Legal Question in Real Estate Law in Washington

Re: quit claim deed

Mr. Busch is quite right in that the grantors, your parents, would have to pay the excise tax of about 2% of the underlying loan balance as of the date of the transfer to you. But, there are other complications that you could run into, e.g., you would have the title to the house in your name but your parents are on the loan and the lender reports to the IRS that your parents are the parties who get to take the interest deduction and not you unless another arrangement is done on the loan. This situation requires you to see an attorney to get the best advice on this matter.

Re: quit claim deed

As you have found out, if someone gifts interest in property but there is an underlying loan, the county considers the gift as an actual purchase by you -- the price paid being the transfer of the loan obligation to you and away from your parents. Excise tax runs between 1-2% of the price paid so you can figure out the approximate tax from there. It varies from county to county. You MAY be able to receive an interest in the property from your parents while keeping them on the loan. However, it really all depends on how the county characterizes the transaction. I don't really like your chances there. There may be other options but in the end your parents may just have to eat the excise tax (and capital gains tax that may also apply). Otherwise, they could pay it off and then gift it to you. There would be no excise tax but you'd be stuck with the initial basis. You may be best served by seeing a local real estate attorney before taking any additional action. As you can see, making the wrong move can lead to some unanticipated results.