on than, than Matt and he presents it.
[00:26:05] Speaker B: Yeah.
[00:26:05] Speaker A: So well and yeah, and it's one of those, like I've seen it, I think three or four times and it still doesn't get old. He does such a really good job.
[00:26:13] Speaker B: Yeah, he does, he does. But I want to start with the Tyler case and I'm going to tell you, we're going to connect the dots here in a second. But the Tyler case, for those who aren't familiar with it, was a 2023 unanimous 90 decision by the Supreme Court, which essentially ruled that the government can't pocket the surplus proceeds after a tax foreclosure.
There has to be some reasonable process to try to get that surplus, if there is any surplus after a judicial foreclosure of a property back to the legal parties that it's entitled to and usually the owner. But it could be a subordinate lienholder, et cetera.
So from a. Let me turn this back to you now. So from a title insurance perspective, what did Tyler case change about how you and your underwriter look at this risk?
[00:27:10] Speaker A: Well, it really didn't. It wasn't really a factor to us. I mean, it's more of a factor to the bid, you know, the homeowner, the winning bidder, the county. You know, that was more of like that trifecta of an issue for us. It. We didn't really see that to be the case because if the tax deed is issued, then our product is needed. So that's kind of where that came into play. And because other states don't do it that way. You know what I mean? So, because, because with, with Tyler, 12 states had to go into effect. 12 states really were like, oh, this Affects us. You know what I mean? We got to do something. You know, like Jersey was one of them. Arizona, Colorado, you know, luckily enough I'm in Indiana. I live in Indiana. That's where I got my feet wet with tax sales in Indiana and could probably read that statute in my sleep.
And that's why when it happened, I knew Indiana wasn't going to be a factor. Because in Indiana, the way our statute is written, the county cannot profit off of the tax sale. They have to just get their taxes break even.
And to us in issuing certifications, we like it when there's a surplus and we like it when the prior owner takes the. The surplus.
Yeah, that helps us. That's what we like. And so you're right that. So for, so for Tyler, not really a factor in the certification aspect of it. But just knowing that now when states have now maybe moved the surplus to be given to the prior owner or like in, you know, like in Indiana or if there's a mortgage of record, that's who gets it.
We like to, we like to see that.
[00:28:43] Speaker B: Got it. Got it. Okay.
So. And because it's interesting because it did have an impact on, in a lot of different ways, including at the institutional tax lien investors who had built surplus into part of their revenue model, you know, even, even at a small percentage of the. But usually it's a big splash, you know, so.
But let's, let's shift over down to the punk case, which at this. As the day of this recording, the oral arguments have already been had, everything is booked with the judges. Then we're just waiting for them to come out with their ruling, which probably in the next six to eight weeks I would think is when I think that they would be coming out with it. But that case has a different question. Right. It's actually one of the questions that the Tyler case kind of punted on because it wasn't entirely relevant there.
But the question there in the punk case is whether just compensation, which is a requirement under, in the due process clause, I'm sorry, in the Bill of Rights, where if the government takes property from you because of a need that there has a justifiable need, they're supposed to give you just compensation in exchange for taking that away to make it a fair exchange.
And so, and that means the auction price or the property's actual fair market value in, in this, in this context. So in the tax deed foreclosure instance, the question of just compensation asks. Is now being asked by the Supreme Court, what does that mean? Does it mean it's the auction price or whatever it fetched? Or is it the property's actual fair market value? Because the facts of that case are pretty extreme.
That case, the tax bill that was sold to the investor was 2,200 bucks.
And the debt, that debt was on a property that the own that the county had assessed at $194,000. It then sold at the auction for $76,000 and flipped after renovating it, et cetera and everything. But if, but effectively the investor who bought it at the auction for 76 flipped it a short time later for 195.
From a title insurance standpoint, not legal advocacy year, what does a ruling that would require fair market value compensation due to the risk profile of a tax deed or any other context,
[00:31:08] Speaker A: how many tax deeds are going to be sold now?
[00:31:12] Speaker B: Could this pull the plug?
[00:31:14] Speaker A: Yeah, I mean, again, the same kind of, I mean almost very similar.
