# Can a 'quit claim deed' serve as collateral?



## KCM (Sep 26, 2005)

I have a family member who has fallen into a tough financial situation. She lost her job when the company shut down and closed the doors. No more company, no more job!

She's not been real diligent in actively trying to find other work, and remains unemployed (except for part time). She has fallen behind on her auto loan, her furnace loan, and some credit cards. She has managed to stay current on her mortgage.

She has quite a bit of equity in her home, but cannot get a loan due to no job and being behind on some of her financial obligations. I'd like to help her financially without taking a home equity loan on my own home. Somebody mentioned a 'quit claim deed' as a potential option, where she could file a 'quit claim deed' over to me for a specified amount of equity she has in her home. Then, I go and take out a home equity loan in my name on the portion of her home that she has 'quit claim deeded' to me.

Does anyone have experience with a 'quit claim deed' on the equity in a home? Is the grantee liable for the mortgage payment if the grantor defaults? Is the grantee liable for property tax payments or insurance payments? Or are all these things still the sole obligation of the mortgage holder (grantor)?


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## KCM (Sep 26, 2005)

Just to clarify a bit, I really want to help her. But I do NOT want to enable her. I'm willing to loan her money but only if she puts up collateral. 

I know there is some risk, but it seems this 'quit claim deed' option might be the best option for all concerned. She is a family member and I trust her completely. I'm thinking if she filed a 'quit claim deed' over to me for the amount I'm willing to borrow and lend her, and then have her sign a personal promissary note detailing pay back, she'd be using her own equity to pull herself back up to financial stability. I'd only be the catapult. 

I'd like to hear from people who have had experience with being granted home equity via a 'quit claim deed'?


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## Wildwood Flower (Aug 26, 2006)

I don't know about "Quit Claim Deeds" but here's my take on it...I am in a similar situation with a close family member, by the way.

The lady is not able to pay the bills she has right now. Therefore, she will not be able to pay another bill--and will especially NOT feel obligated to pay a personal friend or family member before other obligations--like the car, the furnace, and the credit cards.

Sounds like she's headed for bankruptcy unless she does something RIGHT NOW! Your helping her is only prolonging the agony unless she starts saving herself.

Here's what happened to us: Family members got into hot water, couldn't make their mortgage payment of $2500. We gave it (loaned) it to them. They recovered. They did NOT change any of their spending habits or priorities, spent (IMO) a whole lot on other things and did NOT pay us back.

Now, 1 year later, same story--different day. Except that it's being hinted that we co-sign for a note at our bank to "get caught up". (They have absolutely NO credit!) We love these kids dearly, but we CANNOT go under for them. It's time for the "school of hard knocks" to kick in. 

I hate to bring this up on a public board...but it's sure been on my mind...and my SURVIVAL INSTINCTS are kicking in.

We're in for hard times in this country, and we need to hold our ground financially...stay out of debt. It's taken me and DH our whole lives to NOT owe anybody...and I plan to keep it that way.

"TRUST EVERYBODY...BUT MAKE SURE THE CARDS ARE CUT!"


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## mistletoad (Apr 17, 2003)

I'm thinking the only thing this would do is make her mortgage immediately payable in full - most real estate transfers do (and the quit claim is a transfer).


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## copperkid3 (Mar 18, 2005)

In the school of Life, we either learn the cold, hard facts early or we will pay dearly later. #1.) If you want to keep family/friends; don't loan ANY money that you can't afford to say "ADIOS" to........because more than likely in your scenerio, you won't be seeing it again. #2.) Rest assured that if you ignore Rule #1 and then feel any resentment to those you've lent money to and who have failed to repay the loan, you have no one to blame but yourself! :nono: And you have also have proved that Rule #1 is true.....you will no longer be friendly to either family/friends. Either they will resent you for "pressuring" since you are afterall "family".....or "friends" don't let a little thing like money come between them do they? Forewarned is forearmed.


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## Dec429 (Dec 29, 2005)

Quitclaim deeds transfer or "quit" any interest in real property. The grantor may not be in title at all, so the grantee cannot assume that the grantor has any real interest to convey. However, if the grantor were, say, married to the owner of the property, signing and recording a quitclaim deed in favor of the spouse would transfer any interest the grantor may have in the property to the spouse.

