Transferring Property To Another Person – Is it Possible?
Question: We are considering using a holding group and transferring our property to another person to avoid having to hassle with a short sale ourselves; in California, can my lender come after me for transferring property without their prior authorization? This holding group says they take care of everything including the lender.
Answer: – Transferring property to another person using a quit claim deed or warranty deed is not illegal, however just because a different name shows up on title and a new owner is recorded on the county records, you are still liable for paying off the loan(s)!
The loan is still in your name. You are still responsible to pay off the liens against your home. Your credit will be the one that is affected if payments are missed. Transferring property to another person or company to handle the short sale process is fine, just be aware that you’re not totally off the hook. This is very similar to a “subject to” deal, where the new “owners” are taking over the property “subject to” the existing loans. Anytime the property is transferred to someone else, the lender can call the loan due. It’s called the due on sale clause. Very unlikely it will happen.
I’m not sure what they mean when they say, “they’ll take care of the lender.” More than likely it means they will find a buyer for the short sale which will satisfy the loan. However, just because they satisfy the loan doesn’t mean the liability is gone. More than likely you will get a 1099 for the difference between what the bank accepted as the pay off amount and your loan amount.
The only time you would need to worry is if the bank didn’t accept a satisfaction but instead just released the lien. This means they have the option of coming after you for the deficient amount. So you’ll want to make it clear to this holding company that you must get the loan satisfied, even if it means paying a little more to the bank. If the holding company is all about the money and doesn’t care about you, you may find yourself in a judgment situation that could have been avoided.
Nice info.
The questioner did not mention if the holding company was going to collect a fee from the questioner. An advance fee might not be legal, but illegality won’t stop a criminal from taking a fee.
I saw this happen on property my clients offered on years ago, before it became illegal. (Back in the freewheeling twentieth century) My buyers made a strong offer that would have been acceptable to the short sale bank. the gullible seller instead “avoided” the hassle by paying a “safe harbor” company $5,000 to accept title and possession.
Since this was a luxury property, the “safe harbor” company owner’s son moved in for the free rent, which he benefited from until the foreclosure sale on the courthouse steps. I had the buyers. I monitored the situation start to finish. I know they made no effort to sell the place.
“Holding company” Ha. “Holdup company” would be more like it.
I am not sure if this question belongs here, but here goes!!
I have a property in pre-foreclosure that I can acquire “Subject To” ?
The property has one lien. Bal = $86K and the reinstatement = $5100. The tax value = $117K, and the CMA = $123K. The monthly payment is escrowed with P&I, Taxes, and Insurance.
My plan is to pay the $5100 and reinstate the loan, then continue to make monthly payments on behalf of the Seller.
My question is: How do I get around the insurance issue? The insurance is an agreement between the Original borrower and the Ins. Company. If I continue to make payments on the Sellers behalf so that I will not disrupt the “apple cart” ..i.e. “Due on Sale Clause”.
What happens if the house burns down? Will the Ins. Co. deny the claim because the Original Insurer is no longer the home owner?
Thanks!!
You’re right! You must have insurance. And the homeowner’s policy is only good for 30 days after the transfer. So, for starters, call or write the insurance company that has the existing policy, and ask them to add you to the policy.
If you do this, remember to follow up in a few weeks and change the policy to a “renters” policy rather than a homeowner’s policy. Or, get a new homeowners policy in both you and the seller’s name.
What is the difference between adding your name/entity to the homeowner’s policy already in force, or getting a new policy?
Switching insurance policies may trigger the due on sale clause but if the interest rate on the property is not significantly lower than current interest rates the lender would be crazy to call the loan due and start foreclosure preceedings on a loan that was paid to date. The banks bottom line is…Is this loan making money?