Very often the issue of signing a Quitclaim Deed arises during a divorce. When one party buys out the other party’s interest in the marital home, the party receiving the buyout must sign a Quitclaim Deed. A signature on a Quitclaim Deed indicates a party no longer has an interest in or right to the property. The issue becomes complicated when the party being bought out does not want to sign the Quitclaim Deed until he receives his money. Logically, this makes sense. Why would someone sign away their rights to a property when they haven’t received the agreed upon buyout money?
The problem is the mortgage company. The property you are refinancing into your name, in order to buy out your ex, is the security for the loan. If there are two names on the deed, then the mortgage company wants both parties to sign the new mortgage, otherwise they could have legal problems in the event the person borrowing from them defaults on the loan. Consequently, most mortgage companies require that the spouse who is about to be bought out, sign a Quitclaim Deed. By signing a Quitclaim Deed a person is relinquishing all right and title to the home and allowing the other spouse to borrow against the property.
The key to signing a Quitclaim Deed prior to refinancing is holding the Quitclaim Deed in escrow until the closing of the refinanced loan takes place. Recording a deed with the County Clerk’s Office lets the world know who rightfully owns the piece of property. If a deed is sitting in an office somewhere, the rest of the world is not aware that the person has relinquished his rights to the home. However, if the Quitclaim Deed has been signed and the parties and mortgage company agree to record the Quitclaim Deed upon closing, then both the mortgage company and the spouse who is being bought out are protected.
It is important to have safe guards in place before you agree to accept a buyout or sign a Quitclaim Deed. We at Lyons & Associates, PC pride ourselves on giving sound advice in many areas, including real estate. We place a premium on personalized service and attention. For a private consultation, contact us by e-mail or call our office at 908-575-9777.
Written By: ChrisAnn Wright, Esq.