Buying a property on a Quit Claim Deal, need guidance?

I'm doing my first quit claim deal. I've only done warranty deed purchases, so this one is first. What do I need to look out for? What are the pitfalls?

Bill Gulley

Real Estate Investor · Springfield, Missouri

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Jul 16 '10, 02:51 AM

Hi, what are you talking about? I'm lost, unless if it's a pre-foreclosure or something, you don't buy and accept a quit claim deed.....can you explain your deal?

Karim Shah

Real Estate Investor · Farmington Hills, Michigan

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Jul 16 '10, 03:02 AM

the property i'm looking at has backtaxes and a unpaid water bill. The buyer brought the property at a tax sale and wants to sell on a QCD.

Jon Holdman

Real Estate Investor · Wheat Ridge, Colorado

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Jul 16 '10, 03:40 AM

Buy title insurance, or at least pay a title company to do a property title search. If a title company refuses to insure the quit claim be very cautious.

Jon Holdman, Flying Phoenix LLC

Bill Gulley

Real Estate Investor · Springfield, Missouri

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Jul 16 '10, 03:41 AM

I suggest a Special Warranty Deed, so as not to screw up other title matters and simply exclude the issues you are taking the property "subject to", see your closing agent. Good luck, Bill

Steve Babiak

Real Estate Investor · Audubon, Pennsylvania

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Jul 16 '10, 05:18 AM

Your seller is looking for a sucker to take a Quit Claim Deed rather than a warranty deed; YOU will possibly be STUCK with anything and everything that has been unpaid by ALL prior owners.

Getting Title Insurance is a good idea, but be certain that the things you have been told about (backtaxes and unpaid water) don't appear as exceptions in your title policy. Paying off these things should come from the Seller's side of the transaction at closing, i.e. the seller should net less money in proceeds due to the seller paying off these encumbrances.

Bill Gulley

Real Estate Investor · Springfield, Missouri

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Jul 16 '10, 05:42 AM

Hi, Steve is right, if that is your deal. If the seller said I will take 10K and you take the outstanding bills, then you can go with 10K and except out bills or, make your sale contract 10,500 and the seller nets the 500 on the sale price and you pay them, as Steve mentioned.

I agree that you need title insurance, only liens and encumbrances shown of public record will be included and the title search only shows those items of public record, not all liens that could arise or bills like outstanding utility bills, if the owner is held responsible in your state after a transaction. Taxes are brought current, and it is customary that is done by a credit by the seller and paid later by the buyer when due, but other arrangements can be made.

As Steve pointed out, the seller might trying to pull one. Get title work and a policy. If there is an aspect of any title concern or a warranty that is to be excluded by a seller, as in REOs, use a SWD, never a QCD.

Roger Kelley

Surveyor · northglenn, Colorado

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Jul 16 '10, 06:39 AM

Agree with all above- remember, it is legal to sell the Brooklyn Bridge with a Quit Claim Deed. All they are selling is any right or Title they MAY have in the property.

Ibrahim S

Real Estate Investor · Union, New Jersey

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Jul 16 '10, 09:45 AM

Why is it important that the HUD shows the encumbrances be paid by the seller?

Steve Babiak

Real Estate Investor · Audubon, Pennsylvania

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Jul 16 '10, 09:52 AM

If they aren't taken out of the seller's proceeds, then the buyer will end up paying at some point down the road.

Ibrahim S

Real Estate Investor · Union, New Jersey

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Jul 16 '10, 10:05 AM

Thanks Steve but I got that. I was just wondering why it was important to show the encumbrances being paid by the seller as opposed to the buyer.

Karim Shah

Real Estate Investor · Farmington Hills, Michigan

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Jul 16 '10, 10:43 AM

Is there anyway you can do a full title search yourself online?

Karim Shah

Real Estate Investor · Farmington Hills, Michigan

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Jul 16 '10, 10:44 AM

Is there anyway you can do a full title search yourself online?

Karim Shah

Real Estate Investor · Farmington Hills, Michigan

69 posts
1 award
50 influence

Jul 16 '10, 10:44 AM

Is there anyway you can do a full title search yourself online?

Karim Shah

Real Estate Investor · Farmington Hills, Michigan

69 posts
1 award
50 influence

Jul 16 '10, 10:45 AM

Is there anyway you can do a full title search yourself online?

Karim Shah

Real Estate Investor · Farmington Hills, Michigan

69 posts
1 award
50 influence

Jul 16 '10, 10:51 AM

Is there anyway you can do a full title search yourself online?

Karim Shah

Real Estate Investor · Farmington Hills, Michigan

69 posts
1 award
50 influence

Jul 16 '10, 10:53 AM

admin please can you delete the multiple posts. Sorry my browser crashed.

Ibrahim S

Real Estate Investor · Union, New Jersey

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Jul 16 '10, 12:01 PM

Karim it depends on your state and county and whether or not their records are online. Here a "full title search" would include a lower court search (judgments, lis pendens, etc.), an "upper court search" (bankruptcies, federal liens, etc.) as well as up to date municipal charges against the property. I think it's always a good idea for investors (and realtors) to know how to do "preliminary" title searches (PTS) to know if (or confirm) a particular property has equity or not. But by no means would I rely on my 10 years of experience performing these searches to buy a property via quit claim deed. Perform the 'PTS' and then hire a professional and purchase the insurance policy.

Steve Babiak

Real Estate Investor · Audubon, Pennsylvania

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Jul 16 '10, 12:47 PM

Originally posted by Ibrahim S

Thanks Steve but I got that. I was just wondering why it was important to show the encumbrances being paid by the seller as opposed to the buyer.

They just need to be paid. Since the OP was the buyer, the advice given was intended to be for his benefit, hence having the seller pay those. It is also more customary for the seller to be responsible for paying those, since the buyer had nothing to do with those liens being attached to the property. If I were buying, I would make the seller pay from their proceeds - remember that in most transactions the buyer is the only party bringing money to the closing, so it ends up getting paid from money that the buyer provides of course. But in the end the buyer will have to pony up less money by having the liens show up on the seller's side.

Edited: 07/16/2010 at 12:55PM by Steve Babiak

Steve Babiak

Real Estate Investor · Audubon, Pennsylvania

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Jul 16 '10, 12:53 PM

Karim,

Ibrahim has given you a good answer regarding online searches. You can certainly do a preliminary search yourself. Knowing what to look for and where to look for that are some of the challenges you will face being new to that task. I have posted elsewhere regarding some of the due diligence I perform prior to attending sheriff sales; you can search for some of those posts. For example, you will have to know how to match a mortgage with a satisfaction or release; also, there will be mortgage assignments that get thrown into the mix to further confound things.

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