Legal Question in Real Estate Law in California

Erik, I am not sure what you hope to accomplish, as the post is a bit unclear. Are you asking how your partner transfers the house to you in lieu of your foreclosing on your Deed of Trust? If that is your question, then you do not have him sign a Quit Claim Deed, instead he will execute and deliver to you a Deed in Lieu of Foreclosure. Before doing this, however, you need to understand that in a Deed in Lieu, you are probably taking the property subject to any new liens or encumbrances that attached to the house after your original Deed of Trust. You would also be taking it subject to any previously existing liens and encumbrances. If there is a mortgage loan other than yours on the property, that Deed in Lieu probably triggers a Due on Sale clause in the other loan, and you may have to immediately refinance it or pay it off. I would suggest that you use an escrow company and a title company to record the deed. You want a title policy that insures the state of title when you take it back from the partner. They can help you prepare the correct documents, but more importantly, the title report will tell you what liens and encumbrances you are taking the property subject to. It could well be that there is no equity if there are other liens, in which case taking title to the home could be a real mistake. I would suggest that you consult with an attorney in your area to review all of the possible consequences. You also need to review this with your CPA before doing anything, as this may have serious tax implications for you personally.

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You need to speak to a real estate attorney who is familiary with secured land transactions in California. You do not cancel a deed of trust, it is either foreclosed or you have what is known as a reconveyance recorded. You would not want to cancel it, as the money this person owes you is secured, and reconveying the deed of trust will cause you to lose this security interest, without getting paid. As Mr. Gibbs pointed out, this is likely to have other repercussions, so I would not take any action until you have at least consulted with an attorney.