Not sure what a quitclaim deed is, or how to use it to transfer real estate ownership?
Deni and Brian break down exactly how to use quitclaim deeds as a property owner.
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Brian: Hey, everybody. Happy Tuesday. We are so glad to be with you. It’s Brian Davis and Dennis Supplee here from Spark Rental.
Deni: Hey, everyone.
Brian: And last week, I sat down with Adrian Smude, and we had a really interesting conversation about investing in standalone mobile homes, buying plots of land with a mobile home already on it, as opposed.
Deni: I have never, ever thought of that as like an investment. That was really interesting.
Brian: Yeah, no, me neither. I mean, you know, the typical way that people invest in mobile homes is either buying an entire park or buying individual mobile homes with the plan of moving them around, like just buying the structure itself and then moving it to a plot. But Adrian buys the plots with the mobile home already established on it and renovates them and gets a great yield on those. So, it was a really fascinating episode about a niche in real estate investing that most people don’t consider. Now, this week, we’re totally switching gears. We were talking about quitclaim deeds and how to use those as a real estate investor. This is one of those things that, you know, it’s not like advanced or complicated, but people a lot of people haven’t heard about quitclaim deeds. Easy for me to say.
Deni: Nor can they say them.
Brian: Yeah, right. And, you know, they don’t know what they are. They feel intimidated by them. So, we’re going to demystify the quitclaim deed today so that you have this in your toolkit. As a real estate investor, it’s one more tool that you should have available to you. So, as you guys join us, let us know where you’re tuning in from. We always love to hear from you guys. Keep the show interactive, throw your questions at us whenever you feel inspired. And on that note, Deni let’s dive right in. What is a quitclaim deed?
Deni: It’s actually an easy way to do a property transfer without going through, you know, title insurance and all of that stuff. So, if you want to transfer it to a kid or any of those other things and just without being sold, actually. So, it’s you know, it’s being transferred for free. And basically, it’s a form you fill out. You get it notarized and that’s it.
Brian: It’s a deed. It’s a legal way for a property owner to deed their property to someone else.
Deni: Another name. Yes.
Brian: Yeah. And so, and the expression quitclaim the deed is exactly what it sounds like. The owner is quitting their claims to the property and transferring that legal ownership, that legal claim to the property, to someone else.
Deni: And there are no warranties to this or anything. So, you have to kind of be very careful with them.
Brian: Right. So, like Deni you mentioned there’s not necessarily any title check. You know, there could be clouds on the title, you know, whether that be liens or judgments or any other impediments to the title, there could be what are they? Not encroachments. But yeah, there could be all kinds of things on the title. None of that matters for quitclaim deeds. It’s literally just the owner transferring their ownership interest in the property to someone else usually for zero consideration for no amount. So, these are useful to real estate investors in several ways. I’ve used these before to transfer my property to an LLC name. I bought a property under my personal name one time and then decided to move it to an LLC and try to quitclaim, deeded the property to myself or to the LLC, and problem solved. Now you do have to pay transfer taxes when you record the deed in your local courthouse. But that’s really the only expense is the recreation fees and transfer taxes, which are usually on the low side in most counties. So how else many do real estate investors use quitclaim deeds?
Deni: Well, just, you know, to get into it just a little bit quickly, you know, senior citizens or parents can transfer or add children to a deed for a property. Adding can be very advantageous if you’re older and something happens to you, you know.
Brian: For Estate planning purposes.
Deni: Right. And then for senior citizens, there’s that five-year rule where if, God forbid, you know, eventually nursing care is needed, they look back five years at all your assets. So, a lot of people, what they’ll do when they’re getting older is.
Brian: Read to see if you qualify for federal subsidies or government subsidies.
Deni: Exactly. I’m actually kind of going through this now with somebody and it’s quite interesting. And they do. Whatever assets you have in a house are your biggest asset. They take that into consideration and nursing care is expensive.
Brian: That’s for sure. That is for sure. And by the way, it’s worth mentioning here that you don’t have to have 100% ownership in the property to quitclaim deed your ownership interest. You know you could, Deni if you were and I owned property together, 50/50, I could quitclaim my 50% ownership to you. If you were buying me out, for example, that would be a really easy way for us to do it. You write me a check. I quitclaim deed my ownership interest over to you. You know, problem solved. All done.
Deni: Or adding children. You can add children. You can stay on. But if you have, you know, whether it’s asset planning or whatever reason you want to add a child, you can do that, too.
Brian: Right? So, you can transfer a percentage of your ownership as well and you remain on the deed. So, if you own 100% of the property, then you could claim 50% of that ownership to your child, for example, to add them to the deed.
Deni: And then another thing people do is they look for. They kind of look for properties that have these quick claims and they’re not it’s not very easy to do it. And I haven’t heard anybody who actually has done this, but because people do this when they’re older for asset protection, people will sometimes figure, you know, that they can go in and purchase the property fairly cheaply because it could be part of an estate at that point, I don’t know. It looked like a lot of work to me. And quick claims aren’t always part of public records. Like right now on the Internet, you can get information galore, but for whatever reason, quick claims aren’t always that easy to find.
