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Is a QuitClaim Deed or General Warranty Deed enough protection?

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angelou

Junior Member
What is the name of your state (only U.S. law)? Texas.
My sister does not qualify to get a loan to purchase a house offered to her. The seller offered to keep the mortgage he is currently paying under his name and my sister to continue making all payments to the mortgage for about 3 years until her credit has improved and she can get the mortgage loan on her own.

The question: Will getting the Seller to sign a Quitclaim Deed or a General Warranty Deed in the presence of a Notary Public and then file the document with the county clerk be enough to protect my sister's investment until she can get her own loan and all documents transfered to her?
 


FlyingRon

Senior Member
What investment?

What you're envisioning is risky on a couple of avenues.

First, the seller deeding it over would be at risk if your sister stopped paying him.

Second, it's risky for your sister. If he stops paying the mortgage, they will foreclose and she'll lose the property even though it is 100% deeded to her.

Third, it's risky for both parties in that if the lender finds out the property has been sold, they may call the loan (they'll usually notice if the fire insurance gets changed to another name).
 

angelou

Junior Member
What investment?

What you're envisioning is risky on a couple of avenues.

First, the seller deeding it over would be at risk if your sister stopped paying him.

Second, it's risky for your sister. If he stops paying the mortgage, they will foreclose and she'll lose the property even though it is 100% deeded to her.

Third, it's risky for both parties in that if the lender finds out the property has been sold, they may call the loan (they'll usually notice if the fire insurance gets changed to another name).
What investment? Taking over all claim to the house. This is not a Lease with option to purchase later on. The seller does not want and cannot afford the responsibility of the mortgage payments.
The seller wants my sister to take over everything including making all payments. No money will go to seller directly, my sister would be making payments to the mortgage company. If the house got forclosed for no payment it would be my sister's fault because she is responsible for making all payments.
Insurance for the house cannot be changed. Insurance has to be in the name of any person listed in the mortgage (My lender told me that).

Would this really be considered "selling of the house"? From what I understand the Seller is giving up all of his claims to the property but he is still responsible for the Mortgage (which is how he intends to help my sister since she cannot get a loan on her credit)

Thank you for your comments, it helps bring up ideas we might not have though of otherwise.
 

FlyingRon

Senior Member
A due on sale clause is still possible.
Deeding it away to an unrelated party is a sale. What do you think it is?
What your lender told you is wrong if they actually said that. Your sister would be a fool to take a deed to a house and not get insurance in her name. If there is a loss on the property guess who the send that check to? Not your sister, I guarantee.
 

angelou

Junior Member
A due on sale clause is still possible.
Deeding it away to an unrelated party is a sale. What do you think it is?
What your lender told you is wrong if they actually said that. Your sister would be a fool to take a deed to a house and not get insurance in her name. If there is a loss on the property guess who the send that check to? Not your sister, I guarantee.
What does "A due on sale" mean?
Im not sure if deeding away a property to someone means that it is being sold to that person, for example, if someone's parent decides that he/she wants to give the property to an offspring but still make payments for that property via a quitclaim deed, or how about a more common example, a couple who is divorcing and one of the two wants to quitclaim to any property they might have acquired together, I don't see either one of my examples as a sale, specially since the "deeder" is still held liable for any owed money.

What my lender said is that insurance can only be on the name of any one listed in the mortgage (obviously my sister would not be listed). I suggested to my sister that if she wants to protect her personal property she would need to get a separate insurance and I also suggested that the person on the mortgage should change the insurance to the one used when you rent your property (I had to do that when I started renting my house). Thank you for your comment on the insurance, when and if we do a contract I'll make sure to state that any recovery from loss to the property through the insurance is also belongs to the person with claim to the property (my sister).

I totally understand that not having the property in your name and making payments on it is a risky situation but as I stated in the OP, my sister is in a situation where her choices are very limited because of her credit.

Does anyone think that a QuitClaim Deed or General Warranty Deed would be enough to protect my sister from the seller?
 

angelou

Junior Member
Bad plan. LOTS of ways this could blow up.
Which ways could this blow up? (Other than the mortgage calling the loan, which was stated above). Any ideas are very welcome, so that I make sure all angles are covered in a contract or maybe leave me no alternative but to suggest a lawyer to my sister.
 

FlyingRon

Senior Member
Go ahead and delude yourself Angie, but if someone deeds away ownership for other consideration (and an agreement to have someone else pay the mortgage is such), it is a sale. There's no other way of looking at it. This isn't a contract for deed, it is an outright sale. The only thing that is happening is a unacknowledged assumption of the mortgage. That there is one of the biggest risks.

Then you spout in with the uninformed suggestions of some supposed loan officer. Well perhaps that is what that particular loan officer believes, but it isn't the law and it isn't universal. I can guarantee you what I said about insurance has tripped up people in the past. I've seen it.

What the lender wants is the person on the mortgage to be listed along with them as lienholder because that is HOW they get guaranteed that they are covered in the case their is a fire or whatever so the house gets rebuilt or they get the money to cover their loss.

It is untrue that the insurance policy can not be issued in the name of the owner of the property.

