QuitClaim Deed form husband to wife
Real Estate Investor · State College , PA · Member since 2009 · 594 posts · 173 votes
Does anyone know of any concerns to look for if a spouse has transferred interest to a spouse via a quitclaim deed? I saw a video that warned of this transaction. It suggest the grantor could still have interest. Almost like they gave equitable title, but retained legal title. I would just like to know if there is any red flags to look for in this type of transfer. I would like to assume if they did still have an interest the law firm would put them on notice of a foreclosure proceeding and said interest would be lost by way of the foreclosure.
Thanks.
First, I understand why you're trying to check title, just understand while you think you might be doing a title search, you're not, you're not running the abstract of title, and there are many issues that have been unmentioned here. Here is just one:
A couple gets a divorce, the wife gets the house and the husband is to pay her X dollars as part of the divorce settlement. This can only be found by reading the dissolution of marriage ordered by the court.
Husband coneys title by quit claim deed. Fine, the uses of that deed is proper in most jurisdictions, Texas does have some odd title carve out in title insurance, like not insuring mineral rights, but, whatever.
You check and you see it was a divorce. 99.9% of novice examiners don't read the decree.
Then the wife gets behind, the husband is still on the note, they go to foreclosure.
There is a prior lien! It's a judgment by the divorce court against the husband to pay x dollars, the decree is prior to the QCD and becomes a general lien ordered by a court.
You need a satisfaction of lien from the wife to clear that lien!
Another issue, a QCD grants equitable and legal title held, at the time the deed is granted. If the parties are still married, the next day, the grantor still has a marital interest and gains an equitable interest in the assets owned by the spouse and a legal standing upon the death of the spouse to legal title, depending on the distribution of the estate under state law. Just as Matthew pointed out, these tactics are used by amateurish credit dodgers, the transfer is a sham and the interests can be taken back or "clawed back".
Another matter missed, a court appointed administrator, for an adult, executing a QCD does not squash the claims of an incapacitated adult with heirs existing at the time the court finds the adult unable to act for themselves under state laws. So, who executed that deed and when the deed was made has a bearing on future title claims. There are situations where one may not waive or grant all of their rights.
At a foreclosure sale, my last issue is with title, that's because most title matters can be cleared up personally or, if needed, by partition of interests or by finding that claims of creditors are not pursued in a timely manner, or that statutory limitations apply and releases of liens were not filed properly. Simply take that into account in your bid price, if it's a great deal, title matters can be worked out.
Seems like the OP is passing on properties that don't appear to have clean title and in reality, he can't determine if title is insurable. If you're really concerned, have a title company issue a title commitment prior to the sale, repeat customers can get it for free, others might pay $50 if you can't buy it. There is no reason for investors to play abstract attorney. :)
In your example what would be a likely outcome. Wouldn't that fall back in the attorney who sent out the notice of sale.
It depends in the state you live in. Here in California, it is a community property state. If a married couple purchases a home, but only one them qualifies for financing, the ineligible borrowers (spouse) has to deed off. If they later divorce, the non borrowing spouse can make a claim to an interest in the property because it wasn't voluntary quitclaim. The lender made it a condition of the financing at the time of purchase. Not only that, if they also contributed to mortgage payments, property taxes, etc., their case is even stronger.
@Bill Gulley - good advice. One thing I would add, the judgment against the husband you referenced in your post is a non-issue, if it wasn't recorded.
@Account Closed pointed out.
Public auctions, foreclosure, tax sales and estate auctions sold as is without warrant of title needs more attention. This is where $50 is well spent with a title company. I look at title from the date property was acquired by the last owner and go forward. Liens and satisfactions of liens, deeds filed, run the names as to any legal actions, a divorce means reading the decree, law suit means looking at the findings. Death means looking at the estate settlement if heirs acquired the property other than husband and wife. Title passes automatically in joint tenancy, I'm generally not concerned.
Call the building permit folks and see if any building permits were filed, if so what and when, you're looking for potential material/workman's liens. While you're there, look for any violations of code and if they were cued. Often I'll call local utilities for outstanding unpaid bills, I also ask for a utility usage report, I can see if the place holds heat or air conditioning, perhaps a faulty water line.
Foreclosure wipes away most liens by public notice, but there are "super liens" that may remain. General liens by the order of court, taxes, child support may be, each state has a priority of liens you'll need to understand.
Title issues can be resolved, if there seems to be some issue on the surface simply take the cost of an attorney and court costs into account in your bid.
As a Trustee, I've sold property at foreclosure (at the time you don't need to be an attorney in Mo., check before any note holder gets any ideas). Pay attention to the other bidders:
Do you recognize any title company documents in their possession if only one property is being sold at that time, you may assume they had title work done, a better assumption if they bid, IMO. Another note, eyes and ears open, mouth shut about the subject property. You may hear rumors to discourage bidding, (illegal if not true). Another tip, a Trustee may not be alone out there, again, mouth shut.