Again, our product, we only have a need if a tax deed is in the chain of title. So, so if a tax deed is issued, then we have a need.
If tax deeds aren't issued, then we, there's nothing for us to do. Wow, that's, that's kind of the.
Yeah.
[00:31:38] Speaker B: Wow. So, yeah, that's a, that's a whole industry shaping event potentially. Now it also depends on how the court rules, of course. And we're just hypothesizing if that is one way that they could rule.
[00:31:48] Speaker A: Oh no, it will change our industry that day.
[00:31:52] Speaker B: Yeah, yeah, that day.
So I got to ask, like, so is, I mean there's nothing at this point other than wait and watch. Right? But, but, or, or do you guys have some sort of a, a plan B or a response from a business standpoint? I don't mean anything proprietary, but like, is this, is that where you all are at right now in waiting for this to come out? Or I'm sure you're not just sort of hoping for the, the, the, the vanilla benign response from the court saying no, no, we're not going to do any of that. Like what happens if it does happen? You know? What are you talking about right now? Like, what would that look like for you?
[00:32:31] Speaker A: Well, it's, it's. I don't believe tax sales will end.
I don't believe that there will no longer be tax deeds.
There might not just, there might not be as many.
And um, and also there might be an influx of people that want to start unloading their tax deeds or get them insured or get them, get rid of them because they, you Know, for fear, you know, retribution.
It, it, it really, you know, kind of, I mean, like you said, I was part of a couple organizations that, you know, you know, hired people to write and submit amicus briefs for us and present the oral arguments. And, you know, we've also reached out to other people that we knew were going to put their hat in the ring so we can kind of have a, a cohesive argument that was going to help the, help them see, you know, the good that the tax deed investors do. You know, the good.
And you know, we, I, I hope for a favorable outcome.
I, I've heard three of them have already ruled and ruled in the direction that we want them to.
But you know, like you said, as we wait for the other, you know, you said six to eight weeks, which is, I heard May, June. So, you know, probably around that same time frame.
But yeah, it is kind of just a wait and see game.
[00:33:50] Speaker B: Yeah.
So.
Yeah. And that's. Until then, like, we, we just have to kind of like just do exactly that wait and see.
[00:33:58] Speaker A: Now the, yeah, it's hard to, it's hard to project any type of growth or, you know, can we do anything because, well, you know, nobody wants to. Everybody literally. Well, let's just stay where we are. Let's just do what we're doing and then we'll see what happens. Because either we're pivoting to do something else or we just keep going the way we've been going.
[00:34:14] Speaker B: Right, right.
[00:34:14] Speaker A: And then, you know, so yeah, it's,
[00:34:16] Speaker B: or some middle ground that we don't even know about. Yeah, right.
[00:34:20] Speaker A: Right. Who knows?
[00:34:20] Speaker B: Yes, that's, that's, and that's another topic I want to get to before we, before we run out of time, is there's a number of state court cases and you at the, at the, you know, top courts in those states that, that are, that are putting something out here out into the jurisprudence called a state actor.
And, and I, and I've talked with others about this, including Matt and, and we think this might be kind of the sleeping giant in this, in this whole story here of, of the, the, the shaping evolution of, of, you know, what tax sales can be under the Constitution of the United States.
So courts in Nebraska and Maryland, New Jersey, as you pointed out earlier, have started holding that private investors, not just the government itself, can be treated as a, quote, state actor and become liable in that way for just compensation.
That's arguably the bigger long term risk than pung itself because those are your customers. Right.
So how does that change the Title insurance conversation, because now you're not just insuring against title defects. You might be looking at constitutional liability exposure running with the property.
[00:35:32] Speaker A: Yeah, I don't really know as far as an insurance side, if that would. If we're going to really factor into, you know, because we're insured, we insure the property. You know, we insure the property from the date they buy it and we go backward. So that's the part where I'm not really sure where we're going to come into play. But I can say that what would happen is maybe we start seeing less purchases in the states that we're in because the tax lead investors are going to maybe buy less or they will leave and go to other states. And so then you might see states suffer because they don't have as many tax purchasers because they're going to another state. Because a lot of times some of the funds, you know, they're big enough, they have the knowledge you can pivot to a state pretty easily.
