Deeds without warranties can be a risky proposition

Purchasing a home from a seller who uses a deed without a warranty presents several risks to homebuyers.

Q. What is a "deed without warranty?"

A. It's a document that a seller or other granter issues to a buyer or other recipient that does not guarantee that the granter has the right to transfer the underlying property.

Obviously, buying a home from a seller who insists on using a deed without warranty is a risky proposition, because the seller might not even have the legal right to transfer the property. But they're occasionally used at government-run tax sales, or to pass along to heirs an inherited home that may have title-related problems.

Q. We purchased our home about three years ago, and it has since gone up about $30,000 or $40,000 in value. Now we would like to refinance so we could borrow against some of that built-up equity to get the money we need to make some basic upgrades, including new cabinets in our kitchen and new carpeting. But if we refinanced or took out a home-equity credit line, would we have to pay lots of money for an appraisal, pest-inspection and the like?

A. It's unlikely that you would have to pay for a pest inspection, because most lenders don't require one when an existing homeowner refinances or sets up a credit line.

Many lenders today also will waive appraisal fees and many other loan-related charges, in part because competition in the banking industry has grown even more fierce as the refinancing wave has ebbed in the wake of rising interest rates.

Question each fee the lender or mortgage broker may want to charge you, and ask if it can be reduced or eliminated. The worst the lender could say is "no."

Q. I co-signed my son's loan application two years ago, and my name was added to the title of his home. Now I would like to have my name removed from the title. How do I accomplish this? Also, by removing my name, will my status as a co-signer change?

A. It's easy to remove your name from the title to your son's home, but it won't change your status as a co-signer.

To get off the title, you simply must sign a notarized quitclaim deed to the home and then have the deed recorded with the county. A local real estate attorney should have the necessary paperwork, and the entire process should take no more than an hour or two.

Removing your name from the title will not eliminate the bank's ability to force you to make your son's payments if he defaults. You agreed to make those payments when you co-signed, and dropping your name from the title won't relieve you from that obligation. Your name is on the loan documents, and that's all the bank needs to hold you liable.

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© 2017, Cowles Syndicate Inc.