If she filed a quit claim deed, she no longer has any ownership in the property. Thus, whoever the property is transferred to (in this case, you), is responsible for any and all monies owed, i.e. taxes, mortgages, insurance ,etc.


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## mowrey1999 (Aug 25, 2005)

You said this family member had fallen into a tough financial situation and was already behind on a several loans, auto, furnace, credit cards but as far as you know up to date on the house still, You also say she hasn,t been very diligent on finding another job only working part time, it seems to me if being behind on the credit cards, furnace, auto ect, isnt having an effect on her getting another job than the possibility of you giving her money to get caught up will just prolong whats going to happen any way, the only good thing right now is your not involved and wont loose any money and will still have a family member that you talk to , I would personally say we have just to many of our own bills and sorry we can,t help, or if she hasnt asked for help I sure wouldn,t volunteer any since it only seems to tear familys apart in the long run ,my advise never loan money to anyone and the worst ones are the ones closest to you immediate family members ,Maybe she needs to think about selling the house , taking the equity and paying off all her debts, and start over with no debt , get her credit back in order and build from there, instead of putting a burden on others start fresh, just my thoughts


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## KCM (Sep 26, 2005)

Please excuse me for being abrupt, but I am not asking for advice on whether this is a good plan or not. Nobody needs to convince me what I should or should not do for another member of my family. I want to help my family member, and I most certainly will. I am just looking at potential options right now and a personal friend mentioned to me that it might be far more advantageous for all concerned if she could put up her own home equity up as collateral. I'd never heard of 'quitclaim deed' before, and not even sure if the 'quitclaim deed' is possible as I've described it. That is why I've asked for help here so I can learn more about 'quitclaim' options.


I have not mentioned how my family member is related to me. It is not my wife nor my children. But let's say it was my daughter and she was in a bit of financial difficulty right now. She does work part-time and has an income, just not enough right now to meet all her financial obligations. She realized he situation too late and got behind on car loan, furnace loan, and a couple of credit cards.
Things could change quickly as some of her job leads may deliver fruit soon. We're thinking short term here, no more than a year at most. Let's say her home is valued at $100,000 and she still owes $50,000 of that on her mortgage. This leaves her with $50,000 equity in her home. She cannot get a personal or home-equity loan right now due to being behind on some other payments and no full time job. 

We could give her the money but that is the last option we even want to consider. It would cut into our own 'nestegg'. We could go take out a personal loan in our name and then have her sign a personal promisary note to us. But that would provide no collateral of her own. We would prefer she put some of her own equity as collateral into whatever financial help we provide. And to be honest, that is how she would prefer it also. Instead of being handed a silver platter, she would prefer a helping hand. 
Together, we have gone over her finances with a fine-tooth comb. We've decided that if she had $10,000 cash right now, she could pay off her car loan, her furnace loan, and have money left over to apply to her credit cards. This 'consolidation' of bills would cut her monthly payments in half, which would help her tremendously as she climbs out of a financial ditch.


Again, I am not looking as to whether this is a good plan or not. I know everyone is just trying to be helpful and I appreciate the concern. But instead of opinions or advice, I am looking solely for facts about 'quitclaim deeds'. That is why I asked if anyone had experience with 'quitclaim deeds'.

Can a person do a 'quitclaim deed' for only a portion of their equity in their home?


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## Dec429 (Dec 29, 2005)

KCM,

See my post #6.


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## KCM (Sep 26, 2005)

mowrey1999 said:


> You said this family member had fallen into a tough financial situation and was already behind on a several loans, auto, furnace, credit cards but as far as you know up to date on the house still, You also say she hasn,t been very diligent on finding another job only working part time, it seems to me if being behind on the credit cards, furnace, auto ect, isnt having an effect on her getting another job than the possibility of you giving her money to get caught up will just prolong whats going to happen any way, the only good thing right now is your not involved and wont loose any money and will still have a family member that you talk to , I would personally say we have just to many of our own bills and sorry we can,t help, or if she hasnt asked for help I sure wouldn,t volunteer any since it only seems to tear familys apart in the long run ,my advise never loan money to anyone and the worst ones are the ones closest to you immediate family members ,Maybe she needs to think about selling the house , taking the equity and paying off all her debts, and start over with no debt , get her credit back in order and build from there, instead of putting a burden on others start fresh, just my thoughts


