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Deeds in Washington

A deed is legal document that conveys in interest in real property from one person to another. Although there are many similarities, each state has different rules and requirements regarding deeds. Don’t rely on the description of possible deeds for another state if you want to convey property in Washington. By the same token, the information below will not be helpful if you’ve got property outside the Evergreen State.

The basic requirements for a deed in Washington are simple: it must be in writing, contain a legal description of the property, be signed by the grantor, and the grantor’s signature must be notarized. RCW 64.04.020. The legal description is a specific way of describing the property and distinguishing it from any other parcel of property. Washington law is very strict about the requirement of a legal description. An address is not sufficient, nor is a tax parcel number. To be enforceable, a deed must contain either a “metes and bounds” description (a description of the property prepared by a surveyor) or a “lot, block, and plat” description (a description of the property referring to a prior plat recorded in the county records). See Martin v. Seigel, 35 Wn.2d 223, 212 P.2d 107 (1950).

Although many types of deeds are possible, most conveyances in Washington are done with one of three deeds specified by statute:

Statutory Warranty Deed (or just Warranty Deed)
Under RCW 64.04.030, a statutory warranty deed conveys the property together with certain specified covenants from the grantor to the recipient. By using a this deed, the grantor promises the transferee (1) that he or she is the owner of the property and has the right to convey it, (2) that no one else is possessing the property, (3) that there are no encumbrances against the property, (4) that no one with a better claim to the property will interfere with the transferee’s rights, and (5) to defend certain claims regarding title to the property. Warranty deeds are commonly used in purchase transactions where the buyer wants assurances as to the title of the property.

Bargain and Sale Deed
A bargain and sale deed in Washington would be called a special warranty deed in many other states. By using a bargain and sale deed under RCW 64.04.040, the grantor makes some promises regarding title, but the covenants only relate to the period that the grantor owned the property. Thus, the grantor promises (1) that he or she is the owner of the property, (2) that there are no encumbrances against the property during the time the grantor owned it, and (3) that the grantor will not interfere with the transferee’s rights to the property. Bargain and sale deeds are commonly used by banks who have acquired property after foreclosure. A bargain and sale deed could also be used in other situations where the grantor is unwilling to make the broad covenants that go along with a warranty deed.

Quitclaim Deed
A quitclaim deed conveys title with no covenants at all. RCW 64.04.050. The grantor of a quitclaim deed does not even promise that he or she owns the property described in the deed or that he or she has the right to convey it. Quitclaim deeds are used for many purposes, including gifts of property, conveyances to correct prior deeds, and conveyances to settle a legal dispute. Quitclaim deeds are also used simply to confirm that the grantor does not claim any interest in the described property.

Once you have prepared the deed, it is always best to have it recorded in the county records. Recording a deed puts the rest of the world on notice that the transaction has occurred. In the event of a dispute between two grantees, Washington’s recording statute gives priority to the party who recorded first. Any conveyances of an interest in real property is potentially taxable in Washington, so in order to record a deed, the parties must also prepare and sign a real estate excise tax affidavit stating the purchase price or the grounds for any claimed exemption.

If you have additional questions about which deed is right for your situation, you should consult with an attorney licensed to practice law in the jurisdiction where the property is located.

Housing market in recovery? Yes, but signs show there will be a slow down in 2013

Writing for Housing Wire, Megan Hopkins reports that the housing prices are likely to top out at modest increase in value:

Despite beginning the year with market lows, most home prices gained momentum toward the end up 2012, finishing the year at 4.9% year-over-year price gains. Some markets, though they are few, may also suffer a backslide in values.

According to the latest Clear Capital home data report, national home prices are expected to increase by only 2.1% this year. The 2013 yearly gains are expected to be smaller partly because homes are starting on a higher price base, but the entire explanation is more complex than that, Clear Capital notes.

While many western localities are seeing the firming up of housing prices, there are still several areas that could potentially see a shift down in pricing:

Only eight markets are projected to see prices fall in 2013, including Denver; Louisville, Ky.; Charlotte, N.C.; Philadelphia; Atlanta; Baltimore; Chicago and St. Louis. For those eight markets, average declines should come in at just 0.9%.

Thankfully, the Seattle area housing market continues to lead the charge in the beleaguered housing recovery:

Seattle, a market with a strong recovery already in the works, is expected to see the highest gains of the top 50 major metro markets at 13.5%.

