I have someone that wants to quit deed their home to me. They are under water by about 20%. They owe approx $99k and it should sale for $70k. I am located in Ga and the house is a 3/2 brick home in good condition and located in a nice rural town. They also do not care if the house goes to foreclosure. The owner suggested I take it and could rent it out until it forecloses and they would not care. Would you do this? I have been told if you do a lease and it forecloses the bank could not break the lease. I am not sure if there is any money to be made on this house and need your opinion of any any creative ideas or should I walk away??? The house is also almost 3 hrs from where I live. Thanks for any advice because this is a new one on me…
I am not a lawyer and I don’t even play one on TV, but a quit claim deed transfers the owners interest in the property (if any) to you. I can quit claim deed the Empire State building to you. I don’t have to have any interest in the property but any interest I may have is transferred to you.
If this happens you can rent the house and this of course has no bearing on the mortgage or any liens on the property. When the bank forecloses on the house it is possible that the bank may sue you if it is deemed that you acted in a fraudulent manner when you had the quit claim deed executed and make you disgorge the funds you received. That means you may have to give the bank all the rent you have taken in while you had control of the property.
As long as it will cashflow when rented, I would keep the mortage and insurance and taxes current and keep it until it’s paid for or the market turns around.
If it cashflows enough, I would even pay back payments to bring it current if that’s necessary.
If the original buyer is 10 years into a 30 year amortization schedule, and you could assume their mortgage or “take it over” via the subject to method and you want to “pay down” the mortgage over time … that’s not such a bad idea as long as the place would generate positive cashflow.
But I imagine if you put the house in your name, and in a year the bank takes it back via foreclosure, the bank will have to file on YOU (and maybe the previous owner too) because the property will legally be titled in your name. I wonder if that would appear on your credit record OR if it appeared in the public/court records that could hurt your credit in any form or fashion? I would check with a lawyer on that, first.
I would also be concerned with the validity of a quit claim deed. They are not a very good way of conveying title in Texas - they are only legal here in some circumstances / not ALL circumstances. E.G. I bought a property from an major real estate investor one time, and I couldn’t get title insurance on the property until he went back and got a warranty deed from Deutsche Bank (he probably bought bulk REOs from them). The original quit claim deed he got from them would put the title in his company name, but it would make the deed uninsurable for almost 10 years no matter who it was transferred to and no matter what type of deed they gave someone else (yikes!). That alone tied up the deal for 2-3 months, until the incredibly slow Deutsche bank finally re-issued a “warranty deed without warranty” which a title insurance underwriter did accept (the bank refused to re-issue a standard warranty deed, LOL).
So again I would talk to a real estate lawyer about that type of deed too.