I'm being asked by a potential landlord to accept a quick claim interest of 1% which will convey back to them at the end of the lease.

Asked by Brad Hatter, Atlanta, GA Fri Sep 13, 2013

If the property is foreclosed on before the end of my lease will I be legally responsible in any way for any outstanding debt obligations tied to the property?

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14
Bill McGoldr…, Agent, Atlanta, GA
Fri Sep 13, 2013
I actually doubt that Bruce's suspicions are right. Although it is possible, it seems more likely that they just want to circumvent the rental restrictions.
I strongly agree with Lee that it's quite likely that you will end up facing a lot of resentment from your owner occupant neighbors.
Doesn't seem worth the risk to me.
1 vote
Thank you for your feedback. I agree its not worth the risk so I have pulled my application and have instructed my agent to look for another property.
Flag Fri Sep 13, 2013
Bruce Ailion, Agent, Marietta, GA
Fri Sep 13, 2013
Brad,

There is no good reason benefiting you for doing this. Even if the rental rate offered is too good to be true, I suspect it is.

This sounds like the owner is going to try to get an owner occupant loan, using your credit and ownership to gain more favorable mortgage terms than if is was a non-owner occupied loan. If they are a good criminal, they will do this without your knowledge and although you may only have a 1% ownership in the property you will be liable for 100% of the debt. Sadly there remain mortgage brokers and attorneys, they are caught every month willing to scam people like you and mortgage lenders for a fast and easy cash haul.

It's a good way to screw up your life, don't do it.
1 vote
Bill McGoldr…, Agent, Atlanta, GA
Fri Sep 13, 2013
I just noticed Jason's reply and I think he is probably right. They are looking to establish some ownership on your part so that you will qualify as an owner occupant in order to get around the complex's rental restrictions.
I suppose there is the possibility that you could be held liable for the HOA dues if the owner does not pay them.
1 vote
Thank you and yes its to legally get around a rental restriction. I don't want to have any financial risk if the property moves into foreclosure other than walking away from it and having to find another place to live.
Flag Fri Sep 13, 2013
Bill McGoldr…, Agent, Atlanta, GA
Fri Sep 13, 2013
I believe the term you wish to use is a Quitclaim.
In that document the party states that he or she is not asserting that they have an interest in the property, but if they do, they are giving it to another party. It is not a guarantee of title, but a granting of one's interest in a property to another party (whatever that interest turns out to be).
If they are looking to quitclaim an interest to you, that shouldn't give you any liability on the loans but I would definitely talk to an attorney before I signed anything. This is very unusual. I have never heard of it before and I have managed a lot of rental properties.
1 vote
Thank you and yes, I meant quitclaim. I know I'm not responsible per say for the mortgage, but I read somewhere that a bank will name all parties on a deed in a suit if property mortgage is defaulted on.
Flag Fri Sep 13, 2013
j, Agent, Atlanta, GA
Fri Dec 6, 2013
Junior, Home Buyer
It is only an issue if you are a sex offender and was Federally convicted of said crime. Therefore, the answer is yes. And it is best you leave the state when parole is complete....you are not wanted here.
0 votes
Teresa Huber, Home Buyer, Marietta, GA
Sun Nov 17, 2013
Brad why are you renting? I bet I know.
Teresa Huber
0 votes
Richard Burt…, Other Pro, Alpharetta, GA
Sat Sep 14, 2013
I agree with Bill. A large number of properties have rental restrictions and this is one way of getting around them.

As Bruce and others have stated , their is no potential upside for you.
0 votes
Pat & Steve…, Agent, Westlake, OH
Fri Sep 13, 2013
If you are considering doing this, consult an attorney who handles residential real estate matters ASAP. I have never heard of this type of request. It would be best for you to look for a rental elsewhere.
0 votes
Bill McGoldr…, Agent, Atlanta, GA
Fri Sep 13, 2013
Under new federal guidelines, banks now have to accept any leases that are in place at the time of foreclosure. So if you were living there under normal lease terms, you would be allowed to remain in the home until the end of the lease, as long as you continued to make timely lease payments to the new owner (the bank or another new buyer).
If you are an owner of the property (even 1%), you would not be afforded those same protections.
If the HOA contests the occupancy status, they could start a legal proceeding that would include you as a party to the action.
I know there is a very low inventory of available properties, but surely you can find something more legit that this.
0 votes
Lee Taylor, Agent, Decatur, GA
Fri Sep 13, 2013
Get away from this.

At best, you'll just be considered a nuisance neighbor if you participate in this fraud.

At worst, you'll get sued and you'll probably not enjoy living there.

Bruce is dead on...
0 votes
Bill McGoldr…, Agent, Atlanta, GA
Fri Sep 13, 2013
Hi Brad,
I see your follow up note and I agree that in the event of a foreclosure action, or any lawsuit, the plaintiff will usually file against any and every person that holds title.
0 votes
Jason Pless, Agent, Atlanta, GA
Fri Sep 13, 2013
Brad,

I'd be willing to bet you are trying to lease a high-rise unit in Midtown or Buckhead and they don't have a leasing permit. It's probably even priced a couple of hundred dollars less than its comps just to find a tenant quicker. This is a ploy that agents and owners have been using more and more to get around the whole lack of having a leasing permit.

I'm not saying it's a good or bad thing. I will say I personally wouldn't do it because you almost need an attorney to read the language in the actual transaction paperwork and I'm just not that quick to take leaps of faith. If you have a decent budget and reasonable expectations, I would probably move on. Or at least have an agent/broker represent your own interest and go in there with you on the transaction. That way, you know you are receiving a "fair" lease. If the other side writes it, who do they really represent?

If you are not working with YOUR OWN agent, please give me a call at 770-820-4319. If you do have an agent, they should already be in your ear on this. Best of luck and you never know- not saying it's a bad idea, just saying to be careful and know what you are doing or find someone that does.

Cheers,

Jason Pless
Leasing Director, PalmerHouse Properties/ ForLease Atlanta
0 votes
Jeffrey K. C…, Agent, Hiram, GA
Fri Sep 13, 2013
If it were me i would run. Contact an attorney to cover yourself.
0 votes
Rodney Mason, Mortgage Broker Or Lender, Atlanta, GA
Fri Sep 13, 2013
You would need to contact an attorney for any legal advice.
0 votes
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