Foreclosure Fairness Act – Change of Timing for Submission of Mediation Request

In June 7, 2012, the Foreclosure Fairness Act changed regarding when a mediation demand submission may be accepted. It states the following: (SHB 2614, Sec. 5)

A housing counselor or attorney assisting a borrower may refer the borrower tomediation, pursuant to RCW 61.24.163, if the housing counselor or attorney determines that mediation is appropriate based on the individual circumstances and the borrower has received a notice of default. The referral to mediation may be made any time after a notice of default has been issued but no later than twenty days after the date a notice of sale has been recorded.

Foreclosing on an agricultural property – what you need to know

dsaWhen a party forecloses on residential or commercial property they may have options on how to do so. However, when the property being foreclosed on is being used for agricultural purposes Washington law only permits judicial foreclosure. RCW 61.24.030(1). Real property is considered “used for agricultural purposes” if it is used in a manner that produces crops, livestock or aquatic goods. RCW 61.24.030(2). Despite these fairly strict protections for agricultural land, lenders may have alternatives if they draft a deed of trust.

In a recent but unpublished decision a state appellate court upheld a party waiving the right to a judicial foreclosure based solely on the fact that the land was being used for agricultural purposes. Schroeder v. Haberthur, unpublished 2011 WL 4599661 (Oct. 6, 2011). Additionally the parties to real estate transaction may stipulate in a deed of trust that the land is not and will not be used for agricultural purposes. The grantee of the deed of trust may require the grantor to warrant in the deed of trust that the land will not be used for agricultural purposes without the consent of the grantee. Id. Absent such agreements however, deeds of trust and power of sale foreclosure are unavailable for agricultural land and foreclosure must occur judicially.

Photo Credit: federico stevanin

Foreclosures: Washington State is a “non-recourse” state (sort of)

Sign_of_the_Times-ForeclosureOne of the common statements made to me when new clients call to discuss their foreclosure, is the following:  “I don’t care if there is a deficiency when the bank forecloses on my property because Washington is a non-recourse state,” implying that he or she is free of having to pay a deficiency should the house sell for less than what is owed.  The response I always give to that proclamation is “it depends.”

Banks may choose between two options when deciding how to foreclose on property.  The most common (by far) is the non-judicial foreclosure.  This type of foreclosure is straightforward: the bank uses its leverage under their Deed of Trust on the home (think of the Deed of Trust as a very powerful lien…which it is) to compel a sale by the trustee that services the Deed.  This sale is called a trustee sale.  Once the property is sold to an innocent third party purchaser at the trustee sale, the bank is barred from collecting any deficiency on the collateral. For example, if your home is worth $300,000 and the bank forecloses on the property through the non-judicial foreclosure method and nets only $200,000 in the sale, the balance of the $100,000 cannot be collected from the borrower.  Thus, while the credit standing of the borrower may have taken a big hit, he or she no longer has to worry about satisfying that debt obligation.

As you might expect, foreclosures are not always that rosy: there lurks another option that banks may use at their discretion: the judicial foreclosure.

A judicial foreclosure is executed through the courts and is easily identified because it is an actual lawsuit against the homeowner.  How is this possible, you ask?  Why doesn’t the bank just go after the Deed of Trust and sell the property?  A judicial foreclosure goes one step further than regular non-judicial foreclosure: it not only allows the bank to compel a sale of the property, but it provides an avenue by which the bank can obtain a deficiency judgment for whatever balance was lacking in the sale.  Going back to our example above, if that individuals home is sold for the $100,000 deficiency, the bank can move the court to have that sum converted into a judgment against you. Judgments are nasty because they become automatic liens on all real and personal property.  With a judgment a bank can garnish wages and pursue other avenues against the borrower’s assets.

It is still a mystery to me why some people are pursued via judicial foreclosure rather than non-judicial foreclosure.  However, if I had to guess why they choose that option, I would have to say it’s because they suspect (right or wrong) that the borrower has money to cover the judgment.

Bank of America resumes foreclosures

According to the LA Times, Bank of America is ending its temporary foreclosure “freeze” in 23 states.

Given that FHA has altered the waiting period for those who engage in strategic foreclosures (this applies to those who make the strategic decision to “walk away” from their home), seeking a loan modification might be the best option.  According to “HAMP” or the Home Affordable Modification Program: “Borrower eligibility is based on meeting specific criteria including:


1) borrower is delinquent on their mortgage or faces imminent risk of default
2) property is occupied as borrower’s primary residence
3) mortgage was originated on or before Jan. 1, 2009 and unpaid principal balance must be no greater than $729,750 for one-unit properties. 

