Quitclaim Deed After Short Sale in Illinois

15 Replies

Hello,

Before reaching out to an attorney, I would like some feedback, please.

About two months ago we purchased a short sale in Illinois. This was a cash transaction. We updated the unit - mostly cosmetic, rented it, and eventually will get a mortgage on it.

This property is on my name only and I would like to transfer it to my wife's name through a quitclaim deed, as we want to maximize the number of mortgages per SSN.

Being a short sale, I am required to wait a few months before I can sell it. However, do I need to wait if I want to transfer the deed?  Do I need title insurance for the quitclaim process?

Thanks,

Frank

Hi Frank,

Is there a resale restriction in your deed? If so, the terms for transferring should be laid out. Typically it is no resale for 30 days. You could always deed her onto the property and then just put the mortgage in her name (leaving yourself on the deed). I would need to see the resale terms you agreed to at the time of purchase.

A quit claim deed is an uninsured transaction meaning there is no title insurance. 

You may way want to check on any arms length addendums you signed for the short sale.  The majority have some type of of 90 day+ title transfer restriction.

@Frank S.

If your wife wants a Conventional mortgage, she will need to be in title 6 months before she can do the mortgage since this would be considered a cash out refi.  You can start the process after 5 months and then close at 6 months.

So transfer the deed, and make sure you get it recorded right away.  That's the date that starts the clock is the recording date.  No title insurance is needed.  Just the deed prep + recording fee.

Hope that helps!

@Frank Sanchez Check if any of the paperwork you signed ( approval letter, arms length affidavit, affidavits ( these are from the servicing company ) had a restriction or if there is one on the deed. Would need to check both spots.

General rule of thumb is a 30 day deed restriction and at times there is a 120 day deed restriction for a transfer of more than 120% of the sales price.

You should consider holding all Real Estate in an Illinois Land Trust with a business entity you control as trustee. This provides privacy, avoids public records searches and when you pass away it walks around probate and delivers your asserts to your heirs without the need of an attorney.

A land trust is a strategy not a complete tool box. You still need plenty of insurance and all of the other bells and whistles that go with this business. Think of a land trust as the moat around the castle. It won't keep them all out but it discourages those who don't want to get wet and nasty from crossing in the first place.

Eventually you will need a better strategy than my wife's SSN versus mine. Join your local REIA and get access to other lenders, or join Illinois REIA online.

@George Skidis  

Land Trust - I am very interested in this. I read a little about this before and put it on the back burner. It's time to address it. Can you recommend a book?

Insurance is a must, absolutely. This business is risky.  We will increase our umbrella after this new property. 

@Zack Karp  

If I am not mistaking, a delayed financing will not require the six month waiting period. We are ok with limiting the LTV to what we put into the property - if we are lucky. It depends on the appraisal.

@Minna Reid  

I have to look at the paperwork. It could've been 30 days limitation. 


All, thanks for the feedback. 

@Frank S. delayed financing is not possible if you were the only purchaser and you wish to do the loan in only your wife's name.  If she had been on the purchase deed with you, then yes she could do delayed financing.

Originally posted by @Zack Karp :

@Frank Sanchez delayed financing is not possible if you were the only purchaser and you wish to do the loan in only your wife's name.  If she had been on the purchase deed with you, then yes she could do delayed financing.

This is a very good piece of information. We were going to wait a few months, but if that's the route to follow, I have to do this soon, as you indicated. 

What if I get the mortgage and after that do a quitclaim? Could the quitclaim trigger the due on sale clause? 

Thanks, 

Frank 

@Frank S.

I have a sneaky feeling that you are not working with a rockstar loan officer who understands investors.  Like, really understands.  If you were, they would have coached you on what to do and how not to get stuck.

If you get the mortgage in your name, then that doesn't solve the issue of putting the loan under your wife's name only.  And to your point, the quit claim deed after the mortgage is pointless, you're still obligated on the loan.

Sounds like you need a crash course.  Feel free to PM me if you need any further help.

