What is a quit claim deed, and are there any advantages or disadvantages of a quit claim deed? In this video, I’m going to talk about very briefly what a quit claim deed is and talk more about the dangers or disadvantages of using a quit claim deed.

So, in very simple words, a quit claim deed is a simple form used to transfer the title of a home to somebody else. You actually have to transfer your share of the title of homeownership to somebody else. It could be from a divorce situation where the husband transfers to the spouse, the dad transfers to their kids, a transfer from siblings, or a transfer in partnerships. So it’s a very easy way to transfer title. We highly recommend that when you do use this form, which is available at your local assessor’s office, you download it and fill it out, and we also highly recommend that you record this quit claim deed. So it’s a very simple process, there are very minimal fees, and most of the time this form is used to transfer your share of the title. If you have a partnership, you cannot transfer the whole partnership. But if you’re a 50% partner or 35% partner in that property or house, you can transfer your portion to the other transferee or the new owner. As I mentioned earlier, you must record this for protection.

So let’s talk about some dangers or disadvantages of using a quit claim deed when transferring your portion of the property or ownership of the property to someone else. Usually, as I mentioned earlier, you want to transfer and use quit claim deeds from one person to the other in the known community, like your family or divorce situation or your kids. Usually, you don’t do this to strangers. And here are some disadvantages: The number one disadvantage is that, let’s say, if I transfer my property or ownership of my property to you, then you are the owner of that property. But if I’m the mortgage holder on this property and I transfer the property to you, I still own the mortgage. So as me transferring to you, let’s say I’m a friend of yours and transferring the property to you, then the mortgage is in my name. So it’s a disadvantage to me as a transfer to the transferee. So that’s a major disadvantage.

The other disadvantage is that, let’s say the property is paid off, I own a property, it’s paid off, and I transfer it to my brother or my spouse after we get divorced or whatever. When I do that using a quit claim deed, let’s say I had a lien on the property; maybe I have a child support lien; or maybe contractor work was done and I somehow missed paying it. Or there were some other liens on the property, and they were recorded on the property. So when I transfer the title to you, the property comes with the lien. So in the future, when you try to sell this property, even though you are the owner and even though you did not own that contractor or whatever that lien was, you are liable to pay those fees, including any penalties, et cetera. So that’s a major disadvantage. That’s why we always recommend that you seek professional advice and make sure you know exactly what you are doing.

Let’s talk about another disadvantage. A lot of the owners buy property for tax advantages, whether it’s a house or a rental property, income units, commercial properties, or multifamily units. If for some reason you transfer the property via quit claim deed and the mortgage is not on your name and it’s transferred, which should not happen in the first place. But even if that happens and you have some arrangement where you pay with the seller financing, you may not get the tax advantages if you had the loan in your name. As you know, when you buy a house or rental property, one of the reasons that you buy a house or rental property or any property is that you get tax advantages and tax benefits. I’m not going to talk about it. But there are very, very well-documented tax advantages that you get. So I’m not going to talk about those. But then if the mortgage is not in your name, you do not get those deductions. So that’s another disadvantage.

So let me give you two real-life stories of what happened where I was kind of involved in the situation. So this goes back a long time ago. About 15 years ago, I sold a property when I was in escrow. I found out that the escrow was not going to close because what happened was my client, she had moved here from the Philippines and as soon as she came here, she wanted to buy a property. Her sister was here. So my client asked the sister to co-sign her on the mortgage, which she did gladly. So my client was able to buy the house. Now, after 20 years, after my client paid for 20 years all the mortgages, all the taxes, and everything when she decided to sell the home, the sister goes, no, you cannot sell it because I’m still on the title. So she owes half the money or half of the ownership to her. Long story short, my client who asked to co-sign the sister, the sister came back and wanted half of the money of the profits, even though she never paid anything. So the lesson learned is when anybody is on the title after somebody co-signed or helped you with the mortgage or anything, make sure that you retransfer the title or refinance and don’t wait till the last minute. All she could have done was as soon as she got this mortgage signed, my client could have asked the sister to quit claim the deed to her name and then later on refinance. So she gets the mortgage on her. But she did not do it. Long story short, the case ended up in court. It took two years for us to close the escrow. We did close the escrow, and my client was given 100% ownership for whatever reason. She was a lucky gal. So that was one lesson.

But let me give you another example of what happens on a quit claim deed, and this is very, very tragic. And I got this email just about a week ago, and I’m going to read to you about what happened when a son quit claim his property to his dad because he was going through a nasty divorce. So I’m going to read you the email, the portion of the email, and I’m not going to say any name or anything due to the protection of my client’s identity, who he asked me to help him and I referred him to talk to an attorney. So I got this email from a viewer, from my video. Here’s the scenario, a tragic scenario of what happened and what does happen when you use quit claim deeds and don’t do it professionally and the right way.

“About three years ago, I was under the impression that I temporarily quit claim deed of my house to my own father. Due to my second divorce and no kids, my father has legally evicted me out of my own house, which is also paid off. At the time I signed the home over to my father, I was in a very bad depression and in a blood state of mine.”

How tragic that is. So on a quit claim deed, you give your ownership of the house to your parents or your two siblings, et cetera, even if it’s on a temporary basis. Make sure that you transfer back or have a written agreement somewhere, and talk to an attorney that this is temporary. And especially when you paid off. In this case, the house was paid off. The dad said, hey, this is my house now. There’s no loan and he evicted the son. And there are many other stories I can talk about because I get this. If you go to my YouTube and watch that channel, there are a lot of comments on there. You see how people are suffering or taken advantage of. You can read through the comments and you see. I’m not going to repeat them here, but hope this video helps. When it comes to quick claim deeds, you can use a quick claim form, but we recommend professional help. Do it diligently, and professionally, and talk to a few people before you make the move. It’s a very easy thing to do, but it’s also a dangerous thing to do if you do not do it right.