It's this. The smaller investors that maybe just do a few a year would probably have a harder time moving to a different state, but they could still do it.
I would just think that with working with some of the funds and having that national footprint, that we could see a quick shift into where they're at and where they're going.
[00:36:39] Speaker B: That's going to be interesting. And I want to invite anyone in the show who's listening to this, especially where you can comment below is the title insurance industry. I think that's going to be a fight. I do. I think that that's it.
They're going to get a claim. I guarantee you they're going to get a claim. You know, whether they have, whether they have to pay it or not, I don't know. But somebody is going to follow these Supreme Court cases as precedent and say, wait a minute, it doesn't matter that you're not the government, you're the guy who bought it from the government. And that price was not fair because you sold it the next day for twice as much. And under that Supreme Court case, you owe me back some money. So they're going to file a claim on their title insurance because you insured it for whatever level. And that's going to be the fight. I think that's going to be where you're going to start seeing, okay, well, right now insurance is going to say, wait a minute, wait a minute, we're insuring the title retroactively. We're not insuring the purchase. So this Is, but is that claim really retroactive? Because it's all about what price it was sold to him when he acquired it at the point of acquisition. Anyway, I'm just painting arguments here. I'm not taking sides, but I just think that's going to be an interesting, interesting industry topic to follow, you know, parallel and not necessarily tied to the pun case, but the fallout there that might affect, you know, buyers who get, who get stung with those lawsuits and looking for that just compensation back from them.
So counter, counter thesis here. Could the Punk case actually become a good thing?
Now this is obviously depending upon how it rolls, right.
Can it potentially provide clarity in the other direction? Right.
These are questions that are floating out there. And what do underwriters hate? Risk. Right. Where does risk come from? Lack of clarity, no shiny gavel dropping down to say this is the way it is or is not. Right. And so, you know, but what if, what if Punk could give us that? You know, what do you, what, what outcome do you see would create a positive event here from the Punk case for the title insurance industry?
Who or for you?
[00:38:49] Speaker A: Yeah, I say, I think for title insurance, again, I'm still not really.
And I, and I still don't really see that how we could be, I mean, other than somebody trying to force a claim or submit a claim, you mean, somebody can always try. So there might be a lot of wasted time because people are trying. But I just really don't see how title insurance is going to be affected other than, but with my product or with our product with tax certification, I sense that we would have less certificate. We'd be we doing less because people aren't going to buy as much. You know, some of the funds don't want to, you know, purchase that for fear of that they'll that they may have that retribution.
So other than it just going, it just diminishing or soliciting, that's the, that's the challenge that I see. But I do hope that you know, that they rule, you know, that that does give everybody some clarity.
[00:39:39] Speaker B: Yeah, yeah, no, fair enough, fair enough. All right, so the next section of the interview is basically questions that help some of our listeners who are tax lien or deed investors and they're listening to this, looking for guidance about, you know, where should they invest in what states and what, what are they going to be the available resources to help them.
So an investor's listening right now. They let's assume that they've been buying tax deeds in Florida or Georgia, holding illiquid inventory. Of course because they can't get title insurance or so they think. Right. And burning, you know, six months, nine months, 12 months of time and cost on quiet titles, et cetera.
What's the first call they should make?
[00:40:20] Speaker A: Call me.
They should call me.
[00:40:24] Speaker B: What's that on board? How do you help them?
[00:40:27] Speaker A: Yeah, sure. Yeah. So that's.
So that's kind of one of the things. I have a tax deed now what? Okay. Well per the statute you have clear title but entire entitled insurance world and in real estate you don't have marketable title. So they could contact us at US Tax deed Solutions where we would do the review of the initial attorney review of the property. We target 10 business days for that review to be completed. That then would say yes, we would offer the certification that allows the quiet title action to be removed and then they can proceed with the real estate transaction with a buyer or themselves if they're going to hold on to it, they want to self insure it or if they have a buyer with a contract and then we process the real estate closing and issue the buyer title insurance and they have clear and marketable title. And one thing that we didn't mention that we will now is title insurance is issued to the owner of record and stays valid as long as they remain the owner of record. It's a one time fee and it takes, it's from the date that the property closes and backwards and where they going forward.