Yes, putting the mortgage on my name doesn't accomplish our initial goal, I got distracted.  Regardless, will that trigger the due on sale clause? I don't have a lender for this property.  

Our goal was to put this one under my wife's name.  We didn't do it from the beginning, because we felt negotiations were easier  under my name with this particular seller, and we needed the seller to sign the contract ASAP before a higher offer was submitted. It was fast, but worked out very well for us. 

My wife could wait for the next one, I guess. Otherwise, if I transfer the deed, we will have to wait six months - plus another month or so for the loan (?). So, this will put us near December. The market is heating up fast here and we may want to pull some cash out of this one in case something good appears again. 

I'll give you a call to discuss. 

Thanks, 

Frank 

Attorney Mark Warda has written numerous Wiley house publishing books on Land Trusts. I actually wrote "The Ins and Outs of Land Trusts" a few years ago. That was when I traveled and spoke to REIA groups. I also own the web site Mr Land Trust .com and someone else copyrighted it so now I am in a legal dispute and have taken the site down until it is resolved. They got the copyright after I spoke at one of their groups and commented on their Facebook page. I also collected a few course along the way that have forms in them. Pat Tarr and a few others. Feel free to call.

Originally posted by @George Skidis :

Attorney Mark Warda has written numerous Wiley house publishing books on Land Trusts. I actually wrote "The Ins and Outs of Land Trusts" a few years ago. That was when I traveled and spoke to REIA groups. I also own the web site Mr Land Trust .com and someone else copyrighted it so now I am in a legal dispute and have taken the site down until it is resolved. They got the copyright after I spoke at one of their groups and commented on their Facebook page. I also collected a few course along the way that have forms in them. Pat Tarr and a few others. Feel free to call.

This is greatly appreciated.  I will do some research on my end and will follow up.

Frank

Alright, it took a while to figure this out - at least partially.  I have a lot more to research on this and I greatly appreciate the comments and feedback. 

As expected there are a tons of people making money by selling bogus liability protection packages out there.  Liability protection attorneys, investors, CPAs, and trust companies are comprised of efficient salesmen.  They have to keep the lights on,  I can't blame them, it's their business.   However,  some of them  -not all-  push products many investors don't need and fail to explain the real risks they will be facing.  Some investors walk away with a false sense of security and a lot of unnecessary overhead work and costs.  The good old RDPD gullibility syndrome

First and foremost, good insurance and good management is key to minimize risk.   LLCs and land trusts can be good tools, but they may not achieve what most people think they do.  Even with LLCs a court might "pierce the corporate veil", there are many scary examples out there.  It's upsetting to read the false promises of privacy, liability protection, etc.  given my many gurus.   

We would like to avoid probate, so a land trust can be a good mechanism. Sure, I can create a a land trust and pass the interest to a LLC as beneficiary to protect my credit score and to reduce - not to eliminate - some risk. Regarding privacy, the land trust can hep a little if properly structured with nominee trustees. The land trust by itself gives zero protection, it's a revocable trust.

Then, another question is the cost, is it worth it? With more research, I bet this will be a fill-in-the- blank process. Then, rinse wash and repeat.

To answer my concern above, if I wanted to put the property under my wife's "name", I could created a land trust and afterwards pass the beneficiary to her or to a LLC that that she controls. This doesn't get recorded and the bank won't enforce the due-on-sale-clause. We don't need this, as I can direct who will take care of the property as part of the land trust. In our case, I will pull another mortgage and set up the land trust. Then, repeat the process when she purchases one.

As I said, there is much more to learn on this. This is what makes this business fun.  Also, one can find great knowledgeable people willing to help without putting their personal interests first.  

Now, back to the books.

Thanks!

Frank

Land trust will keep you from being able to refinance conventional. 

The short sale surely has a restriction from transferring the deed as a sale.

You may be able (read every page from the bank/seller) to change to a Living Trust which

is a family transfer deed NOT a sale deed. Don't just handwrite the quitclaim and file it,

get an expert to help you. It is easy to get the legal description incorrect and cloud the title