Home Selling in Great Falls>Question Details

W_mt, Home Seller in Great Falls, MT

My brother wants to quit claim the house supposedly having my nephew as the owner for two years will make it possible to get a loan in two years

Asked by W_mt, Great Falls, MT Mon Feb 1, 2010

Help I need Quit claim for deed advise
Two years ago my dad died leaving the house us five kids to be split equally 5 ways. We have not done anything with the house yet. Last November one of my nephews declared bankruptcy, lost his home and moved his family home to live with my brother. My nephew would like to buy the house but can’t get financing, we said he could rent the house for two years and then get financing and buy it. My brother wants to quit claim the house to him now because he says supposedly having my nephew as the owner for two years will make it possible to get a loan in two years. I am the only one who thinks this is a bad idea. Please tell me EVERYTHING that could go wrong here. To me this is such a bad idea on so many levels, I can’t understand what is wrong with my siblings thinking. Please advise, Thanks

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Absolutely! I agree with Melanie and more. If you Quit Claim the home to him, you have just given him ownership of the home outright. If something happens down the road, and doesn't it always?, and he decides not to pay or get a loan, he owns that home and you would have to take it to court to try to have him removed. Definitely look into a Contract for Deed for a short term such as 2-5 years. This will allow him time to build his credit and get a loan for the home at a later date. A CFD gives him an ownership interest in the home that builds over time the more he pays on it. I would definitely recommend having the CFD drawn up by a licensed real estate agent or even better, by a real estate attorney. The cost is generally about $400 for the atty and then do the closing through a local title company AND have the title company manage the CFD for you. He would make his payments to the title company each month and the title company would make sure the taxes and insurance are paid and send the balance of each payment to you. They will also record the deed when the CFD is initiated and once it is paid in full or file a Quit Claim Deed to remove the nephew from the home if he defaults on the CFD. The title co cost is approx $800 and I would split the cost.
1 vote Thank Flag Link Wed Feb 3, 2010
Ok, well if you do decide to quit claim deed it to him, you are just giving it away and he doesn't have to pay you anything legally because it is his house. Check out the info the others talked about with a contract for deed and whatever you do, get legal advice and go through a Title Company to close whatever deal you do. Good Luck
1 vote Thank Flag Link Wed Feb 3, 2010
W_mt I think we are wondering if we have helped answer some questions for you and maybe now there is a direction an expert could help you with. I agree at this point we are all just making assumptions so just proceed with care and if you feel like sharing any further thoughts I think you can see there are several of us out here to point you in the right direction.
1 vote Thank Flag Link Wed Feb 3, 2010
Amber, because W_mt has not posted again to explain the exact circumstance, we are all making giant leaps here. However, what his brother might be thinking, although it doesn't have to be done right now, is that if the nephew is on title he would be a seasoned owner of the house, so the purchase can be as a refinance instead of a purchase. Of course we also don't know the ownership percentage he is going to have, what amount the loan will be based on, whether the brother is going to gift his share to his son, who knows.
1 vote Thank Flag Link Wed Feb 3, 2010
He now owns this home as much as I do but he has no obligation for the mortgage, I OWN the mortgage and the home and he just owns the home and has no obligation to pay my mortgage. I Quit Claimed him onto the deed. Anyone can do this on thier home. That's what it sounds like your brother wants to do. It sounds like he has good inetentions, but he is misinformed about what this will actaully do for the nephew. A Contract for Deed id your best option, it gives protection to you the seller that the payment will be made and it gives your nephew an ownership interest in the home. If you choose to go this route, I HIGHLY recommend you use and attorney to write up the document AND you do the closing at a title company here in Great Falls. I would recommend Jeanne at First American Title as she did mine. I know this is alot of information and I did not put near as much in here as I wanted to but I hope it helps. If you have more questions, please call me any time as I am here in Great Falls. 799-1564.
1 vote Thank Flag Link Tue Feb 2, 2010
Let's get back to the basics though...Quit Claim just adds him to the deed whether the other siblings are removed or not. This does not give him any advantage when it comes to getting a loan as he is not getting the credit advantage of being on the current mortgage. The only way he is going to improve his credit to purchase the home in two years is the same way all the rest of us do it, by paying off old debt and opening a few accounts and paying them, to build his credit. If he truly wants to purchase the home and has good intentions of doing so, do a contract for deed for 2-5 years to allow him time to fix and build his credit then get a loan. Even though it won't show on his credit, it will help to show credit worthiness in 2 years, along with his other efforts to improve his credit, and may increase his chances of getting a mortgage. A loan is based on credit, not time in a home or if you own it or not. If you just add him to the deed, he could just claim ownership and not pay a dime and then you would have yo go through legal channels to have him removed with no guarantee that you would win. I have done the same thing on my home...my room mate couldn't qaulify for the loan but I added him to the deed. Continued again...
1 vote Thank Flag Link Tue Feb 2, 2010
You are absolutely correct! There are NUMEROUS problems that can arise here. First and foremost, Quit Claiming the home to him does not mean that in 2 years he can get a loan. All that does is remove everyone else(or whoever is giving the Quit Claim) from the deed. What that also means is whoever is giving the Quit Claim, no longer has an ownership interest in the home. That does not remove anyone from the MORTGAGE and that is the big issue. You can have as many owners on a home(the deed) as you want but it's the name on the mortgage that actually gets the CREDIT advantage. If there isn't a mortgage, all you are doing is giving the nephew FULL ownership of the home and he never has to get a mortgage! Ever! Back to if there is a mortgage...I am ASSUMING there is one. If there is, there are certain Montana statutes that state that after a certain period of time, the mortagage has to be transferred into the name of the executor or whoever has been given ownership-check this with your probate attorney as he or she will know this information. This may have already been done on your part. It's hard for me to tell you all that could go wrong here without knowing if there is a mortgage, ...continued on separate email ran out of room
1 vote Thank Flag Link Tue Feb 2, 2010
Is your brother suggesting that each of your siblings signs the home over to his son, or does he just want to add him to title, so that he can get cash out as a refinance after 2 years? The other thing to consider is that in 2 years the rules for time since bankruptcy could change, it could become 7 years as some of the banks have in their guidelines now. If, however, he wants to gift his share of the house to his son, leaving your names on but replacing his name on title with his son's, that might be different. You would still want to be the ones in charge of making sure that the property tax and homeowner's insurance are paid.
1 vote Thank Flag Link Tue Feb 2, 2010
I agree with you and the others here that the idea of quit claiming the property to your nephew is a bad idea.

