Quit Claim Inquiry.
I bought a house with another indivdual about a year ago. Due to certain circumstances the other individual was trying to refinance to remove my name, however, now he is tellign me that the only option for me to be removed from any responsiblity of the house would be to file a quit claim. What does a quit claim have to offer a 1/2 owner like me, who wants to rid herself 100% of the house, the title and any financial obligations. Your advice and knowledge will be greatly appreciated.
Re: Quit Claim Inquiry.
As the previous answers have pointed out, being an owner (by your name appearing on recorded title) and being a borrower (by signing a promissory note) are two entirely separate and different concepts! Well, nearly so anyway, because if you aren’t an owner, most lenders won’t let you borrow.
Giving up ownership will not take your name off the promissory note.
On the other hand, the risks and other bad consequences of remaining a co-borrower on the loan may not be quite as bad as you might fear. If the loan or loans on which you are a borrower or co-borrower are “purchase money” loans, i.e., were used to buy the house (as opposed to second loans, refinancing loans, home equity lines of credit, etc.), then the lender(s) can’t come after you personally for a deficiency if there is a default, foreclosure, and the foreclosure doesn’t raise enough to pay off the loan(s). Therefore, your risk is pretty much limited to having a foreclosure on your credit report. This alone is pretty bad, but not nearly as bad as having a judgment against you for tens of thousands of dollars!
You should insist that the loan be paid off (by refinancing with the other individual as sole borrower) as part of the deal for your quitclaiming your interest. The refi and the quitclaim should be handled through the same escrow for your mutual protection.
You should get tax advice – you may have a capital gain or loss as a result of surrendering ownership.
You didn’t discuss who paid the down payment, how title is held, whether the house has appreciated or depreciated, or whether there is much or any net equity in the house now. The tax consequences might depend on one or more of these factors; also, your ownership percentage isn’t necessarily 50%; it could be determined by the relative amount you contributed to the down payment.
Finally, there is a legal tool available to unhappy co-owners if they cannot reach a buy-out or joint sale agreement voluntarily: the lawsuit for partition.
Bryan Whipple
Bryan R. R. Whipple, Attorney at Law
P O Box 318
Tomales, CA 94971-0318
Re: Quit Claim Inquiry.
The quit claim would not rid you of financial obligation, unless the lender agrees in writing to take you off the loan. It would divest you of title, however, and you would lose any rights in the property. Also, the other individual might face a taxation issue.
Robert F. Cohen
Law Office of Robert F. Cohen
P.O. Box 15896
San Francisco, CA 94115-0896
Re: Quit Claim Inquiry.
If you bought the house and your name is on the loan, the last thing you want to do is relinquish title by signing a quit claim deed, as that will NOT get you off the loan and you will still owe the money for the loan but have NO interest in the house! If the other individual wants to buy you out, they can do so by getting a new loan which pays off the old loan wherein you are one of the borrowers and THEN you can give him a quit claim in return.
Judith Deming
Deming & Associates
5334 E. Chapman Avenue, Suite 100
Orange, CA 932869