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  1. #1
    Join Date
    Oct 2012
    Posts
    2

    Default Making a Gift of a House by Quitclaim Deed

    My question involves real estate located in the State of: California

    My dad wants to give his house to my wife and I. In my research, I came upon the term "quitclaim deed". However, I also found that just being removed from the deed/title does not cancel your obligation to the loan. My wife and I would like to take ownership of the house and get our own mortgage for the house so that my dad can be totally free of the house. Can someone tell us how this process is typically done?

    Thanks!

  2. #2
    Join Date
    Jan 2006
    Posts
    38,867

    Default Re: Quitclaim Deed in California

    You go down to the bank and apply for a mortgage loan. Then, if you are approved, you ask them if they do closings. If they do, ask them to handle the closing of your purchase. If they don't do closings, ask them for a referral to a title company or some other entity that does.

    You might ask dad to ask the bank if his loan is assumable. If it is, you would have to qualify for the loan but they can transfer the loan to you.

  3. #3
    Join Date
    Jul 2012
    Posts
    479

    Default Re: Quitclaim Deed in California

    I'd say general research on "how to buy a house" or "how to get a mortgage" would better cover what you need than any individual response. This even though it appears dad is making a gift of any excess equity in the place (which, if it totals more than $26k when done -- $13k to you and the same to your wife -- would I think require him to file a gift tax return and use up part of his $5 million lifetime gift tax exemption to avoid gift tax).

  4. #4
    Join Date
    Oct 2012
    Posts
    2

    Default Re: Quitclaim Deed in California

    jk - Thanks for your response. That helps me out a lot. Real Estate Agents and Loan Officers that I have spoken to haven't been very straight with me. Some have told me that this is not legal while some say they have never heard of this. I'm not sure why that is, oh well, that's why there are informative forums such as this. I will review my dad's bank note to see what it says regarding "assumption".

    Foster_Foster - Thanks for your suggestion. However, I have purchased a home in the past and have only gone through the "mainstream" channels such as: get loan approved, get an RE Agent, find a house, fill out paperwork, and then wait for closing. This process leaves me blind to what is happening "behind the scene". We're trying to involve as few people as possible to save costs. I think the risks are minimal as this is a family transaction. As for the gift tax stuff, it seems I have a little bit more research to do.

  5. #5
    Join Date
    Mar 2008
    Posts
    1,995

    Default Re: Making a Gift of a House by Quitclaim Deed

    We've done real estate gifting within our family. We did not do it on a quitclaim basis as it'll rasie all kinds of tax and inheritance issues later.

    First, this involves gifting, and generally, when it's done on a quit claim basis, rarely does the donor or donee determine the value of the property changing hands to develop a value for gifting, recording it, and then reporting the gifting.

    Second, if it's just quit-claimed, then at the time of sale, the you'll have to calculate your capital gains, even it you live there, and gain is the difference between the selling price and the "cost basis", which is determined at the time the property is gifted over, and the gifted value. When it's just quit claimed, you have no cost basis whatever. We also went out and got appraisals done when the gifting was done.

    There is some paperwork involved, while usually transfers of such type are gift-tax free, but reduces the amount subject to estate taxes at the time of death via the unitary credit. However, there might be some capital gain consequences for the donor.

    When we did it, we also took out a mortgage to relieve the donor of all financial liability, take care of her capital gains if any (turned out to be none in our case) but it is done via a normal purchase and sale contract, the difference being the seller is given a note at the time of purchase to set a gift value, and the note is then forgiven, making it a gift. We had an estate attorney handle all the paperwork and details.

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