Quit Claim Deeds And Pre-foreclosure
I was recently at a foreclosure auction in a bidding battle with one particular person for a property. In between bidding he quickly turned to me and said I have a quit claim deed on this property and the surpluss (the bid was over the amount of lien at this point) is going to go to me anyway, so I'm going to bid as high as I have to. He got the owner of the property to sign a quit claim. Is it as simple as that? To convince an owner in distress to sign a quit claim, have it recorded in county records and then the property is your's (after the bank's posistion and any other liens are satisfied of course)? :-?
It is true that typically any overbid will be delivered back to the owner...(varies on state i believe) getting a quitclaim deed and collecting the overbid in my opinion is saying please sue me. There are some timing issues to watch on this.
In a quit claim deed, the grantor transfers all the right, claim, or interest in the real estate to the grantee. It does not contain any of the covenants or warranties found in a warranty deed. It does not covenant or warrant that the grantor's interest in the real estate is valid, but simply transfers any interest, claimed by the grantor, to the grantee.
All states require that a quit claim deed must be in writing and must be signed. It must be recorded to put third persons such as creditors and subsequent purchasers on notice as to the transfer.
Most title companies are reluctant to insure title when a quit claim deed was previously used to transfer title.
If someone deceives a person and gets them to sign a quit claim deed, they may be found guilty of theft by deception in the first degree, a class B felony. This kind of felony is punishable by up to 10 years in prison, a fine, a payment to a victims fund, court costs, and DNA profiling. In addition, a court may order restitution up to double the value of the loss. If found guilty, the person would lose some of their civil rights, such as the right to vote and the right to own a firearm. In addition to criminal penalties, there are civil penalties for such fraudulent transfers
See court case http://www.sdbar.org/opinions/1998/December/1998_119.htm
So in answer to your question it is not as simple as having a homeowner quit their claim, without a good faith offer one can set their self up for major trouble.