Certified Residential Appraiser Practice Exam

In which situation is a tax deed usually used?

1. Conveying property between family members

2. Conveying title from a seller to a buyer

3. Transferring title of property purchased at a tax sale

4. Transferring title in a foreclosure process

The correct answer is: Transferring title of property purchased at a tax sale

A tax deed is specifically utilized in the context of transferring the title of property that has been purchased at a tax sale. This situation typically arises when a property owner fails to pay property taxes, leading the local government to seize the property. The property is then auctioned or sold to recover the unpaid taxes, and the buyer of the property receives a tax deed, which confirms their ownership of the property and provides a legal foundation for them to take possession. In contrast, conveying property between family members typically involves a different legal mechanism like a quitclaim deed or warranty deed, as this transaction does not relate to tax delinquency. Similarly, transferring title from a seller to a buyer in a straightforward real estate transaction usually requires a deed that reflects a purchase agreement, not a tax deed. Finally, while a foreclosure process does involve transferring title, it is conducted through a judicial or non-judicial foreclosure process, leading to the issuance of a foreclosure deed rather than a tax deed. Thus, the use of tax deeds is distinctly relevant to properties sold specifically due to tax-related issues, solidifying why the correct answer is the transfer of title for property purchased at a tax sale.