If you nephew wants to buy the house and the five kids all agree, fine. Let him buy it now--except he's not able to. So let him lease (lease-option, as Dan suggests) now and if he still wants to buy it in two years, and is able to, great. You sell to him.

You brother appears not to have a full understanding of home financing. Whether your nephew owns the home for 1 year or 10 years won't have anything to do with him getting financing. There are plenty of people out there right now who bought homes 3-5 years ago and want to refinance but can't. Sometimes because there's not enough equity, sometimes because their credit isn't sufficient.

Your siblings want to somehow provide a home for your nephew. That's good. But you can accomplish exactly the same thing by renting the home to him, or doing a lease-option. And 2 years from now, he'll be just as able to buy as he would be able to finance it. Or just as unable.

And turn the clock ahead 2 years. Suppose he isn't able to finance the home. What then? If he's leasing, that's OK. But if he already is the owner, you either leave him in there, or you foreclose. Neither option is particularly attractive.

If you all don't care about any revenue from the house, if you're just willing to give it away, then that's a different matter. Sell the house to him for $10. Then you all just walk away. Eliminate the expectation that you may see some revenue when he gets a loan for it in 2 years.

I'd suggest the siblings all sit down with a lawyer or accountant to lay out the situation and get feedback from a professional. They don't seem to be taking your views on the matter seriously enough. Perhaps they'll listen to a lawyer or accountant.

Hope that helps.
1 vote Thank Flag Link Tue Feb 2, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
W_mt Doug is going in the right direction. The other thing is that if you do a land contract sale or contract for deed he will have monthly payments to make to the owners. That would give a small income stream and the ability to regain control of the property if he does not pay as agreed.

