Whether or not the deed is effective without recording depends on the jurisdiction. In most cases, failing to record your deed means you have no rights against a subsequent purchaser for value who is not on notice of your title - meaning the owners could sell the house again and take off with your money.
You can file and record any paperwork you want – the recorder does not rule on the veracity of any document – but no title company will insure the title, and the bank will assert their rights and win over the quit claim deed in one of the quickest court actions you ever saw. It will be a total waste of your time and you are opening yourself to an escalation in legal costs with no defense.
But don’t take my word for it – see an attorney for something this serious.
That’s going to be the biggest problem with any of these plans. 640 isn’t a very high FICO score; it’s actually pretty miserable. The bank (which is going to have to be a party to any agreement you make, however structured) isn’t going to play ball if the potential borrower (and if you’re taking over the payments in any form, you become the borrower) can’t even make that. They’d just be trading a distressed property now for one later. Giving people with that poor of credit loans is a big part of what caused the last financial mess, which is why the requirement is there now.
What are you saying?
That a quit claim deed has zero standing?
Or that the quit claim deed does not trump or release any mortgage or lien on the title, which we all (I assume) take as obvious?
Or were you referring to this?
I assume this is to protect against the “turn it into a grow op” new owners. They would get a house with no money down, all financial liability is still with the old owners, and not vetted as financially reliable by the bank.
Another few side notes:
-an article I found on quit claims suggests that if the deed quit claim deed is not registered, the original owner going bankrupt might cause the property to be sold out from under the new owner. (Ohio?)
-quit claim does exactly that for the original owner. The new owner is liable for any issues arising from that property. i.e. if it has a major toxic waste dump or is causing landslides that wreck the neighbour’s land, or there is some legal dispute about trees - the new owner assumes all owner liability.
Both. Just recording a document does nothing beyond making a public record. You could record a Robert Frost poem at the courthouse if you pay the fee (although the clerk might reject that as frivolous) and it would be permanently attached to the property record. That’s all it does.
Exactly.
If a document relating to a property is not recorded, it will not be found by a title search. If it is not found, it won’t be insured by title insurers. The possibility remains that a court may rule it valid, but it’s a gamble, and it won’t be automatic.
Also note that recording documents is a race (at least in my state). Whoever gets there first takes precedence, should there be a question (like first mortgage, second mortgage). And there are exceptions – government tax liens take precedence over everything else at all times.
But the OP is not about a short sell but taking overpayments.
A short sell can not happen if the bank has foreclosed. When the bank forecloses the loan is closed. No sell happens. After the foreclosure the bank can then sell the house, normally for a loss.
And my response is that won’t work, and a better choice is a short sale if the bank can be convinced.
I’m not sure I understand the logic here.
A quit claim deed is a specific legal document transferring specific legal rights (from what I’ve read in several different places). In what way is it no more valid than a Robert Frost poem?
The obvious caveat is that if the person giving the quit claim has zero rights, that’s what you receive. If the person giving has previously contracted in their mortgage to NOT give quit claim deeds, the grant may be invalid. But on its own, without these restrictions, it is a valid legal document. What logic is there that says it means nothing?
Because the mere filing of a document in the Register of Deeds does not make it legal or valid. It just makes it recorded as a public document, with a time stamp. The clerk does not make a determination as to the validity or legality of any document she records; that is up to the courts.
Do you really think that if you write out a Quit Claim Deed and record it, that you have instantly acquired or disposed of property that you have no rights to and can’t be challenged, just by the act of filing?
Yes, most documents filed are not challenged, and that is because most filings are made by title, mortgage companies or attorneys filing liens or judgments, and they usually know what they are doing.
A quitclaim deed transfers whatever rights the deed signer has. It isn’t effective as against the lienholder. In other words, the seller can’t sign away the lender’s rights.
My nephew bought a forclosed house at auction. He went to see it a couple of weeks earlier but couldn’t get in; however he had a good look through the windows and the house looked well maintained.
At the auction, he was a little surprised, and very happy, that he got it as cheaply as he did. Until he went to check it out. The previous owners had not only stripped it of everything moveable - all the kitchen cabinets, door furniture, electrical and plumbing fittings, they had kicked holes in the walls and doors. Worst of all, they had fixed the water tank in the loft to overflow, bringing the ceiling down and causing other damage.
People who get evicted are not usually very happy about it.
This is correct. A quit claim dead on a property is the weakest form of a dead but if properly recorded it is still a dead on the property. The holder has the rights to the property. But a quit claim dead is not a clear title. liens against the property still stand and will need to be cleared before a clear title will be given.
I have some experience with quit claim deeds in my family. My great grandfather quit claimed the ranch to my Grandmother. My Grandmother quit claim the ranch to my Dad. My Dad quit claimed a section or the ranch to my sister. My sister quit claimed 1/2 of her section to me. I sold my part of the ranch. The buyer did a title search on the property to get a clear title with title insurance. He took out a loan on the property to build his house.
I still don’t follow your logic.
If the person with (mortgaged, liened) property writes a quit claim deed…
If that deed is a legitimate contract, i.e. it’s what both parties want and agree to…
if the deed is registered in the Land Titles office…
If it does NOT CONTRADICT clauses in the bank’s mortgage, there are no clauses forbidding quit claim deeds…
then the person receiving the quit claim now has the same rights as the original owner wrt the property.
Nowhere did anyone suggest the bank’s mortgage or other liens were nullified or transferred.
In fact, that is what I and most of the other posters have been saying - a quit claim deed is no great advantage to either side if there is still a mortgage, still owed to the bank, still owed by the original owner.
However, legally, the ne owner is in the same position as anyone with a house title and mortgage, except the bank is dealing with someone else for the mortgage details until/unless the bank consents to transfer the mortgage debt to him… likely on their terms.