[00:41:33] Speaker B: Makes sense. Where could they find you and where can they find a list of the states that you're in?
[00:41:37] Speaker A: Sure. So ustaxdeedsolutions.com is the website that would provide all the information about the products coverage area, pricing and a place to submit orders.
My phone number is 574-855-8968 and my email address is bflatterogs.com Perfect.
[00:42:02] Speaker B: And we're going to put all of that in the show notes below. So the one will have to remember it by memory.
But a couple more questions before we before we end. So this is the two different camps of investors are typically you're on the lean side or the deed side and sometimes they cross, crisscross, whatever. But for the lean investors out there, the setup to this question is that Louisiana just changed their entire legal tax sale system.
And if anyone was there, if you were at the conference and you heard me talking about it, you probably know more than you ever like to know about Louisiana tax sales.
But it used to be kind of a hybrid. I don't think it was confused as to what it was, but it's a pure lien state now. I mean, this is a dual auction. This is a replica of Florida. This is a tax lien, and there's a judicial foreclosure, and there's an auction and there's a liquidation of the lien. That's it. I mean, that's, that's the. I mean, there's nuances there. But the reason I'm bringing this up is because the title insurance conversation is entirely different between lien and deed states. Right. And so for an investor who is on the lean side of the fence and is hearing about tax deeds and is kind of thinking like, man, maybe I should talk about, think about moving into those tax deed states. What, what does that person need to understand about how the title risk, it matters and is fundamentally different than what they're used to if they're just been a lean player all along?
[00:43:26] Speaker A: Well, as a lean player, you own paper that you never own the real estate. You know, you're chasing either the interest rate or, you know, or the redemption amount.
A lien is just a piece of paper. So title insurance is probably something that's not part of your conversation. It's probably not something that you're, you know, that you even focus on.
But if you. Then when we come into play is when a tax deed is issued, that's when, you know, people. And I like the fact that buyers are getting more savvy, you know what I mean? They're like, oh, no, we have to close at a title company. We h. I want title insurance. You know, I mean, so I do like the fact that people are educating themselves better. So then when a tax deed is issued, then they know that this is an extra step that they will have to go through. It is a misconception a lot, especially with newer investors. They, they tend to get very upset when they find out that, well, the county told me I had clear title. Well, you do, but that's at the county level. That's not real estate. And so that's where it's. It's very hard to be able to educate the county and the county sector in order to be able to let them know about these extra steps. So it's kind of like buyer beware. And then it's being able to try to get in front of the deed holders or the people that are purchasing the deeds to know, hey, you got to be prepared that there's an extra step that you have to go through. And it does cost quite a bit of money or can cost quite A bit of money.
[00:44:46] Speaker B: Right? Right.
Cool. That is great because it's, it is. With as much as the industry is shifting right now, I think a lot of people are thinking like, wait, if I get in now, like, do I go this route or do I go this route? And if you're on that side of the fence, like, maybe I should go over to that side of the fence.
And it's entirely different. It's like you said, they probably haven't even had the conversation about like what is needed there. So that's good to good advice.
All right.
Where's the market going here? This is the net. This is the next theme. With the punk case out hanging out there another four, six, whatever weeks, Louisiana is switching, you know, among many other states to a true lean certificate state post. Tyler, where do you see the biggest title insurance opportunity opening up in the next 12 to 24 months? Like where is this going for if you're in the title insurance, I don't necessarily mean in the underwriting side of things, but where do you see its place in the industry over the next couple years, pung case notwithstanding, what states and what product type is most underserved? Where do you see title insurance evolving as, as the industry evolves?
[00:46:00] Speaker A: I think I want to say one, the consumers, they're going to. Also the consumers are going to increase the awareness and the need for title insurance. I think people are going to be more familiar with that and what it can do for you because it protects your property rights.
And the reason why I think that is a case is because hopefully if people are using Realtors or have the knowledge to go to a title company, then one of the expansions that we have seen a lot of activity in is vacant land fraud and, and, and fraud in general. So kind of twofold. So there is some fraud happen. You know, fraud does happen in improved property, but we're really seeing it in vacant land.
