Using a Quitclaim Deed in Foreclosure

Published: 17th February 2009
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When the economy is not doing well, thousands of people may very well lose their job as well as their ability to continue meeting mortgage payments. When that happens, the inevitable follows - foreclosure of the property is looming ahead in the horizon. If no action is being taken, the lender will foreclose the property, and the homeowner will become homeless.

If you find yourself to be in a similar position, you may need to find a creative solution quickly. Some may suggest using a quitclaim deed to avoid foreclosure. That may sound like a good idea, when it is actually not. You will soon see why.

A quickclaim deed is a legal document that passes the rights of the property from the grantor (the property owner), to the grantee (the person receiving the rights). The document will then have to be filed with the state county.

But bear in mind that the quitclaim deed can help you, or it can bring harm to you. What you need to do, is to be clear about what the document entails, so that you can make the right decision.

To elaborate further, you can use a quitclaim deed to transfer the rights of the property to another person. But that doesn't free you from mortgage commitments. You will still need to find a way to repay your lender. But with the quitclaim deed, the lender cannot foreclose your home.

The goal is simple. Use the quitclaim deed to get yourself more time. Often, homeowners cannot meet mortgage payments due to temporary circumstances. If you lost a job during the economic downturn, you can always get a new job some time down the road. The economy will recover after some time. It always has. So it makes no sense to make matters worse by letting the lender foreclose your home. That makes it even harder for you to recover from the crisis that you are already facing.

However, it is necessary to note that the quitclaim deed will not work in all circumstances. For example, if there is a "Due on Sale" clause that is included in the mortgage contract, the homeowner will have to pay off the mortgage upon transfer. Check with your lender to see if the clause applies to you. The quitclaim deed may be viewed by the lender as a sale, and the clause may be activated.

Then there may be scammers who are lurking round the corner, looking to take advantage of desperate homeowners. They attempt to trick the homeowner into believing that they can stop the foreclosure process, by transferring the rights of the property to a third party entity, such as a land trust or grant. In return, the homeowner has to pay the scammer rent to continue living in the house. However, all this while, the foreclosure process is still taking place.

When you consider the information above, it makes little sense to use the quitclaim deed to stop foreclosure. This document primarily exists to simplify the transfer process between family members. It's never meant to help homeowners avoid their financial obligations.

Download quitclaim deed and other real estate contracts

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