Beware Of Sellers Offering Only A Quitclaim Deed

I got a call from a Student asking me if I knew how to help a friend of hers.  The friend had purchased a condo for $35,000 which was well below Fair Market Value (FMV) and seemed to be a good deal.  The seller gave the buyer a quitclaim deed.

A quitclaim deed means the seller "quits" any responsibility for the property including liens, code violations and even personal judgments that might be attached to the property because of something the seller did or didn't do – like not paying his credit cards, HOA fees and code liens or even a mortgage.

What the buyer didn't know was that the seller had purchased the deed to the property at a foreclosure auction.  However, the foreclosure auction in this case was not for the mortgage against the property, actually it was for a Homeowners Association's Lien (HOA) for non-payment of fees and assessments.  Unfortunately, even after the auction, the mortgage remained in place and there remained a danger that the lender could foreclose in the future.

As fate would have it, the lender notified the new owner that they were going ahead with the foreclosure by serving him a lis pendens.  The panicked buyer called the Student and wanted to know what to do to get his money back. The seller no doubt thought that the fact he gave the buyer a quitclaim deed would get him off the hook when the lender foreclosed.  I am sure there was no closing agent involved or the closing agent would have alerted the buyer to the potential loss of his entire investment.

Non-disclosure of a "material defect" in a property to a buyer can be considered fraud especially if it can be proven that the seller knew about the defect.  In this case the seller had to know as he bought the HOA lien at the auction.  I suggested the buyer contact the Attorney General's Office and file a complaint so a case could be opened against the seller.  It could be that the seller had gotten the deed and intended to rent the unit until the lender foreclosed.  However, he found a gullible and greedy buyer who paid him many months' rent and a nice profit on his purchase.

The buyer will lose his entire investment and may even be personally mentioned in the foreclosure action as he is now the owner of the property.  His chance of recovery of any of his money is dependent on his tenacity with the state in pursuing the seller.  The seller may have done this other times and the unsuspecting buyers haven't been foreclosed on yet.  The biggest clue to this travesty is the use of a quitclaim deed to transfer title of the property.

If you are going to bid at a real estate auction you have to do homework on the property well before the auction.  If you are getting a property from an investor seller, you have to pay for a title policy to insure good title so you can sell it later to a buyer who gets conventional financing.  Remember, a quitclaim deed is a huge red flag that something is wrong with the title to the property – not the condition of the structure of the property.

In summary, a seller giving you a quitclaim deed should be considered the same as a person giving you an incurable and very infectious disease and all the while knowing you will be infected and he doesn't care.

change your life mentoring click button j 300x236 1

To your limitless success,

Dave Dinkel

Visit davedinkel.com for full privacy policy, terms of use, etc.  Be sure to contact us through the website at davedinkel.com if you have questions or concerns ([email protected]).  Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential.  No advice is to be construed as legal, accounting, or professional advice EVER.  Please consult related licensed and qualified professionals before taking any action.  No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.

Beware Of Sellers Offering Only A Quitclaim Deed

I got a call from a Student asking me if I knew how to help a friend of hers.  The friend had purchased a condo for $35,000 which was well below Fair Market Value (FMV) and seemed to be a good deal.  The seller gave the buyer a quitclaim deed.

A quitclaim deed means the seller "quits" any responsibility for the property including liens, code violations and even personal judgments that might be attached to the property because of something the seller did or didn't do – like not paying his credit cards, HOA fees and code liens or even a mortgage.

What the buyer didn't know was that the seller had purchased the deed to the property at a foreclosure auction.  However, the foreclosure auction in this case was not for the mortgage against the property, actually it was for a Homeowners Association's Lien (HOA) for non-payment of fees and assessments.  Unfortunately, even after the auction, the mortgage remained in place and there remained a danger that the lender could foreclose in the future.

As fate would have it, the lender notified the new owner that they were going ahead with the foreclosure by serving him a lis pendens.  The panicked buyer called the Student and wanted to know what to do to get his money back. The seller no doubt thought that the fact he gave the buyer a quitclaim deed would get him off the hook when the lender foreclosed.  I am sure there was no closing agent involved or the closing agent would have alerted the buyer to the potential loss of his entire investment.

