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Ely
Ely, Counselor at Law
Category: Real Estate Law
Satisfied Customers: 99982
Experience:  Qualified attorney in private practice including business, family, criminal, and real estate issues.
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My father has a property in State. He is unable to care for

Customer Question

My father has a property in Washington State. He is unable to care for the property and wishes to sell it to me for $35K. The property was appraised at $170K. It may or may not appraise for that now because he let it fall into such poor condition. I am currently updating the property and would like to refinance it. I'm trying to understand our options. For refinancing purposes, is it better if he "gifts" me the property? how will that affect taxes, etc?
Submitted: 1 month ago.
Category: Real Estate Law
Expert:  Ely replied 1 month ago.

Hello and welcome to JustAnswer. Please note: This is general information for educational purposes only and is not legal advice. No specific course of action is proposed herein, and no attorney-client relationship or privilege is formed by speaking to an expert on this site. By continuing, you confirm that you understand and agree to these terms.

For refinancing purposes, it does not matter. Any lender you approach for refinancing will likely have an underwriter or an inspector (or both) evaluate the worth of the property independent of any taxes or the amount that it sold for, and go off that amount primarily.

For tax purposes, this involves excise tax. Please find the chart for this HERE. Under WAC 458-61A-215, no excise tax applies to quitclaim deeds "given for the sole purpose of clearing title if no consideration passes otherwise. This rule does not apply to deeds executed for the purpose of adding persons to title, except in cases of persons added to title for co-signing security purposes only." Your matter may or may not fall under this. If it does not, the amount typically goes off the estimated value by the county if the deed is quit claim.

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Customer: replied 1 month ago.
I should add that this is not a principle residence. It will become my principle residence but the house originally belonged to my grandmother and my father has been in charge of the home for 20 years and the home was transffered to him, this past year.
Expert:  Ely replied 1 month ago.
Whether or not this is your principle residence does not matter. Please see my answer above (I think you and I posted at the same time).
Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.
Customer: replied 1 month ago.
I am trying to figure out the best way to get extra money out of the property by refinancing vs applying for a mortgage. If I buy the property for cash for it's appraised value (let's just stick with the 170K for ease of understanding). The excise tax would be ~$3500. Does the cash actually have to exchange hands?
Expert:  Ely replied 1 month ago.
No one checks whether or not cash actually exchanges hands. However, note that falsifying governmental documents may be a misdemeanor.
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Customer: replied 1 month ago.
I am currently renovating the property. My father accumulated a lot of debt, caring for my grandmother that isn't easily attributed to her person. I would like to be able to get the title to the house (quitclaim or sale) and refinance the house in order to cover some of those costs he incurred. He DOES NOT want to be on the title of the house any longer, for whatever other reasons. I also need money to recover the cost of renovations.
Expert:  Ely replied 1 month ago.
I understand. To clarify, does the house have a mortgage now? It does, right?
Customer: replied 1 month ago.
The main problem with financing is that I have no credit score, right now. I've been living outside of the country. All of my US credit has gone through my business. That information doesn't seem to be reported on my credit report. My THOUGHT was that I would be eligible fore lending with the house as an asset......as opposed to being eligible for a mortgage with no asset and very little credit.
Customer: replied 1 month ago.
The house does NOT have a mortgage now. I will be receiving a fully paid off home.
Expert:  Ely replied 1 month ago.

Thank you.

Refinancing means refinancing a home that has a mortgage. You keep saying "refinancing," but that would not apply to a property which has no mortgage to refinance.

You can finance the purchase of the property if this is for money. If it is via a quit claim deed, then of course, there is no need for financing.

I think what you may be attempting to do here is to get the house from him, and then use it as a collateral for a loan? If so, that is possible.

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Customer: replied 1 month ago.
I don't know why I didn't think of it that way. I got bogged down in the housing financing terms. What is the best way to use the home as collateral? HELOC?
Expert:  Ely replied 1 month ago.
A HELOC is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house (akin to a second mortgage).
You would not have equity in the home. Home equity is the value of ownership built up in a home or property that represents the current market value of the house less any remaining mortgage payments. You would not have equity in the home.
You'd just have the home. The home would be the collateral.
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Customer: replied 1 month ago.
If the home was sold to me for $170K, cash, would I be eligible for a HELOC to put that cash back where I want it?
Expert:  Ely replied 1 month ago.
No. Even if you got a mortgage for the property, you'd need to build up several years of equity to qualify for a HELOC.
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Customer: replied 1 month ago.
Ok - so maybe a mortgage is the best way to go. Easiest.
Expert:  Ely replied 1 month ago.
That depends. What do you wish to accomplish? What is it that you wish to do?
Expert:  Ely replied 1 month ago.
Hello,
My apologies, I did not mean to be redundant.
"I am trying to figure out the best way to get extra money out of the property..."
This is then done by getting the property via a quitclaim, and then taking out a loan with the property as a collateral.
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