If you're overly concerned about pitfalls, you're missing out on deals! Learn to accept risk, the greater the risk the greater the reward, you just need to learn how to manage risks not require they be eliminated. Good luck :)
Thanks all. Lots of great information picked up here. To answer you question Bill, about acquisitions I have never had a tie issues. Although I did get hit with a 13k sewer bill that was not on record, which I was not aware of. I have gotten hit with a bunch of municipal liens but was aware of.
Had a problem where the deed prepared for me did not contain all the lots of the parcel, so the old owner keep getting tax bills and I only got some of the bills. The scary thing was the lot that was missing contained the improvements. Yikes.
Thanks all. Lots of great information picked up here. To answer you question Bill, about acquisitions I have never had a tie issues. Although I did get hit with a 13k sewer bill that was not on record, which I was not aware of. I have gotten hit with a bunch of municipal liens but was aware of.
Had a problem where the deed prepared for me did not contain all the lots of the parcel, so the old owner keep getting tax bills and I only got some of the bills. The scary thing was the lot that was missing contained the improvements. Yikes.
Phone calls to utilities and building regs as mentioned will help you find any hidden or unrecorded liens. Read legal descriptions carefully and be sure you know where you are, LOL :)
by the way the house that had the missing a lot, I went ahead and got Alina credit against that house and the title company mussed it. so basically the bank gave me a line of credit against a vacant parcel of land
In the story you gave, is there anything she could have done to protect herself. I ask because you referenced the quitclaim deed, and how it removed title but not the debt.
Thanks.
You wrote the following:
You check and you see it was a divorce. 99.9% of novice examiners don't read the decree.
Then the wife gets behind, the husband is still on the note, they go to foreclosure.
There is a prior lien! It's a judgment by the divorce court against the husband to pay x dollars, the decree is prior to the QCD and becomes a general lien ordered by a court.
You need a satisfaction of lien from the wife to clear that lien!
I don't understand this one part. As you stated the husband is still on the note, the mortgage being foreclosed on goes back to when the couple got the house. It exists before the QCD as well as the said general lien. Yes, or am I missing something.
Thanks.
Bill you also wrote the following:
Another issue, a QCD grants equitable and legal title held, at the time the deed is granted. If the parties are still married, the next day, the grantor still has a marital interest and gains an equitable interest in the assets owned by the spouse and a legal standing upon the death of the spouse to legal title, depending on the distribution of the estate under state law. Just as Matthew pointed out, these tactics are used by amateurish credit dodgers, the transfer is a sham and the interests can be taken back or "clawed back".
So what your saying is the husband conveyed his interests to the wife in anticipation of a judgment against him, or even after a judgment had been made against him. He does this to limit his worth and give the judgment creditor as little as possible. Of course the conveyance is illegal because it took place after the issue came about, and the creditors can get at the house. Hopefully I am right this far into it. So your point is that I need to research the husband as well, and make sure any judgments against him occur on a date well after the QCD had been recorded. Yes?
Thanks again.
You wrote the following:
You check and you see it was a divorce. 99.9% of novice examiners don't read the decree.
Then the wife gets behind, the husband is still on the note, they go to foreclosure.
There is a prior lien! It's a judgment by the divorce court against the husband to pay x dollars, the decree is prior to the QCD and becomes a general lien ordered by a court.
You need a satisfaction of lien from the wife to clear that lien!
I don't understand this one part. As you stated the husband is still on the note, the mortgage being foreclosed on goes back to when the couple got the house. It exists before the QCD as well as the said general lien. Yes, or am I missing something.
Thanks.
No, sorry for the confusion.
My bad I think, say the wife owes the husband, he deeds the house over, but he is still a creditor and the wife is a debtor under the judgment from the divorce. While he deeded the property over he still has a general lien in his favor. He could come back and say he holds a subordinate lien on the property. He might step in on the foreclosure as a lien holder, slim chance. Being on the note, he could take other actions as well.
But, the wife loses her legal title from the foreclosure, his lien is also wiped out. At foreclosure if the property sells for more than what the lender is owed, the husband may make a claim, also the wife still has an equitable interest to claim excess amounts owed the lender, this may be by suit in "courts of equity" depending too on the state being a lien state or title state.
As a buyer at foreclosure you're on the other side of the fence, these issues don't effect you.
They would if you were buying the property from her. Hope that's cleared up.
Happy New Year! :)
Crystal. Thanks for sticking with me on this one :)
Happy New Year to you too. Time for pork and sauerkraut.