Hello Mowrey,

I appreciate the concern, I really do. But this is family and we are going to help. She never asked, not even once. My wife and I have discussed this over the past couple of weeks. She is single, has no husband or children. We can help, but we are not going to 'enable' her. She needs a helping hand, not a hand out. She has too much equity in her home for us to sit back and allow it to be lost due to a difficult financial year for her, and some poor job seeking decisions. This is NOT a long term problem of hers, she has ALWAYS been one of the more financially responsible of any of our family members. We will not allow her to fall further behind so that she might feel she'll never be able to dig out. We are definitely going to help her one way or another, even if we have to buy her house from her for what she owes. But that will be our very last option.

I do thank you, and EVERYBODY else here who has offered well-intentioned advice about loaning money to family members. We understand all of that, we've seen too many other situations where this has gone bad. We know this could turn bad, but we have every reason to firmly believe the chances of losing in this situation is very remote. We would be willing to lose the money if it came to that in order to keep our relationship with this family member. My wife and I are extremely forgiving people, we've already discussed potential disasterous 'what-if' scenarios. If we didn't do this already, then we'd be financially irresponsible ourselves.

Just trying to find out as much as I can about 'quitclaim deeds'.

Thank you.


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## tchan (Nov 28, 2006)

My DD is assuming my loan on my house as I do not need the house anymore and she wants to invest some of the money she saved while in Iraq and have somewhere to call home when she gets out of the Army in three years. To do this I had to quit claim the house to her. In this county I know I could not quit claim just part of the equity, I had to quit claim the whole house to her. In a weird situation right now, she actually owns the house but I own the mortgage until the paperwork is signed. She is responsible for this years taxes but I am responsible for the mortgage. It is nerve racking even though it is my daughter and the title company is diligently working on getting all the paperwork finished. My DD can use the house right now as collateral on a loan.
I don't know if this helps you any nor do I know if in your county you can only quit claim part of the equity. Call the county recorder in your county to find out. It is pretty simple to file a quit claim and I got the form free from the mortgage company. It only cost me $14.00 in filing fees and took a week.


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## KCM (Sep 26, 2005)

Dec429 said:


> KCM,
> 
> See my post #6.


My understanding is that the transfer of interest via a 'quitclaim deed' only transfers ownership equity. 
It is also my understanding that the 'quitclaim deed' does NOT transfer the financial obligations.


http://www.thinkglink.com/Quitclaim_Deed_Does_Not_Change_Mortgage.htm

"When the homeowner transfers title to the home and does not pay off the mortgage or deed of trust, the ownership of the home transfers but the old homeowner remains responsible under the original mortgage or deed of trust."


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## KCM (Sep 26, 2005)

tchan said:


> My DD is assuming my loan on my house as I do not need the house anymore and she wants to invest some of the money she saved while in Iraq and have somewhere to call home when she gets out of the Army in three years. To do this I had to quit claim the house to her. In this county I know I could not quit claim just part of the equity, I had to quit claim the whole house to her. In a weird situation right now, she actually owns the house but I own the mortgage until the paperwork is signed. She is responsible for this years taxes but I am responsible for the mortgage. It is nerve racking even though it is my daughter and the title company is diligently working on getting all the paperwork finished. My DD can use the house right now as collateral on a loan.
> I don't know if this helps you any nor do I know if in your county you can only quit claim part of the equity. Call the county recorder in your county to find out. It is pretty simple to file a quit claim and I got the form free from the mortgage company. It only cost me $14.00 in filing fees and took a week.


Thanks tchan.  That is what I'm wondering right now, whether we can 'quitclaim deed' only a percentage of her home which I can use as collateral for a home equity loan. I am not sure who to call. I appreciate your suggestion. I will call the county recorder tomorrow.

Also going to call a title insurance company, and my attorney. We should ultimately find out everything we need to know by end of business tomorrow (or Monday at latest). We also will call her mortgage company and find out if a 'quitclaim' will make the entire mortgage due and payable.


