Quitclaim in order to keep sale history at market value
Member since 2018 · 41 posts · 2 votes
Quitclaim in order to keep sale history at market value
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes@Jason Washington
Jason, I’m afraid you’re getting ahead of yourself. Educate yourself on real estate basics, I.e. foundations, concepts, legal, etc. before wondering about strategies. Once you really understand the basics much more will become clear
27 Replies
- Investor · Kirkland, WA · Member since 2017 · 310 posts · 271 votes7y
@Account Closed
What is your real question or goal with this?
I'm surely not getting the "scenario", you're asking people to sign over their interest in a property for "a fee" you pay to them, I assume you mean paying less than FMV in cash, in order to benefit you in some other way re other properties you own nearby... and your intent is that you then have title to this new property also? What seller in their right mind would sell/transfer their property to you for say 1% of it's current FMV? Or how am I misunderstanding?
Not to provide legal advice but you should maybe consider more deeply, this might look to some people like something more than you might intend. Are you catching the drift? Would this property owner happen to be elderly? In what state does this property owner live?
- Member since 2018 · 41 posts · 2 votes7y@Tyler Mullen I don’t have a deal. I don’t invest yet. I’m just here asking questions before I do. The reason I ask this question is because when I look at the price history of properties in the tax records I can see the point in time where an investor made a purchase for less than market value. In the world of pros and cons this made me think of 2 cons 1. During the hold and rehab phase that low sale price could bring down the value of a nearby property and potentially hurt them if they wanted to sell. 2. The end buyer of the rehabbed property could look at the tax records and possibly resent the the fact that the investor is making the amount of profit they are. As far as the “right mind” comment and ”elderly” question goes, I don’t understand. Isn’t the person receiving the property via quitclaim the party at risk?
- Member since 2018 · 41 posts · 2 votes7y@Tyler Mullen as for which state... all of them.
- Member since 2018 · 41 posts · 2 votes7y@Tyler Mullen why did you say “1%“ of FMV... how did you arrive at that percentage? Also, is it bad to buy property from elderly people?
- Investor · Kirkland, WA · Member since 2017 · 310 posts · 271 votes7y
Okay as far as your second point. People are free to look back and dislike prices paid or not, if they want to waste their time playing the "coulda, woulda, shoulda" game, that's their own problem, it's got nothing to do with you and nothing to do with the value of property today. If they don't like you're making money as a rehabber and they want the rehab headaches then let them go buy their own rehab. If you're the rehabber your goal is to buy low, rehab on budget and sell high as fast as possible. As far as if your purchase of something you intend to rehab then having a negative effect on valuation of other property you own, isn't that just the breaks? I mean, if you bought... that's a buy, I don't get why it should be excluded unless it wasn't an arms length transaction.
Now back to what I guess seems like your strategy or business plan... So how would this work exactly? Assume I'm the sole owner on a property the value of which I have no idea, but you think is worth approximately $100,000 if listed today, and I tell you I paid $200,000 for it in 2006... So then you find me and offer to pay me $5000 to sign your "documents". So from this point lets say I sign the documents you give me, deposit your check, now what? What's next? Have I sold my property to you or not? In your mind how should it go, what is your end goal?
- 7yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes@Jason Washington Jason, I’m afraid you’re getting ahead of yourself. Educate yourself on real estate basics, I.e. foundations, concepts, legal, etc. before wondering about strategies. Once you really understand the basics much more will become clear
- Member since 2018 · 41 posts · 2 votes7y@Tyler Mullen I don’t understand where you get your numbers from. I would pay them no more than 70% of ARV-repairs. As for negative affects on other properties I own, I’m talking about negatively impacting properties owned by other people. I wouldn’t target a neighborhood with several vacant properties because the property values are probably low. I want a vacant house in an occupied neighborhood. My end goal is to own the property and have the price history stay either the same or go up because my goal is to not hurt the value of the surrounding properties owned by other people and to avoid the potential spite of an end buyer.
- 7yLinda WeygantPro MemberInvestor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
Your concern about buying a property at much lower than the surrounding comps is a baseless fear.
When doing a desk appraisal (or any appraisal really) or any type of market valuation, the professionals throw out price anomalies as something to be disregarded.
The high highs and the low lows do not affect the average or other comps. Those outliers are considered just that - outliers. A smart appraiser might dig in to find out why it's an outlier, but at the end of the day, it doesn't matter.
