Wholesaler · Atwater, CA · Member since 2013 · 161 posts · 27 votes
Many of us here on BP pretty much know the various types of deeds... Warranty Deed, Grant Deed (California), Deed of trust, Quitclaim ect. We also know some the differences between them. So my question is when would we NOT want to quitclaim versus when should we. I know a lady that is currently in a pre forecosure and is letting her house go. She moved out a year ago and the bank has done nothing whatsoever other than send her a NOD. She still owns the house. She may be willing to sign the house to me via quitclaim. I know I am ussuming all the liens and title will not insure it. But what if I do get the quitclaim, I can rent it out right? Also, would the quitclaim deed allow me some leverage to negotiate a deal with the lien holder for a short sale. Finally, what risk what I have with the quitclaim and a house in pre foreclosure.
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
13y
My philosophy is always get the strongest deed you can.
If the lady you mention is willing to give a stronger deed I would take it. However there is nothing wrong with taking a quit claim deed. If she owns the property and she gives you a quit claim deed then you own it and you can rent it out. I am doing a similar deal right now.
For those reading along a quit claim deed essentially says "IF I have any rights to this property I am granting to you those rights I have. However I am making no claim that I even have any right to this property."
That is not a particularly strong deed. And a quit claim deed could be granting you no rights whatsoever.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Ned, are you making any payments on the underlying mortgage, if any? Doesn't a sub2, when you have no plans of making payments on a loan in default open you up to rent skimming federal and perhaps state violations? Isn't that actually a felony? I'm on my IPad so I can't tag Bill Gulley and K Marie Poe, who I know have some knowledge on this.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
I suggest you not do any deed if you want to seek a short sale.
You are not on the note and being in title only complicates matters, more than likely the lender will see you as trying to pull fast one and might refuse to deal with you. If you are not on the note, the lender doesn't need to speak to you.
If the house is underwater begin a short sale. If it isn't go with a straight sale.
By taking title you would put yourself in a refinance position not a purchase transaction so you need to consider your financing position, either way you can't cash out within a year.
Any installment purchase, like a sub-2, puts you in the property subject to the loan, which is about to foreclose, you'd need financing to take out the loan in who knows what time frame, it's wasted energy IMO as you might as well just buy it.
Taking title and then leasing it could really tick off a judge. Clouding the foreclosure process will likely land you in court as your lease, IMO, is not at arms length in good faith as you are obstructing the expected foreclosure, in this deal where the owner has left and not paying the mortgage, it's obvious to a reasonable person that a foreclosure is likely.
Obstructing any foreclosure process as a third party could put you in a position to defend yourself under federal laws pertaining such matters. Any scheme that an owner and/or a third party may enter into to avoid or manipulate the foreclosure process can be a serious matter, that is the case if you take title and put a tenant in there without the ability to payoff the loan and purchase.
If you can't buy it, it's pretty clear that all you are accomplishing is attempting to pull money out as rents for a short period clouding the chain of title.
So, unless you have more to your plan as some exit taking the lender out, I'd say walk away.
Ned is giving good advice as to taking the strongest deed you can get. If you are familiar with the rights and title conveyed with the different deeds, it is never appropriate using a lesser deed of conveyance. As a grantor, a quit claim deed carries less liability but is not appropriate in a sale in any state and can cause title insurance issues. QCDs are probably the most misused instrument in real estate. IMO
If you have the ability to follow through in this, use a Special Warranty Deed excepting out the existing liens. :)
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
13y
Originally posted by Sean Brennan:
Quit claim deeds are by far the most popular here in massachusetts.
Sean Brennan, since I don't see any signs of sarcasm here, I must presume that you really believe that. I highly doubt that quit claims are that popular though. I suggest getting to the local county recorder and actually looking at the deeds. Gather some real statistics to back that statement. Banks don't like making loans when a quit claim is the form of title being given.
Wholesaler · Atwater, CA · Member since 2013 · 161 posts · 27 votes
13y
My exit plan is to buy the house but not for what is owed on the note. I'm just wondering if I take title and do all diligence to work with the lender to remodify the original note or buy the house at a discount, how can a judge get upset went I did everthing posssible to pay back a debt that I did not create. A bank will get nothing from the 220k owed, an owner nothing, a house sitting vacant versus me taking title, fixing the house and renting, owner can walk away with ease and some cash, and bank can get payments with interest or a short sale. I really don't see how my motives seem as if I would be pulling a fast one. Now on the other hand, if I would rent the place with or without taking title and have no intentions to pay back the debt, then yes that's pretty shady. Again in my case everything is in the open, on the table and willing to pay a debt. I believe a bank would be more interested in a debt being settled versus doing a foreclosure. Right?
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
A short sale is your best bet. Some investors feel like if they get on the title, the bank"has to deal with us". Not true. The bank will be much more suspect of the deal if you get a QCD, than I'f you just try a short sale.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
No, I don't think so.
I'm not accusing you of pulling a fast one, I see how you are justifying your idea. It's a bad idea and not the way to go.