The worst thing that could happen if you sign a quit claim deed is that he does not even say thank you for the free house. Once you quit claim the property over he is now the legal owner.

On a land contract sale after a few years he could just do a refinance instead of a purchase money mortgage under the current rules to buy out you and you your siblings.

This is not legal advice please check with an attorney in your state.
Web Reference: http://www.Find1Home.com
1 vote Thank Flag Link Tue Feb 2, 2010
I believe quit claim gives him title and he won't need to pay for it. Now if he can successfully show that he's capable of renting in it for 2 years instead this shows rental history and improves his chances of getting a loan to properly purchase the home.

heres the wikipedia defintion of "quit claim deed"

A quitclaim deed is a term used to describe a document by which a person (the "grantor") disclaims any interest the grantor may have in a piece of real property and passes that claim to another person (the grantee). A quitclaim deed neither warrants nor professes that the grantor's claim is valid. By contrast, the deeds normally used for real estate sales (called grant deeds or warranty deeds, depending on the jurisdiction) contain guarantees from the grantor to the grantee that the title is clear. The exact nature of the warranties varies from jurisdiction to jurisdiction. Quitclaim deeds are sometimes used for transfers between family members, gifts, placing personal property into a business entity, to eliminate clouds on title, or in other special or unusual circumstances.

The most common use for a quitclaim deed is, in a divorce situation, where one party is granting the other full rights to, and eliminating any interest in, a property in which both parties held an interest. If a husband and wife own a home and divorce, and the wife acquires the home in the decree, the husband would enact a quitclaim deed to eliminate interest in the property. Quitclaim deeds are also typically provided in cases of tax deed sales where property is auctioned off to pay outstanding tax debt. The auctioning body is usually a local government, which claims no interest in the property whatsoever, but is selling it only to recover the back taxes.
1 vote Thank Flag Link Mon Feb 1, 2010
I understand your family wanting to help out a relative, but be careful here. I think you are confusing two terms which sound similar, but are very different. I think what you are wanting to do is a "Contract for Deed" not a Quit Claim Deed. An attorney can draw this contract up for you which will allow you to sell to your nephew now ( I would get a substantial down pament) and to re-finance (and pay you off) in a couple of years once a bank will touch him again. This would be a much safer route for you, since you could still take the house back if he decided to stop paying you. Best of luck to you and feel free to contact me if I can be of any other assistance.
Web Reference: http://www.DougMaas.com
1 vote Thank Flag Link Mon Feb 1, 2010
My name is Melaine Loy, Broker of Real Estate Salutions of Great Falls and I see red flags here. First and foremost, I would like to tell you and the rest of your family to contact an attorney for some legal advice. Just because you quit claimed the property to him wouldn't mean he has shown any ability to pay anything and puts him in no better place than he is now. You can quit claim a property to anyone but the mortgage is what matters. If there isn't a loan which may be the case, the same stands true. The only person getting credit for (good credit), as far as a credit score goes, would be the one who has the mortgage in thier name. He would be able to show his history of paying rent for 2 years to a financial institution looking to finance him, but this wouldn't require a quit claim deed and any renter could show this. I would suggest selling the house now to stop the possibility of future arguements that can tear your family apart. One last thought, doing business with family and friends is usually not a good idea. Feel free to contact me and best of luck.
1 vote Thank Flag Link Mon Feb 1, 2010
Once you give him a deed he will own the place. You will have given up all rights to it. If you have nothing saying you get money from the house he could keep it and never pay. Can you imagine trying to foreclose on him?

To be fair to all involved you could give him a rent or lease to own. Then in a few years he could apply the rent to the purchase price.

The worst case scenario. He owns the place. Does not pay taxes on it. Loses it for the tax bill and everyone loses.
1 vote Thank Flag Link Mon Feb 1, 2010
Whoa. Red flags are waving all over on this. Can't get financing, but he is going to pay you? Quit claim and no legal ownership anymore? Even a Contract for Deed has risks; especially if he defaults. There might also be issues with implied tenancy and getting him out, if you decide to sell the home to someone else later. Call a real estate, and possibly an estate, attorney before doing, or signing, anything.
0 votes Thank Flag Link Fri Mar 14, 2014
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