Non-disclosure of a "material defect" in a property to a buyer can be considered fraud especially if it can be proven that the seller knew about the defect.  In this case the seller had to know as he bought the HOA lien at the auction.  I suggested the buyer contact the Attorney General's Office and file a complaint so a case could be opened against the seller.  It could be that the seller had gotten the deed and intended to rent the unit until the lender foreclosed.  However, he found a gullible and greedy buyer who paid him many months' rent and a nice profit on his purchase.

The buyer will lose his entire investment and may even be personally mentioned in the foreclosure action as he is now the owner of the property.  His chance of recovery of any of his money is dependent on his tenacity with the state in pursuing the seller.  The seller may have done this other times and the unsuspecting buyers haven't been foreclosed on yet.  The biggest clue to this travesty is the use of a quitclaim deed to transfer title of the property.

If you are going to bid at a real estate auction you have to do homework on the property well before the auction.  If you are getting a property from an investor seller, you have to pay for a title policy to insure good title so you can sell it later to a buyer who gets conventional financing.  Remember, a quitclaim deed is a huge red flag that something is wrong with the title to the property – not the condition of the structure of the property.

In summary, a seller giving you a quitclaim deed should be considered the same as a person giving you an incurable and very infectious disease and all the while knowing you will be infected and he doesn't care.

change your life mentoring click button j 300x236 1

To your limitless success,

Dave Dinkel

Frequently Asked Questions

1. What Should I Do If a Seller Ghosts Me?

If you feel you have been ghosted, act decisively and quickly. If you have tried texting and calling, it's time to drive by the seller's location. I always take the recorded Notice of Interest or Memorandum of Contract to leave, so the seller knows it exists. Go by at a time when you know they will be there and don't be confrontational, just get the facts.

In our experience with new investors, the chances of losing a deal with no contract is likely over 85%. Verbal commitments do not apply in contract law; get everything in writing, especially contract changes.

Different 'gurus' have different opinions, but our experience is finding motivated sellers and then a buyer for your deal. Ideally, you should be finding motivated buyers from day one, so you are ready when you find a seller. Buyers are easier to find as you can see at https://davedinkel.com/products/

Prevention only comes about by thinking a Black Hat wholesaler will be coming after your deal. First, educate the seller that an unscrupulous investor may come by and illegally offer more money, have the seller sign your "Notice to Homeowner," stating that he understands he cannot accept another offer.

There is nothing illegal about changing their mind, it is called seller remorse and occurs about 25% of the time. However, if they have signed your contract, it can't be cancelled for any reason unless acceptable to the investor/buyer.

If price is an objection, you need to find out how important it is to sell fast and for cash. If the seller isn't under a time constraint, has a money issue, or has a personal dilemma, he may not agree to the price you need. Offer to help move and build it into your price before you make your offer. However, never give the seller money; only pay the moving company, and only after closing (escrow with a closing agent). If fear is the seller's issue, break it down into what the real problem is and answer their objections one at a time.

You can get to the root of motivation for a seller by asking a few questions. First, "Why are you selling?", "How soon can you close?", and Are you ready to sign an AGREEMENT today, if not, what do I have to do to make you comfortable?'. The answers to these questions will determine the truth about your seller's motivations.

The best times to involve your attorney in your deals are to have him review your contracting, review the signed contracts from the seller and end buyer, have him open escrow and start the title work, negotiate with city or counties for lien reductions or mortgage payoffs with lenders, and to close the transactions." Your attorney is not the adversary; it's the opposing party's attorney who is a deal killer, and having your attorney allows him to help overcome this obstacle.

The key to successful prospecting and bringing back deals that didn't close is to follow up until the property is transferred in the public record. Some of our deals have been where the seller came back to us months and years later because they felt comfortable with us and not the other "pushy" investors who contacted them.

Your contract's most important clauses are inspection period (as long as possible), when the EMD must be deposited if at all, your ability to access the property, any added clauses specific to the property that will protect you against seller claims later that were verbal only.

Visit davedinkel.com for full privacy policy, terms of use, etc.  Be sure to contact us through the website at davedinkel.com if you have questions or concerns ([email protected]).  Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential.  No advice is to be construed as legal, accounting, or professional advice EVER.  Please consult related licensed and qualified professionals before taking any action.  No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.