My ex and I still jointly own a house. He initally wanted to “remodel” it to live in (after our divorce, in lieu of selling it), so he basically gutted it, then changed his mind and abandoned it. Now he’s having second thoughts and might decide to fix it up after all (assuming the mortgage company will allow him to try to catch up, etc).
He wants me to sign a quit-claim on it, and for various reasons I’m considering doing so, but I want to make sure that I understand the implications. This is what I think will happen:
I will lose any entitlement to the house or the proceeds of it if he should eventually sell it for a profit. IOW, I can’t live in it or sell it or demand any cash from it if he somehow makes money off the thing.
I will still be responsible for the mortgage (since my name is on it as well) until such time as he gets the loan refinanced in his name alone.
Should he default on the current loan, the mortgage company will sue both of us, and I will have to take him to court to recover any money that I have to pay the loanholder.
Should I die (while I’m still on the mortgage), the mortgage insurance will pay off the loan, leaving him in possession of a now-paid-for (if unhabitable) house. If he dies, the insurance will pay off the loan and the house would go to the kids or to whomever he specifies in a will.
Is that about it? I don’t want to get screwed, but the house needs thousands of dollars worth of work (tens of thousands, to be more accurate), and I can neither make the payments nor pay to have it made habitable again.
It’s a lose-lose situation at this point, and I can’t afford another attorney bill. If I’m understanding my situation correctly, I can more easily make a decision about it, though. Thanks for any insight.
Yes, you have them right. A QCD is merely a form of conveyance (deed) wherein the grantor conveys and quit-claims any and all interest he or she may have in the property, without any warranty whatsoever. It is usually used in gifts of real estate, conveyances to a dummy third party who will, in turn, convey it back to the grantor and spouse to validly create a joint tenancy, conveyances wherein the grantor is not sure that he or she has any title or interest, and in similar situations. It is just another conveyance, and if you signed the mortgage, you are still liable on the mortgage. A conveyance does not relieve the mortgagor of responsibility on the mortgage, unless the grantee agrees to assume the mortgage and the mortgagee has consented to that arrangement.
If I were you, I wouldn’t sign a quit-claim deed until he’s arranged a new mortgage in his name only. You can sit down with the banker at that time and sign the QCD at the same time his mortgage is signed.
Otherwise, there’s no bebefit to you. You’re surrendering your ownership rights for nothing and you’re still responsible for the debt. Also, if you’ve already signed away your ownership, he has ZERO incentive to get another mortgage that excludes you from it.
There may be other factors that we’re not aware of, but in general, if you’re giving away ownership in something, you should expect some benefit from your gift. In this case, freedom from responsibility for the debt.
I’m afraid he won’t be able to refinance until he cleans up his credit, unfortunately. I don’t know if the mortgage holder (Manhattan Chase) will just remove me from the mortgage, but I doubt that they’d do so without a full refinancing.
The only benefit to signing it now is that the house is literally uninhabitable and is in danger of beginning to stack up fines for its condition. (The county has posted danger/do not enter signs on it already.) I’d prefer it to be his little red wagon at this point, considering that he’s the one who gutted it.
It’s a bad situation. I don’t want to sign a quit-claim without his refinancing; he can’t refinance it in the condition it’s in; he refuses to fix it unless I sign it over. sigh It’s depressing.
I don’t know how to get off the mortgage without the refi, though.
You can set up an escrow, placing the QCD in escrow to be delivered when the refinancing is completed. A deed is not completed unless it is delivered, so you can even sign it before you put it in escrow, provided the agreement is there to protect you.
I’m not sure but in spite of the cost I think an attorney is indicated. In California, and maybe elsewhere, I’m pretty sure that the only penalty for failure to pay the loan on real property is forfeiture of the property. This is different than a contract of sale; as for an automobile where the debt is for a certain amount of money irrespective of the value of the asset.
bodypoet , I would agree with everything barbitu8 has said…some very sound advice there.
I would add though that you should be careful should you execute (and not escrow) a QCD without your ex refinancing. Your mortgage very likely has a “Due on Sale” clause, which could be triggered by executing said deed (regardless of whether or not money changes hands…it’s still a “transfer of interest”). What that means is that if the lender so chooses they can call the entire note due immediately. Whether or not they enforce that depends on the lender and the laws of your state, but it can’t hurt to be aware of the possibility.
And if it helps any: there are lenders out there that make loans for home renovation (one of them has a picture of running horses pulling a wagon in their logo…and no, I don’t work for them).
If there is enough equity in the property, it is possible that he could refinance and pay off the first loan while also pulling out the money to fix the place up. Just a thought.
A deficiency judgment can be obtained from real estate foreclosure. It seldom
happens – the most common bid by the note holder is the amount of the loan
payment and authorized foreclosure expense.
There are two reasons why a note holder of a home loan will almost never “underbid” and obtain a deficiency judgment. First, it’s rare a person
would default on a home loan and have anything left. Second, underbidding
and trying to collect a deficiency opens up legal claims by the defaulted party that the note owners illegally manipulated their bid or the later sales price.
We’re so upside-down on the loan–the payoff is far larger than the amount we could sell it for–that if we sold it, we’d still owe the mortgage company a ton of money. Since we don’t have any money to make up for the loss, we basically can’t afford to sell it.
I’d guess that if we got the best possible price out of it, we’d still owe $30K on the loan, maybe more.