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Twisted-Up Title

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Posted On: 09/24/2008

Q:My two sons and one son's girlfriend bought a house. The girlfriend and son broke up and she moved out. My sons then refinanced and got some money, however one son walked out of his job and all his financial obligations. The son who left also quitclaimed his interest to me leaving me, the ex-girlfriend and the other son on title.

I have been paying half the mortgage. We have been trying unsuccessfully to modify the loan for over a year because the interest rate will increase a lot in a few months. If we are foreclosed, since the ex-girlfriend and I are not on the loan, whose credit will be affected? Should the ex-girlfriend and I quitclaim to the remaining son?

A: A "quitclaim" deed says that someone has given you whatever rights they have to a property. So, for example, I could give you a perfectly valid quitclaim deed to the Brooklyn Bridge. In such a case you would get whatever rights I had, which would be none.

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What you have is a property and a mortgage. If you look at the mortgage you will see two things: First, everyone on the mortgage is responsible for repayment of the entire loan, not just a portion of it. Second, if the title is changed the lender has the right to "accelerate" the loan; that is, to require its immediate repayment.

Your two sons, if they signed for the new mortgage, are both fully responsible for its repayment.

The change in ownership represented by the quitclaim deeds will not end a borrower's responsibility to repay a loan. Most probably you are best served by quickly selling the property, something that will require the written agreement of all owners.

A foreclosure will surely impact the credit of both sons. As to you and the ex-girlfriend, if you're not responsible for the loan then typically your credit will not be impaired.

Q: My brother and I inherited a lot from our father. We each have a half interest. What happens if one of us dies? Both of us have our own families. Will the wife or the husband of the deceased inherit the property? My husband says that he has no claim to the property unless it's stated in a will that my portion will go to him. I say that with or without a will, he and our kids are the heirs to my portion of the property. Also, does the attorney who took care of the probate also registered the property under the new names?

A: The first issue that needs to be determined is what, exactly, was inherited by you and your brother. You each own "half" of a lot, but how is your ownership titled?

For example, are you and your brother "tenants in common?" If yes, you each have an interest which may be sold separately or willed to an heir. Or, do you have a "joint tenancy" with a right of survivorship? With such an arrangement if one of you dies the other would automatically get title to the property.

Husbands and wives typically hold property in a "tenancy by the entireties." This is a form of ownership reserved for married couples. Under a tenancy by the entireties you and your spouse would each have 100-percent interest in a property. If one of you died, the other would automatically own the property because, in a sense, you each already own it.

In community property states the idea is that all property that comes into the marriage should be shared equally - however, there may be exceptions for property acquired prior to the marriage or through inheritance.

In your situation it would be best to sit down with your brother and determine if you want the lot. If not, then put it up for sale and get the cash. If you do want the property, then you should decide how you want to hold title. You should discuss survivorship and you should look into the whether you want a mutual right of first refusal in case one owner prefers to sell but the other wants to keep the property.

To prevent future disputes, these matters should be resolved now, on paper, and with the help of an attorney in the jurisdiction where the property is located. The attorney can check local property records to assure they are current. Also, you and your brother - and your spouses - should all have wills and living wills because state rules are unlikely to produce a division of your estate that you would want.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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