I didn't start doing RE last year Arcinio, having been a lender you got my opinion how I would view this and I know what ticks off lenders.
I also know what may tick off a judge.
Actually, renting the property would put you in a better light than taking title, at least the lender will see that a tenant is interested in buying the house in a short sale, that would be a common and understandable situation.
The lender really doesn't care about occupancy, it's another matter to address for them.
What is the advantage of taking title? Why is that important? Why not just do things in a customary manner? :)
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Arcinio: Read CA's rent skimming law. And read the terms of the actual note and deed of trust to see what it says about assignment of rents and whether it's binding on successors or assignees. This is not the place, IMO, to debate the validity or enforcement of those laws, but you should at least read them to know the law and loan security doc say.
Get a grant deed. Title companies and lenders in CA will require new deeds or affidavits if you use a quit claim, so get the right deed in the first place.
I did exactly the deal you are proposing, without renting the property. Took me six months to negotiate the discounted payoff as owner. Rehabbed it and sold it, closed last Friday.
CA Civil Code 2942 says the lender must respond to successors in interest when they make demands for payoff amounts or want a full accounting. But the lender doesn't have to work with you in any other way or negotiate anything with you. I suggesting getting an authorization to release from the borrower and a specific power of attorney if you can. I also suggest keeping the borrower in the loop as you may need their signatures on other docs as well.
First and foremost, be aware that you are working with a borrower in foreclosure (I was not) and there are CA laws that apply and specific disclosures and paperwork required. I suggest you get legal advice so that you follow the letter of the law on that.
Be sure you know and understand what's going on with the borrower's BK. If the borrower's house debt was not eliminated, a foreclosure could have an unexpected negative impact for her. Also, be aware that you might hasten the foreclosure process once you notify the bank that you are the owner. Once the lender is aware the borrower is not in the property, that could trigger a notice of trustee's sale. The Notice of Default that was filed last year on that prop is still in effect. Once the lender files a notice of sale, you'd have less than month to work something out or stall a sale.
Wholesaler · Atwater, CA · Member since 2013 · 161 posts · 27 votes
13y
K. Marie Poe On your deal, I assume you got a grant deed and then negotiated the payoff. You didn't rent in the mean time because of rent skimming laws , right? Also, do you say that lenders must respond to successors in interest (those on title). If so that would be my reason to hold title.
Bill Gulley
Thanks for understanding and giving your feedback. To clarirfy...Renting without taking title puts me in better position? Is that not contrary to rent skimming.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
You're not skimming rents if you rent it and send the rents to the bank under any setoff provision. The tenant usually isn't doing the skimming, the owner does by collecting rents and not paying the lender.
Not totally directed at you Arcinio, but most all newbies, don't get creative until you fully understand usual and customary practices, the basics and legal aspects of the situation.
There is no advantage in taking title just because you can in thsi deal. Now, if it were not a pending foreclosure issue, it would be different, but it is. :)
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Arcinio Arauz:
K. Marie Poe On your deal, I assume you got a grant deed and then negotiated the payoff. You didn't rent in the mean time because of rent skimming laws , right? Also, do you say that lenders must respond to successors in interest (those on title). If so that would be my reason to hold title.
Bill Gulley
Thanks for understanding and giving your feedback. To clarirfy...Renting without taking title puts me in better position? Is that not contrary to rent skimming.
Thanks again all
No, the rent skimming laws had no effect on my decision not to rent the property. I do what I can to avoid being a landlord unless it's absolutely necessary. My game plan had me working out a payoff in less than a year, which I did. Renting was one of a few Plan Bs and might have come into play if that hadn't worked out. Again, make sure you read the law and the DOT/note so you understand how the law and the lender make claims on the rents.
There is no necessarily good reason for you to hold title. When I said lenders have to respond to you when you have a deed, all I meant was that they are required by law to give you a total payoff. That's it. They don't have to accept the past due amount, they don't have to accept monthly payments, they don't have to work out a discounted payoff. In fact, the deed is in violation of the due on sale clause, so it's just one more count towards foreclosure. I got the deed because the borrower wouldn't participate in a short sale. It was take it subject-to or nothing. I was comfortable with the risk and so was the seller.
Rental Property Investor · Manchester, NH · Member since 2013 · 447 posts · 81 votes
13y
Steve Babiak I am an appraiser and I look at deeds daily. You had me second guessing myself so I looked at the most recent deeds for the last 5 properties I appraised and they were all quitclaim deeds. The property types varied and included multifamily, industrial, land, etc.
I just read that quitlclaim deeds in MA are similar to "special warranty deeds" in other states. If that makes any sense.
Felony? Whoa, I hope not. Since this gets away from Quit Claim deeds I am starting the new thread above. Wayne and others I would appreciate your feedback there.
Wholesaler · Atwater, CA · Member since 2013 · 161 posts · 27 votes
13y
I sent an email to the Lender. They said they'll reply within 48 hours.
Depending on what the lender says will determine my play. I'm also waiting for a response from my attorneys in California.
Im jumping over to Ned's topic on rent skimming. I'll keep you posted on this deal.