- Member since 2018 · 41 posts · 2 votes7y@Tyler Mullen In your example, why does the property owner have no idea how much their property is worth... why are you imagining me telling them it’s presently worth half of what they paid... and how come documents is in quotes? Isn’t quitclaim a real thing? Is buying a depressed property at a steep discount, arm‘s length? Also, do you know of any deals where I could get a $200k property for $5k because I would love to. I wouldn’t even rehab it with that amount of equity.
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
Originally posted by @Account Closed:
@Tyler Mullen as for which state... all of them.It's a state-specific question, so you need to specify a state.
In general quitclaim deeds are a very dangerous way to buy a home. I can quitclaim the White House to you and this wouldn't be fraud, since I'm merely transferring to you any interest that I "may or may not" have in the White House. It's transferring title via a Glomar response - "neither confirm nor deny."
You also generally do not get title insurance, which means even if I happen to be the sole owner of the White House, you're on the hook for my IRS tax bill that I might not have paid back in 2013. Same with the Mechanic's Lien from 2014, and so on.
But, in short, send me the paperwork and a $50k cashier's check, and I personally will quitclaim the White House to you. Another $10k and I'll throw in the Golden Gate Bridge. It'll all be notarized and everything. :P
- Member since 2018 · 41 posts · 2 votes7y@Chris Mason I was being serious when I said all of them. I want properties in every state that has them.
- Member since 2018 · 41 posts · 2 votes7y@Chris Mason why not do a title search before accepting the quitclaim?
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
Originally posted by @Account Closed:
@Chris Mason why not do a title search before accepting the quitclaim?Automated title searches are the least authoritative, since it's not backed by any insurance policy. It's just what happens to be, or not be, in ABC Title's existing database.
Even when a physical manual title search is done as part of getting title insurance, things are overlooked all the time. I personally made a title insurance claim just a few years ago.
I don't know the specific law making it thus, but in California gov't entities do not have to file their claim at the county recorder's office for it to be considered valid. I can't tell you how many times the automated title report was clear, but then all of a sudden at the last minute when it's time to issue title insurance, the title company found a litany of crap that the homeowner was behind on (garbage service being a common one, but not the only one).
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes7y
Originally posted by @Account Closed:
@Chris Mason I was being serious when I said all of them. I want properties in every state that has them.I'm dead serious about my willingness to sign a notarized quitclaim deed for the White House and Golden Gate Bridge for $60k, fyi. :P
- Member since 2018 · 41 posts · 2 votes7y@Chris Mason got it. Dont forgo Title search with title insurance just because it’s a quitclaim. Thanks!
Back to the original question... more goes into tax assessed values than the purchase price stated in the deed. In most jurisdictions the assessor will weed out distress sales ... and those entries will not affect the value of the subject property or other similar properties.
Gimer Law516 Reviews- Investor · Kirkland, WA · Member since 2017 · 310 posts · 271 votes7y
@Account Closed
I'm inserting made up numbers in your scenario and asking you to lay it all out beginning to end as clearly as you can so I can try to get from you your description of what you think you want to do because I'm trying to assess what you are thinking and whether or not what you're thinking is above board.
You're saying your goal is to pay 70% or less which implies to me you're thinking you're dealing with normal sellers, so I'm heartened by that and that you responded to my crazy low numbers as absurd. I agree with a previous poster, you would benefit from reading a few of the basic books commonly recommended about REI and listening to all of the podcasts. Listen as 1.5x speed, it won't take that long. Take notes.
You're end goal is to own and flip the property for a profit? I was quite confused by your use of the terms "quitclaim" and paying them a "fee" for that, "...in an effort to keep the sales history at market value and not negatively impact the comps?". I just don't understand why you would do that alone and in exactly that way. Firstly, as Linda said, let the comps be the comps, just worry about your transaction. Second, you're mixing terms and referring to things out of context. A sale is either a sale or it isn't, sale history is sale history then based on sales. Transfer history is transfer history, some transfers are tax exempt, others not. So you need to get clear on your processes and definitions, you don't pre-heat the oven to 25 bananas then filter the blinker fluid into the chakra through the hopscotch, that's just word salad.
Your choice of wording, lack of clarity and completeness made my antenna go up, that's why I seemed to come back curtly. After engaging with you though you seem like you're earnestly learning and not something negative so I'm willing to help.