That does not nullify the quit claim deed or make it meaningless- it simply means that the situation is very risky for all parties with minimal reward.
-the original owner still has the contractual obligation and credit risk of the debt.
-the new owner can either screw over the original owner by not paying and destroying the property, …
or the original owner can possibly make bad choices over the mortgage, or the bank can make them a bad offer, the original owner is not motivated to get a good deal for renewal and the new owner is faced with pay up or lose the house.
-if the original owner is in bankruptcy or disappears, then they default eventually (don’t show up to renew the mortgage) and the bank forecloses by default.
-the bank is not “incetivized” to give a good deal to a person who is essentially left holding the bag, when the new owner does try to get their name on the mortgage instead. In a regular purchase, the buyer will shop around or walk away if the mortgage terms are awful. In the situation described, the new owner has minimal leverage with the bank - other than walking away with nothing after spending money on the house for a while.
This is the reason the article above gives for banks having “no title transfer” clauses in their mortgages.
The logical incentive is for the new owner to get their name on the mortgage instead. If so, then why even bother with the quit claim route? To me, it seems a useful short-term arrangement or for people who trust each other deeply (family?) or have other business entanglements that would give them incentive to behave.
The bank doesn’t have a mortgage agreement with “whoever owns this house”. They have a mortgage agreement with a particular guy, the guy who currently owns the house, Saint Cad’s neighbor.
The bank is not going to agree to just transfer the mortgage over the Saint Cad. If the owner sells the house to Saint Cad, the mortgage is closed, it does not transfer to Saint Cad. Yes, it is logically possible for the bank to agree to this, the only problem is that in reality they won’t.
That means the neighbor is going to have to pay off the entire amount of the mortgage to the bank when he sells the house, and Saint Cad will have to pony up the entire amount for the house. If Saint Cad doesn’t have cash on hand, he will have to find a bank willing to give him a mortgage, and if he can’t, he can’t buy the house. The neighbor isn’t going to be able to sell Cad the house for one dollar and other good and valuable considerations and stiff the bank, because the house has a lien on it from the mortgage.
It is certainly possible for Saint Cad to start giving this guy $X a month, and for this guy to let Cad live in the house. The problem is that Cad won’t be the owner of the house, the neighbor is still the owner. The money Cad gives the neighbor is nice and all, but there’s going to be a sticky situation when Cad figures he owns the house after X years of payments, and the owner suddenly disagrees.
The point is, this will not work because the bank won’t let it work. Nevermind the argument that the bank would come out a winner because they won’t have to foreclose. Maybe they would, maybe they wouldn’t. It doesn’t matter, because the bank doesn’t care. They will require Cad to get a new mortgage to buy the house, because that’s the way banks are. It will never happen that the bank will let Cad “take over” the mortgage. So if he doesn’t have the down payment and credit history to get a mortgage, then no bank will agree to give him a mortgage.
Or to put it another way, I can sign over my rights to the Dallas Cowboys to Saint Cad for one dollar and other good and valuable considerations. That doesn’t make Saint Cad the owner of the Dallas Cowboys.
The neighbor is not free to sell his house to Cad, because the house has a lien against it.
Absolutely. You could even register the document with the county, but that doesn’t make Saint Cad the owner of the Dallas Cowboys, either.
Md2000, if you have a serious need to know what you are asking, and doubt what I am saying, you really need to work with a title company or an attorney. A title company will not accept a quit claim deed unless they feel it is legal, legitimate, and valid. If they will not insure a property, it would be gamble for you to buy it without title insurance no matter what has been filed with the Register of Deeds and no matter how firm you feel a Quit Claim Deed is. I really can’t be more clear than that.
Yes, it is typically used between family members or in cases where it is unlikely to be challenged. It is not the first choice of transfer document in most other cases.
I used a Quit Claim Deed when I changed the name on one of my properties. Since I was transferring it from me to me, I wasn’t worried about being challenged by me. Another reason might be from a single party or married couple to a wholly-owned trust.
You do not have any rights to the Dallas Cowboys in the first place. The present owner does and he can sign them away. The owner also has also responsibilities and those he can not sign away.
Which is why I’m confused and we are arguing in circles.
Nobody said a quit claim deed absolves the owner or the property of any current lien or mortgage.
All it does is transfer the same right to title the original owner had. If the original owner “owns” the house of the Cowboys, he can transfer those rights.
A mortgage or lien says “I am owed a debt and if the debt is defaulted, I can take the property as payment”.
Most people are reluctant to take on a title with liens unsatisfied, for all the reasons beaten to death in the discussion above. So obtaining an encumbered title is a plus, but one that comes with serious drawbacks. You will not be able to refinance, sell to most people who want a clear title, both parties are at risk if the payments on the mortgage are missed, etc.
Plus, as I quoted above, most mortgages forbid quit claim deeds; so the original owner does not have the right to pass on title, which would render the transfer invalid - not because the law does not recognize the transfer, but because the owner has previously contracted to NOT sign a quit claim deed.
So unless you can find something that says explicitly that quit claim deeds have no validity in law, I assume they do in the circumstances they are used?
(I’m thinking here of builder liens by tradesmen, as opposed to mortgages - do they prohibit/trump quit claim deeds? Or does the builder have to wait until someone comes along who wants clear title?)
Having a mortgage that forbids a quit claim deed does not make a quit claim deed invalid. If the quit claim deed is registered the bank call the note and demand payment in full or the bank can exersize the lean.
What the article said:
Basically, the way I read that, the original owner has signed away his right to exercise a quitclaim until the mortgage is paid off. Theoretically, that seems to mean to me that the quitclaim’s rights and validity are at best postponed until after the mortgage is paid off. Worst case, anything signed before the mortgage is paid off is invalid.