Quit-Claim Deeds!!(Semi-Long) - Posted by Derek(NC)

Posted by Irwin on January 24, 1999 at 23:31:43:

The owner hasn’t been able to pay $520 a month. How do you expect him to pay $660? Let me guess. He’s had a bad run of luck, but that’s over and now everything is straightened out, and he’s not likely to ever miss another payment. Sure. Ask around to other investors and find out what their default rate is on deals like these. My offhand guess is that it’s about 80%.
If you want to do small profit deals by pulling people with no equity out of foreclosure, you’ll run out of money long before you run out of “deals” to buy.

Quit-Claim Deeds!!(Semi-Long) - Posted by Derek(NC)

Posted by Derek(NC) on January 24, 1999 at 15:03:23:

First, let me say this is a great board, with wonderful info being put out…Thanks

My wife and I had a brainstorm, but we are not sure about it, so here goes…

If a homeowner is in foreclosure, and they really don’t have any equity to borrow against, only been there for 2-4 years, and I offer a solution of a Quit-Claim Deed (QCD)to us. If they accept and QCD to us we then own the house right? So we pay back all their arrears, increase rent for repayment to us, and give them a L/O to repurchase with strict guidelines, i.e. rent due on 1st if they default, forfeit option, they will then be strictly tenants, still paying inflated rent, hopefully they will move, we could then resale the home “Rent-To-Own” and once we find a tenant/buyer sale just below FMV…

Of course we know we would only be making small change but we have other details about the repurchase option with the original owners, and if we never had a buyer only renters we still have the home tied up always increasing rent as the market will handle…One day owning the home free and clear.

Whew!! All that aside Please tell us we’re not dreaming and this is legal, There are so many foreclosures here we could rack up!!



Re: Quit-Claim Deeds!!(Semi-Long) - Posted by Irwin(CA)

Posted by Irwin(CA) on January 27, 1999 at 15:11:15:


You’ve received a lot of good advice here but another point you need to consider is that the lease-option might be characterized as a loan, making you responsible for compliance with all the rules and regs associated with lending.

Good luck.


Re: Quit-Claim Deeds! An alternative - Posted by Bill Gatten

Posted by Bill Gatten on January 25, 1999 at 13:50:05:


Good idea, but may I offer a (possibly) simpler and more secure solution, affording you the same benefits and objectives without the risk or DOS violation? A Quit Claim is usually not a very good way to convey secure title. Quit Claims can easily be contested and voided in court, and they’re not considered a powerful document, unless given to someone who already has a title interest in the property–ex-spouse, partners, etc. (“Valid and Enforceable, but too easily Voidable” as it were)

But you can do the following and get the same results with a good legal shield against further default, Due-on-Sale violation, involvement of the property in the owner’s BKS, liens, suits or judgements, etc.:

  1. Have the owner put the property into a title-holding trust (land trust) in his OWN name.

  2. You then take an assignment of fifty percent the trust’s Beneficiary Interest and (in Escrow) and bring all of his late payments current.

  3. You and the “seller” then lease the property to the seller as a simple (triple net) lease tenant, with the understanding–and contractual provision–that ANY further default will result in immediate eviction, termination of the trust, and forfeiture of all beneficiary interest held by the defaulting party.

  4. The new tenant now pays all PITI (and trustee fee) and in say, six months or a years, begin repaying you all the money you put into to cure the default.

  5. At the end of the agreement, the contract provides that the property will be sold on the open market for Fair Market Value and that the proceeds of sale will be as follows:

  6. Retire all loans

  7. Cover all costs of disposition (Escrow, RE fees, whatever)

  8. Return any moneys you paid in at the beginning, if they haven’t already been repaid to you on a monthly basis

  9. Divide the remaining proceeds between you in proportion to your share of Beneficiary Interest held in the trust (50:50; 25:75, etc.)

Hope this does the trick… we’ve done over 1,000 so far without a hitch of any kind.


Re: Quit-Claim Deeds!!(Semi-Long) - Posted by Kevin(OK)

Posted by Kevin(OK) on January 25, 1999 at 04:38:23:

And how will you get around the due on sale clause? You would have to have them QCD it into a Land Trust.

Good Luck!


Read this… - Posted by Rob FL

Posted by Rob FL on January 24, 1999 at 19:24:28:

…before you consider doing that scenario. It is on Bill Bronchick’s website (legalwiz) and addresses this exact issue.

Re: Quit-Claim Deeds!!(Semi-Long) - Posted by Irwin

Posted by Irwin on January 24, 1999 at 17:10:36:

You’ve got the theory down o.k. except for one point, which happens to be THE MAJOR ONE. You have to have significant equity to do this without getting your financial clock cleaned.
To sell back to the owner who is in f/c, I like $20-25k minimum on a house with fmv of $75k or less. You have to mark up the resale price $12-15k at least, to make it worthwhile. There needs to be some equity left over for the owner to have incentive make higher payments than the ones he couldn’t make before (think about that for a minute). Also, he has to get a new mortgage to buy it back and you don’t want to have to carryback too much.
You say in case of default,“hopefully they will move, we could resell the home etc…” That is wishful thinking in many cases. I won’t bore you with the gory details of some of the legal fights I’ve been in, but believe me, these people don’t just move. After all, they’ve been fighting f/c and eviction for years, so why should they roll over and play dead for you. They might, but don’t count on it, and for sure, don’t budget it in.
In short, you shoudn’t do this kind of deal for a “small change” payback because this is probably the most problematic and downright dangerous area of real estate investing that one can get into.
Your thinking was okay. You just need to adjust your planning and expectations to reality.

Re: Quit-Claim Deeds!!(Semi-Long)…Yea But~ - Posted by Derek(NC)

Posted by Derek(NC) on January 24, 1999 at 18:58:18:

What If we’re really not looking for a short term high return on the property for example:

FMV: $79,000
Seller Paid: $73,000
PITI: $500.00
Late Fee: $520.00
Seller owned: 4 yrs.
Behind: 4 mos.
Total Arrears: $2,080.00

If I approach this owner with the QCD offer and he/she accepts I then pay the arrears give the seller a L/O at $77,000, with monthly payments at $660.12 ($120.00 to repay me, $20.12 for just in case late fee’s) Prior to owner repurchasing home he/she would have to give me $2,080.00 original cost of arrears + $3,500.00 for me to QCD back to him…I would’nt necessarily be looking for the owner to obtain new financing, when I could just QCD it back o him right?

If he never decides to repurchase I have a home that, the owner will probably stay in for a good while, if not re-rent it or sell it…

Wouldn’t that be a good deal? For a long term investment?