If by fee you mean you're buying it to flip then why would you not just say buy it with a SWD or at least B&SD and title insurance? Otherwise it makes it that much harder for you to sell later as Chris said.
The other part of why I'm digging in is... and I'm not telling you what to do, just cautioning you to maybe review your entire plan with an attorney as you're hesitant to lay it out clearly in public, which I get that. What you're missing is understanding another risk:
If your plan is to acquire properties exclusively through direct means, ie quitclaims of off market deals, rather than listed properties, then you are going to run into a higher number of sellers that are losing or have lost capacity than you otherwise would with listed properties. Granted it's just a few percent now, but demographics are shifting and the elderly will be selling trillions in property in the next 20-40 years to fund retirement.
This is another reason why realtors, mortgage brokers, title and escrow and on market transactions costs what they are and provide a value for that cost. A reputable agent will meet the client and might be able to tell something is wrong. The agent has a fiduciary duty to their seller so that means among other things sell for the highest price possible. Even if they don't catch the problem with the seller and neglect to get family or the state involved, at least the sale is public, so the argument is pretty clear that whatever final sale price there is is probably pretty close to real FMV as it was open to the public and their agent is supposed to be protecting them.
Again, not telling you how to run your business, but what is your plan for when you buy a property and later the family or DSHS interprets that transaction as possible elder abuse and financial exploitation because the seller was incapacitated, the deal was private and no REI professionals were involved?
How will you explain yourself when this is your whole business plan, ie from the investigators point of view this is how you do every deal and this is your typical client? This is a risk you need to address because although it's not highly likely, a single occurrence of it with an administrative hearing outcome negative to you, that could be a career ending event even if you never knowingly or intentionally abused or exploited anyone. You might know your intentions but the investigators and judges have to reach conclusions based on what they see and hear, they can't get inside your mind.
Sorry for the wordy post, thanks for your patience.
Tyler Mullen, CFE
Originally posted by @Chris Mason:
Originally posted by @Account Closed:
@Tyler Mullen as for which state... all of them.It's a state-specific question, so you need to specify a state.
In general quitclaim deeds are a very dangerous way to buy a home. I can quitclaim the White House to you and this wouldn't be fraud, since I'm merely transferring to you any interest that I "may or may not" have in the White House. It's transferring title via a Glomar response - "neither confirm nor deny."
You also generally do not get title insurance, which means even if I happen to be the sole owner of the White House, you're on the hook for my IRS tax bill that I might not have paid back in 2013. Same with the Mechanic's Lien from 2014, and so on.
But, in short, send me the paperwork and a $50k cashier's check, and I personally will quitclaim the White House to you. Another $10k and I'll throw in the Golden Gate Bridge. It'll all be notarized and everything. :P
And for limited time San Quentin is included for half price at only 25k, normally 50k
- @Jason Washington the answer to your question is yes, you can pay someone to quit claim a deed to you. The answer to question that you haven't asked is, yes, it's a terrible idea. I would accept a quit claim deed from my parents, my wife, and my own LLC, that is it. Friends, cousins, strangers, motivated sellers, I only buy with a warranty deed, with insurance. You, literally, have no idea what you are getting into with a quit claim deed.
- Member since 2018 · 41 posts · 2 votes7y@Tyler Mullen is there word salad on my part? I want to give them money for them to quitclaim their property to me. As for whether or not it’s a sale, I don’t think a quitclaim is a sale (I think this because price info doesn’t show up in the tax records) and you just made it clear that transfer history is separate from sales history so... Also, I’m publically laying my plan out, quitclaim to protect property value and to avoid spite from end buyer. Linda made it clear that I don’t have to worry about the property value con so that one is eliminated. What is an SWD?
SWD is a special warranty deed.
Anybody who wants to know what a property was sold for can always figure it out if they're interested enough.
This is bush league stuff here. End buyers pay what they are willing to pay and most could care less what the wholesaler's profit is.
Gimer Law516 Reviews- Investor · Kirkland, WA · Member since 2017 · 310 posts · 271 votes7y
@Account Closed
I and others have pointed out several pitfalls and reasons why we would not do it the way you described. Why not do something much more straight forward and build from there?
When I first went skiing I did the bunny hill. Double black diamond would have killed me and maybe someone else too. As your first foray into REI and in the spirit of learning, why not house hack or Air BNB a split level or buy a duplex, live in one side and rent out the other?
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