Neither one of those will protect your sister from anything. What she needs is a warranty deed as well as title insurance which nobody is going to issue to you. Do you understand that what she and the seller are proposing to do is FRAUD?

By the way the other thread you're chatting with shows yet another way she could get screwed. If that seller files bankruptcy the wheels will come off their wink-and-nod arrangement.
 
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angelou

Junior Member
Sir, you are starting to sound rude with your comments and innuendos. If you can't make comments in a civil manner I would prefer taking comments from someone else.

Go ahead and delude yourself Angie, but if someone deeds away ownership for other consideration (and an agreement to have someone else pay the mortgage is such), it is a sale. There's no other way of looking at it. This isn't a contract for deed, it is an outright sale. The only thing that is happening is a unacknowledged assumption of the mortgage. That there is one of the biggest risks.

Then you spout in with the uninformed suggestions of some supposed loan officer. Well perhaps that is what that particular loan officer believes, but it isn't the law and it isn't universal. I can guarantee you what I said about insurance has tripped up people in the past. I've seen it.

What the lender wants is the person on the mortgage to be listed along with them as lienholder because that is HOW they get guaranteed that they are covered in the case their is a fire or whatever so the house gets rebuilt or they get the money to cover their loss.

It is untrue that the insurance policy can not be issued in the name of the owner of the property.

Neither one of those will protect your sister from anything. What she needs is a warranty deed as well as title insurance which nobody is going to issue to you. Do you understand that what she and the seller are proposing to do is FRAUD?

By the way the other thread you're chatting with shows yet another way she could get screwed. If that seller files bankruptcy the wheels will come off their wink-and-nod arrangement.
This post was not meant to discuss the definition of sale so I'll just leave it at that.

Regarding insurance, I think you mis-read what I typed so here it goes again in other words: The insurance to the house MUST be IN the name of ANYONE of the people listed as borrowers in the Mortgage contract that means that if A and B are listed in the mortgage the insurance to the house has to be in either A or B's name in order for the mortgage to accept it. Since my sisters name is NOT in the mortgage contract the insurance CANNOT be in her name.

From what I understand when a person signs a General Warranty Deed they are also guaranteeing that no one else has a claim to the property (guaranteeing the deed) and that if anyone shows up and claims the property the person who signed the General Warranty Deed will take responsibility for fixing the problem. That is what differentiates it from a Special Warranty Deed and a QuitClaim Deed. So for a buyer the best contract to have is a General Warranty Deed and for a Seller it is better to have a Special Warranty Deed which does not make him guarantee the deed.

FlyingRon you also mentioned something about a comment I made in another thread. I would prefer to keep comments from another thread in that thread if you don't mind. Thank you for your comments.
 

FlyingRon

Senior Member
Regarding insurance, I think you mis-read what I typed so here it goes again in other words: The insurance to the house MUST be IN the name of ANYONE of the people listed as borrowers in the Mortgage contract that means that if A and B are listed in the mortgage the insurance to the house has to be in either A or B's name in order for the mortgage to accept it. Since my sisters name is NOT in the mortgage contract the insurance CANNOT be in her name.
I am not misreading anything. Yes of course the lender is going to insist that the insurance be listed in the borrower's name(s). I said that. I also said your sister is a fool for not having her name on the insurance. She will be completely unprotected in the case of a claim. They won't pay her. They'll write a check to the NAMED PERSON on the policy (along with the bank). So if there's a fire, Mr. Fraudulant seller runs off with the money, she ends up with a burned down house, a mortgage payment and if the bank finds out the property is destroyed they'll foreclose. She'll lose everything regardless of what you think the deeds are doing.

In addition she will be 100% open to liability claims unless she also has some coverage for that in her name. They also won't replace her personal belongings, nor will they likely accept claims from her even if they would be covered if made by the named insured.
From what I understand when a person signs a General Warranty Deed they are also guaranteeing that no one else has a claim to the property (guaranteeing the deed) and that if anyone shows up and claims the property the person who signed the General Warranty Deed will take responsibility for fixing the problem.
Sorry, that's incorrect. A quit claim deed says I'm giving up interest in the property without any representation of ownership. A warranty deed does assert the title is owned by the seller (as documented) and provides a course of action against the seller if that is not true. However, the warranty may be useless to you for a number of reasons. The biggest risk is that the grantor could die, become bankrupt, or just be poor enough that he can't "fix" the issues. In this case there's nothing your sister can do. This is why buyers are always advised to get owners title insurance.

FlyingRon you also mentioned something about a comment I made in another thread. I would prefer to keep comments from another thread in that thread if you don't mind.
It was in reference to THIS thread. If I had mentioned your sisters foolhardy and fraudulent behavior over there it would have been inappropriate (and uninteresting). I was just pointing out that you that poster's problem (the seller going bankrupt) was another possible way your sister would get screwed that I hadn't previously mentioned.
 

angelou

Junior Member
Thank you everyone for all the comments, I wish we had a professional here who could answer questions without so much guessing and missinformation. Good luck on your transactions.
 

Zigner

Senior Member, Non-Attorney
Thank you everyone for all the comments, I wish we had a professional here who could answer questions without so much guessing and missinformation. Good luck on your transactions.
My, you sure are sounding like a know-it-all brat.

Good riddance
 
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