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## Dec429 (Dec 29, 2005)

the property already has a lien on it. A quit claim deed does not relieve the debt on the property.

Someone, you or her, is still responsible for the mortgage, and it is a first mortgage she already has on it, so it has priority over any second mortgage. If she does not make the first mortgage payment, your lien is insubordinate. First mortgage reposseses. You lose.


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## KCM (Sep 26, 2005)

Dec429 said:


> the property already has a lien on it. A quit claim deed does not relieve the debt on the property.
> 
> Someone, you or her, is still responsible for the mortgage, and it is a first mortgage she already has on it, so it has priority over any second mortgage. If she does not make the first mortgage payment, your lien is insubordinate. First mortgage reposseses. You lose.



Yes, understood. Thanks.

First mortgage would not repossess. If it got where she could not keep up with her mortgage payment, we will buy the house. No way are we going to allow all that equity to go back to the mortgage holder. Not a chance.

We're looking for info on 'quitclaim deeds'. How do they work? What are the options? Can a 'quitclaim' be given for only a percentage of the home, i.e. Can she grant a 'quitclaim deed' to us that is only for the percentage of her home ownership that equals the value of her equity?


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## suburbanite (Jul 27, 2006)

KCM--

If she is at the core a reliable worker and economic unit, then better than a quit claim would be to cosign a loan with her. Yes that makes you responsible for the payments for a time, but if she can use your support of paying the mortgage a few months plus the loan money to get all her *other* debts paid off, she may then be able to get credit fully in her name to pay off the loan you cosigned. Then at least she'll be flying straight on her own and you can work out how she'll pay you back for the months of support (if the loan in her own name won't cover that immediately).

My family would use gifts in this circumstance. What goes around comes around--whenever one falls on hard times the others help and it all pretty much evens out.

Our aggregate project right now is to get my sister into a property as she's the only one of us who hasn't bought a home and is still renting.


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## Dec429 (Dec 29, 2005)

A QCD transfers ownership of the whole property, not just a percentage.

Here is a link to a website that hopefully will help you.
I am in the mortgage industry, so feel free to pm me if you have other questions.
good luck!

http://homebuying.about.com/od/glossaryqr/g/quitclaimdeed.htm

Don


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## quietstar (Dec 11, 2002)

My friend, you need to involve a good real estate lawyer and reread Don's post about the purpose of a Quit Claim deed which would normally convey what ever interest she has in the property to you. Almost certainly this act will provide grounds for the holder of the 1st note to declare the full balance due and payable as the result of an unapproved equity sale. Look for a "due on sale" clause and see that lawyer. Good luck....Glen


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## suburbanite (Jul 27, 2006)

Oh, another thing you can do if you have enough money, is sit down with her and her credit cards, and go through cancelling every single one of them with you paying off the balance of each, tallying up to just under $12,000 so that your gift to her is not taxable. If you do this you need to make sure that every single card you pay for is *cancelled* by her. Don't pay if she doesn't cancel the credit card and swear to you not to reopen an account there.

Leave her with a single card active, and freeze it in a block of ice so that she has to wait a few hours for the ice to melt, or take a hammer to the block, before she can use it, to thwart impulse buys. The point of leaving a single card open with a zero balance is for emergencies--like paying for a visit to the ER after an uninsured injury.


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## Wildwood Flower (Aug 26, 2006)

I would like to apologize to you for jumping to conclusions about your family member. It just goes to show you--JUDGE NOT!!! I am so sorry.

I applaud you for helping your daughter under these circumstances. 

I would tend to agree that co-signing a note would be a much better idea.


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## KCM (Sep 26, 2005)

suburbanite said:


> KCM-- if she can use your support of paying the mortgage a few months plus the loan money to get all her *other* debts paid off, she may then be able to get credit fully in her name to pay off the loan you cosigned. Then at least she'll be flying straight on her own and you can work out how she'll pay you back for the months of support (if the loan in her own name won't cover that immediately).


I hadn't thought along those lines. It sounds like a fair option, and we will consider it. Thanks.



suburbanite said:


> My family would use gifts in this circumstance. What goes around comes around--whenever one falls on hard times the others help and it all pretty much evens out.