And so I think that's where some of the title insurance direction is going to change is because of the vacant land fraud.
I also FinCEN, FinCEN came out March 1st. You know, that's a reporting mechanism. If a buyer is purchasing property in cash or with a hard money lender, they have to report it to the government. And there is a lot of systems out there, a lot of vendors that have set themselves up and there's an additional fee for that. And the buyer, they will want to know who's buying the property.
And whether you're two LLCs deep or six LLCs and a couple trusts, you're gonna. They're gonna come back to where they're gonna find out who the, who the actual owner is. So that's where I see title insurance outside of the tax. The side of the tax deed space is progressing is with the vacant land fraud.
[00:47:38] Speaker B: My company jurisd. Our. Our mission is to make tax lien investing in delinquent assets as easy as participating in your 401k. Really democratizing the access to the investment class and in homogenizing it across the whole country into a single thing.
So title insurance barriers have historically kept this asset class really behind one of numerous barriers of entry to being successful in tax lien investing. It's just one more thing you have to overcome. Have to understand.
You need to meet Brenda Flatter. You need to understand how is this going to make or break my investment class.
It is just one more of in a series of barriers that we've studied thoroughly at Juristeed in thinking what do we need to do to make this simpler? How can we break these barriers down so that people who don't have time to become a pro at doing this can put money into delinquent tax liens and deeds and not have to worry about all these complications that the institutional players have overcome for decades because they had the resources and the teams and the money to do it.
So does, does the work you're doing at U.S. tax Deed Solutions, do you see that angle? Do you see the ability to reach more people who want to get into this investment class who have maybe felt like they've been kept out or kind of on the other side of like, I just, I don't, I don't get it. I don't understand it. I've heard about these lawsuits. Like, do you feel like this is a. What you're doing kind of plays a role and if so, how in. In helping democratize access to the investment class to more people?
[00:49:12] Speaker A: Yeah, I definitely think that we help probably in ways we don't realize that we are helping, you know, one, you know, because we do understand the statute. And when somebody calls me and says, hey, you know, I understand my title company told me I had a clouded title. I didn't know what do you do? You know, sometimes you just start with, well, what state are you in? You mean? And then you kind of start with, okay, well here's what did happen. Ask them for the, the details of the property or the details of their process. And then you can kind of help explain to them, you know, what the need is. Talk to them about the real estate transaction. Either get them educated or connect them with a school or some, you know, because we have the education platforms, different organizations, different associations, try to encourage them to immerse themselves into that education and, and around some of those like minded people to where they can learn.
But they're going to need to put, you know, some money into it. A lot of people want free, free, free, free. Everybody wants you to do it. Just, you know, just you take care of it. You know, really kind of need to educate everybody and this is why we need to do it. This is how much it's going to cost. And you know, really, like, I think it goes back to some of the old additives. You got to make money, you got to spend money to make money. You know, not the infomercial at 2am that use somebody else's money. You know, I mean, yes, I know people have done that and it works. But you know, I think in some respects, you know, I like to hold myself accountable and if I'm going to do something, then I want to make sure that I can afford to do it, do it the correct way, make sure I'm getting the education.
Because you could end up with a, with a, with a big risk.
You could end up with a big risk.
[00:50:51] Speaker B: You and I probably both know numerous instances where that happened. And you're like, what did I get myself into?
[00:50:58] Speaker A: Oh, they call and then they want you to, and then they want you
[00:51:00] Speaker B: to mail it out, of course.
[00:51:02] Speaker A: Well, okay, but this is how much it's going to cost. And they get mad and I'm like, well, I can't help it. You, you bought a quick claim deed on the corner with the guy and he handed you, you know, you handed him a thousand dollars. So, you know, I'm sorry, you don't own the property or I'm sorry, you only own half the property. You know what I mean? Like, yeah, I mean, so again, it's that, you know, that buyer beware.
[00:51:22] Speaker B: Yeah, that's a big risk. And I think that's a big fear that many people have, even those that are actively investing, but certainly the ones who are studying from the outside thinking about, should I do this? And they're gonna, they've certainly heard those horror stories.