Brian: You mean trying to filter land records by quitclaim deed? So, quitclaim deeds are always recorded on public record, but you can’t necessarily filter out a county’s public records by which ones have been recorded by a quitclaim deed versus a more traditional deed. So, if you are looking to find cheap deals as an investor and want to reach out to every property owner in the county who use a deed that was recorded as a quitclaim deed. You may have a hard time filtering those results to identify which properties transferred ownership last with a quitclaim deed versus a traditional land deed. So, Harry here asks any disadvantages of quitclaim dealing to your own LLC later? I can think of one and then Deni I’ll hand it over to you. So, if you have a mortgage in your personal name and you quitclaim deed the property to an LLC that technically triggers the due on sale clause in your mortgage contract with your lender. So technically, the lender can call your loan if they find out that you transferred ownership of the property away from your personal name into your LLC name. And just because you transfer the ownership of the property to an LLC doesn’t mean that you are no longer personally liable on that mortgage. With every LLC mortgage I’ve ever signed, the lender required a personal guarantee where I personally guaranteed that the loan would be paid back in full. And if the loan was not paid back in full, they could come after me for a deficiency judgment on any extra balance owed. So yeah, it could trigger the due on sale clause. If you have a mortgage loan in your personal name. Deni, what did you want to add on to that?
Deni: Just that we have to remember that these are easy to do. And so, some of them, you know, there are no warranties, there are no guarantees. And I think, you know, you have to keep that in mind. Just in the scheme of things like how, you know, so many people will do these and not even do them correctly or not file them. And so, you think because you have one, all is as well, and then you find out later, oops, you know what I mean? So, you just got to be very careful or maybe have an attorney do it for you because you just want to make sure it’s legit and then the mortgage thing is real. Although I don’t think as long as you’re, you know, paying your payments, they’re going to really come after you. But you do have to be careful with that.
Brian: Yeah, my experience has been that mortgage lenders don’t typically come after you for that sort of thing, but they can. So, the thing to understand about quitclaim deeds is that it’s the least formal type of transferring ownership to someone else. So, this is really something you do to transfer ownership. To yourself. To an LLC. To a business partner that you trust implicitly. To a family member. It’s not something you necessarily want to do with a stranger. Because if someone offers to quitclaim you a property in exchange for a large check or a large amount of money, you as the recipient don’t get any protections or guarantees with a quick name deed. The property could come with all kinds of Oh, sorry, how unprofessional.
Deni: How real in today’s world.
Brian: Yeah, right. So, yeah, the property could come with all kinds of liens and encumbrances and judgments. Clouds on the title. So, you really only want to do this with people you know well and trust implicitly?
Deni: Absolutely. Absolutely. So, it has its place. Just be very careful.
Brian: Yeah. It’s great for transferring ownership to yourself. It’s great for deals within the family, you know, transferring property within the family or among business partners who have known each other for a long time and trust each other. Yeah. Deni, any other thoughts that you want to share about quitclaim deeds before we call this episode complete?
Deni: No, I think we pretty much covered it. I mean, it is used a lot in real estate investing for mostly asset protection and, you know, just. Beware. You know, be careful.
Brian: Yeah. And by the way, you can find these templates online at places like Legal Zoom, Ladipo. That sort of place, you know, you feel free to reach out to me if you email us at support at SparkRental.com. I have a Maryland version which I made quickly, and these are so informal that there really isn’t much difference among states. It’s like a one or two-page document. I mean, it’s really quite, quite simple and basic. So, yeah, I’d be happy to email you a copy of a word doc I have of an old quitclaim deed.
Deni: You can contact your locality or your state to find out what the recording instructions are.
Brian: Yeah, yeah. But it’s recorded like any other Land deed at your local courthouse, so. All right. On that note, we’re going to wrap it up. We will see you guys next.
Deni: Oh, wait, we have we are having another contest.
Brian: Oh, that’s right. Give away. I almost forgot. Yes, we should have led with that.
Deni: Yeah, I guess so. But we are giving away another six-month prop stream subscription. Parents or people really like it.
Brian: By the way, prop stream charges are over 100 bucks a month for their service. It’s a great online software platform for real estate investors to find great deals on properties.
Brian: These are distressed. It’s a platform for finding distressed sellers or potentially distressed sellers, people in foreclosure, people in tax sale, people with judgments and liens, people going through divorces, all that sort of stuff. So, these are the people that you want to hit up in when your direct mail campaigns, right? As a real estate investor to try to identify people who are looking to sell quickly for a reduced price. So, prop stream is awesome. We use it ourselves. We’re giving away a free six-month subscription. Deni how do people enter for the drawing for this?
Brian: Yeah. So, the short version is anyone who leaves us a five-star review on site Jabber qualifies for the drawing. We will be drawing the winner next Tuesday on our regular Facebook Live podcast at 2 p.m. Eastern. So, get in this, get in those five-star reviews. Make sure you shoot us an email after you do so, so that we have your contact information so that we can actually contact you to let you know that you won. And yeah, know what we draw on that next week. You guys, seriously, the odds of winning this are really high because not that many people have historically entered these drawings. So, I mean, I think last time there were like five or six people total that yeah. So, I mean that’s like 20% odds of winning the contest. It’s really high. So, we’ll be drawing that next Tuesday at 2 p.m. Eastern. And in the meantime, have a great week and shoot us an email. Let us know what else you want to hear about in the future. Webinars, podcast episodes, blog articles. You know, we do all that good stuff, and we always want to know what you want to learn more about. So absolutely.
Deni: I think next week we have a guest. So, I think.
Brian: You know, we should know.
Deni: Yes. All right. Good day.
Brian: Talk to you soon.