Legal Question in Real Estate Law in California

Re: Selling Quit Claimed Property

Was the quitclaim deed recorded? If so, serious problems are unlikely. If not, serious problems might arise.

Was your father in financial troubles at the time of his quitclaim? Is there any possibility that keeping his property out of the grasp of creditors was a motive for quitclaiming it away? Did you receive the house as a gift rather than pay your father market value? If the answer to any of these questions is yes, there is a possible problem; if the answer to two or three of them is yes, there is a probable problem.

More likely than not, the title company, which will be asked to issue a policy of title insurance and thus take some risk that title isn't good, is merely covering its, umm, bases.

If I were in your guys' position, I'd just pick up the phone and ask the title officer, wazzup? A lawyer from far away can only guess whether they have encountered a title problem. Did they provide a preliminary title report to the buyer? If so, did you get a copy? Did it show any red flags?

Are you using a broker to assist you with the sale? That's another person who should be researching and answering any doubts you might have about whether there is a deal-killer lurking out there.

Finally, I have to add that transfering real property, especially real property that has appreciated in value, by quitclaim during one's lifetime, rather than passing it by will or better yet living trust, is not usually a sound practice, as you guys will find out when you have to pay a stiff capital-gains tax. Your gain is based on the difference between your father's original purchase price (back in 1955??) and the 2007 selling price, which will be a lot of money. If you had inherited the house by will or trust, your gain (if any) would be the difference in value between the date of your father's death and the sale date. You would probably have a small deductible loss instead of a large taxable gain. Too late to do anything about it now, but I mention this for the guidance of others who may read this post.