[00:51:37] Speaker A: Well, and, and there's a gentleman that you and I both know of. He is a client of mine. He buys vacant land all across the country.
And in less than, well, it's been, I think, eight months. So we've caught three. There's been three transactions that we've caught for seller land, seller fraud, wow. If he hadn't, you know, that's a lot.
[00:51:59] Speaker B: Yeah, that's.
[00:52:00] Speaker A: I mean, it's. I mean, November to now. I mean, we've had three cheese.
[00:52:05] Speaker B: And I'm sure that's just scratching the surface.
[00:52:08] Speaker A: Well, and I'm just one company, you know, so if somebody else is catching it on. But, but again, you know, I think with this client, you know, we've some. We've submitted our. Our spot. Like, this is how we're valuable. This is why we're valuable, because some of the extra steps that we have people go through to confirm their identity.
[00:52:26] Speaker B: Okay. So thank you for sharing that, by the way, because I think that's a lot of our listeners are definitely in that camp of like, okay, if I do go over to the tax deed side or if I'm still thinking about this, like, like this isn't a legitimate concern of mine and something that's keeping me out. And so that it's very helpful for them to consider and know that there's a solution out there.
So what's next for us? Tax. Tax deed solutions, pun case notwithstanding, like, what's the trajectory look like for the. For the business and where do you. You're in 18, what, 16. 16. 16 states technically now. So, like, where are you going and what's. What's on the horizon for us taxpayers?
[00:53:06] Speaker A: Sure. Yeah. So we'd like to, you know, continue building the business with onboarding more of the agents of the underwriters that we are currently working with.
That's one of the things that we're focusing on is that agent growth.
We also are looking at expanding into a few other states where there is some more growth there, and then just working on getting the product branded and marketed and get the word out and try to ramp up some of our marketing efforts again, you know, once.
Once we hear what happens, then we'll. We'll kind of know. But, you know, we. I do have goals for us to go forward once we know that there will be via. That those are going to be the viable goals.
[00:53:54] Speaker B: Right, right. Makes sense.
Okay, final segment here we have a final closing called the deed Line Closer.
So every episode of the Innovative Investor Podcast closes with this deed line, because in real estate, the deed is where the rubber meets the road.
It's the document that records who took the risk and who gets to build on what's been created. So here's yours.
If you had to write one sentence, just one. Here I am putting it on the spot again.
If you had to write one sentence on the deed of this moment in tax deed investing in title insurance. Something that captures what investors, underwriters, homeowners, policymakers need to understand about where we are right now in the life cycle of this industry. What would that one sentence be? As of right now?
[00:54:47] Speaker A: We help communities.
We help communities stay with good roads, good schools.
We're good stewards to our, to our neighborhoods.
[00:54:58] Speaker B: That. Okay, I love it. And that one's going on the wall because nobody, most people don't understand the impact that the, in this investment has on their communities. And, and it's part of this ecosystem that is kind of lives in harmony because, because everyone's role to play in it, including the, the, the investors, without which you'd have a lot of bankrupt counties and cities in America. So, so no. Very well said. I think that's, that's perfect. So.
[00:55:27] Speaker A: Okay. Yeah, that would be it. We're good stewards to our communities.
[00:55:31] Speaker B: Love it.
[00:55:31] Speaker A: Our neighborhoods. Yeah.
[00:55:32] Speaker B: So for listeners who want to explore what US Tax Deed Solutions can do for your portfolio once again, can you give us the details, the contact points for where they can find you?
[00:55:42] Speaker A: Sure, yeah.
Please go to us taxdeedsolutions.com I'm bflatterlogs.com and then my phone number is 574-855-8968.
[00:55:56] Speaker B: Great. Thank you, Brenda. You've been listening to the Innovative Investor Podcast. Subscribe and share this episode and please drop a comment. We've covered numerous topics today.
We read every single one and we'll respond to every single one. At Juristd, we're building the platform that makes delinquent property tax investing accessible and secure for Every serious investor. Jurisd.com come and join the wait list until next time. I'm Stephen Morrell and this is the Innovative Investor Podcast. Thanks again to Brenda Flatter and US Tax Deed Solutions for joining us today.