Not all our family members are responsible or helpful. It would be nice if they were because then all we'd need is take up a collection. If everyone always tried to put the other's interest before their own, there is nothing that couldn't be accomplished. The most cohesive family units help each other when the needs arise. This year it might be one in need, the next year another, and so on. You hit the nail right on the head when you say "What goes around comes around."



suburbanite said:


> Our aggregate project right now is to get my sister into a property as she's the only one of us who hasn't bought a home and is still renting.


My thoughts are with you. Best Wishes.


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## KCM (Sep 26, 2005)

Dec429 said:


> Here is a link to a website that hopefully will help you.
> 
> http://homebuying.about.com/od/glossaryqr/g/quitclaimdeed.htm
> 
> Don


Thanks for the great link Don.


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## KCM (Sep 26, 2005)

Wildwood Flower said:


> I would like to apologize to you for jumping to conclusions about your family member. It just goes to show you--JUDGE NOT!!! I am so sorry.
> 
> I applaud you for helping your daughter under these circumstances.
> 
> I would tend to agree that co-signing a note would be a much better idea.


Apology fully accepted, but you didn't need to. I already 100% believed that everyone was trying to be helpful. Thanks.

I'm going to consider all options between now and this time next week. We'll not make a decision until the week following next.


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## Dec429 (Dec 29, 2005)

KCM said:


> Thanks for the great link Don.



Anytime! Glad to help out!


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## citilivin (Mar 21, 2006)

States are different, but here is my take. I would have her sign a second deed of trust and just be able to take over the first if she would default. This is a simple process and you can easily work out the terms. Just make sure the deed is recorded. This wil protect all parties. Also, she would not be able to refinance again until you release the second. This will protect your interests.


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## fantasymaker (Aug 28, 2005)

Nope you cant do what you want to do. 
The nature of a quitclaim deed is to put the world at notice that the grantor has no interest in the property. You cant say I have No interest in this much of the property but some interest in this percent of the undivided whole. Its just not possable.
Two posable ways to go about it.
There are lenders who will finance the house even without her having a job.There may be some downsides to closing costs and interests rates but it can be done.
Second there may be a chance of finding a lender who would give her a second morgage on the property.


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## fantasymaker (Aug 28, 2005)

You need to be clear about one thing a quit claim deed *DOES NOT TRANSFER ANYTHING* In spite of what some here are saying it just doesnt. all It does is say that someone doesnt have any interest in something. 
I dont own the brooklyn bridge but I can leagaly give you a quitclaim deed to it be cause it says im giving up what I own .in that case nothing.The party thr quit Claim is going to is responceable for securing thier own claim to the property in some way.


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## KCM (Sep 26, 2005)

Made a few phone calls today and seems there are more legal issues to sort through with a 'quitclaim deed' than I originally thought. 

I did call the County Recorders Office today and in my area it is absolutely legal to 'quitclaim' just a percentage of the property. The property owner can 'quitclaim' any percentage of the property that he or she desires. 

I also called the title company and found out that they will help with the entire process if we so choose. 

Still need answers to many details before deciding whether to proceed with the 'quitclaim' option. Next week will discuss situation and potential options with attorney.

Thank you very much to everyone who has offered helpful advice and information. It is appreciated.


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## KCM (Sep 26, 2005)

citilivin said:


> States are different, but here is my take. I would have her sign a second deed of trust and just be able to take over the first if she would default. This is a simple process and you can easily work out the terms. Just make sure the deed is recorded. This wil protect all parties. Also, she would not be able to refinance again until you release the second. This will protect your interests.


Thanks citilivin, this is the first I've ever heard of a 'deed of trust'. We will look into that option.


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## chickenmommy (Aug 24, 2004)

Wait a minute, couldn't she do a stated refinance on her home? That would get her credit cards and other obligations paid off, and maybe a little cash in her hand and your name and credit rating wouldn't be mixed up in any of it. If she is current on her house payment and has any equity built up she should be able to refi without stating how much her income is, where she works, nothing, just her word that she will pay the loan. With a little extra cash that could help to make the payments while she looks (seriously this time because her mortgage depends on her being serious) for a job.


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