can a buyer do a dead of trust and keep a lien on title paying purchase price minus the lien and quit claim over to the new buyers?

Asked by Michelle Roethle, Belfair, WA Thu Oct 21, 2010

buyer wants to pay 65000 dollars for a home. Their is a 14,000 dollar home equity lien on title. Can the home be quit claimed into the new buyers name and the purchase price can then be 14000 dollars less without the lien needing to be paid at closing?

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Kary Krismer, Agent, Renton, WA
Fri Oct 22, 2010
This is really a legal question, but one that real estate agents knew very well back in the 70s. Back then and before it was very common to either buy a property "subject to" the existing deed of trust or to actually assume the existing deed of trust. The new deed of trust would either be for the net amount, as you describe, or would be a "wrap around" deed of trust. The difference would be whether the new buyer would pay the original loan directly or through the seller. That decision has risks, because who ever is not paying that first mortgage is basically assuming the other party is doing what they should be doing, and might learn that they weren't paying the loan when they receive foreclosure paperwork.

This all changed when the banks paid money to the politicians in Washington DC, who passed what's called the Garn Act. That federal act made due on sale clauses in deeds of trust enforceable (they are not generally enforceable under Washington law). If you want to read more on that, Google Krismer and Garn Act.

Anyway, long answer to tell you this is a legal question, and to know whether you can do what you want to do you'll have to have an attorney review the existing deed of trust. Chances are though there is a due on sale clause in the deed of trust or note.
1 vote
Jirius Isaac, Agent, Kenmore, WA
Fri Oct 22, 2010
Would you really go with an answer that someone gave you here online. Go talk with a real estate attorney that does escrow.
0 votes
Patrick Thies, Agent, Anytown, IL
Thu Oct 21, 2010
Probably not. Liens need to be satisfied when transfering title.
0 votes
Jean Bradford, Agent, Silverdale, WA
Thu Oct 21, 2010
Hi, Michelle,

If the $14,000 home equity loan is assumable (not likely), it's possible, but don't even think about a quit claim. If the buyer pays off the $14,000 at closing with the seller carrying $14,000 in "seller financinging", that might be possible. I'm assuming the buyer has $51,000 in cash??? Don't let this one get's best to get that buyer to a lender ASAP.

Good Luck,
Jean Bradford, ABR,GRI,CRS,CRB
Managing Broker Associate
John L. Scott RE
Silverdale, WA
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