After determining a borrower’s eligibility, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower’s total pretax monthly income:

  • First, reduce the interest rate to as low as 2%,
  • Next, if necessary, extend the loan term to 40 years,
  • Finally, if necessary, forbear (defer) a portion of the principal until the loan is paid off and waive interest on the deferred amount.

Note: Servicers may elect to forgive principal under HAMP on a stand-alone basis or before any modification step in order to achieve the target monthly mortgage payment.”


The redefining of “Decommission” in the Model Toxics Control Act

Commercial property owners sometimes run across the unexpected on their property during excavations and/or renovations. One of the most difficult (and feared) situation is that of locating an underground fuel storage tank on your property. The reason why this can be challenging to a landowner is because of how stringent Washington State’s environmental regulations are. The Model Toxics Control Act (“MTCA”, or “MoTCA” as it is often called) provides the statutory authority to demand clean-up/remediation of these underground tanks. The Washington Administrative Code, section 173-340, outlines with specificity the limitations to remediation of these tanks. On March 3, 2010, according to a Board of Health Resolution No. 2010-4225, the manner in which tanks are “decommissioned” was altered.

Up until March 3, 2010, an option that property owners had in decommissioning these tanks was to extract whatever fuel remained, then fill it with inert material. The tank would stay underground, but it would be harmless as it would contain no fuel and would be full of soil. This is no longer an option. “Decommissioning” now means that the tank must be fully removed from the property. This is significant, as the costs involved in removing a tank vs. filling it with inert material, is substantial.

If at first you don’t succeed, try, try again! The federal government takes another shot at curbing the foreclosure crisis

After the first attempt by the Obama Administration to stem the foreclosure tide fell flat (only a fraction of eligible home owners facing foreclosure secured permanent modifications), the federal government is proposing a broad new initiative.

The New York Times reports that the government will now try to reduce the principal for home loan modifications.  To do this, it intends to provide a program by which those who are “underwater” (home value less than what is owed) can refinance into a government-backed mortgage.

This is significant because most (if not all) loan modifications up to now consisted of banks largely shifting interest rates and extending payment terms.  Thus, the actual principal of the loan was never really effected, merely the interest.  As a result, the underlying problem which plagued a lot of homeowners was never truly addressed (that they simply had purchased homes which were beyond their budget).

To fund this new program, the government intends to utilize $50 billion funds previously allotted to the Troubled Asset Relief Program, more commonly known as “TARP.”  Though reaction from many non-profit groups is generally positive, it remains to be seen whether banks will cooperate with the new program.

Loan modifications – Seven things you need to know

Wells_Fargo_Bank_Plaza,_Houston,_from_baseThe US News and World Report online provides a dynamic breakdown of the basic components of the federally-backed loan modification program. 

According to the article, here are “Seven things you need to know” about a loan modification:

1. The plan focuses on payments made to lenders rather than the price of the loan.  Experts believe that even if the value of the home possesses little or no equity, if the modified loan payment is affordable, the homeowner will continue making payments.

2.  The plan would seek to reduce the mortgage payment to 31 percent of the borrower’s gross monthly income.  “To that end, the administration’s plan requires participating loan servicers to reduce monthly payments to no more than 38 percent of the borrower’s gross monthly income. The government would then chip in to bring payments down further, to no more than 31 percent of the borrower’s monthly income. In lowering the payment, the servicer would first reduce the interest rate to as low as 2 percent. If that’s not enough to hit the 31 percent threshold, they would then extend the terms of the loan to up to 40 years. If that’s still not enough, the servicer would forebear loan principal at no interest.” 

3.  The plan would then encourage loan servicer participation by providing cash incentives:  “To encourage participation, servicers will be paid $1,000 for each modification and will get an additional $1,000 payout each year for as many as three years, as long as the borrower continues making payments. Borrowers, meanwhile, can get up to $1,000 knocked off the principal of their loan each year for as many as five years if they make their payments on time. Neither party can receive the cash incentives until the modified loan payments have been made for at least three months.”

4.  The plan would only apply to those under financial hardship.  Only owner-occupied residences with an outstanding balance of $729,750 or lower would be eligible.  (Sorry, no speculators.)

5.  The plan will require the loan modification to meet the net present value test.  What this means is that the lenders would compare the expected cash flow of the proposed modified loan with the expected cash flow of the loan unmodified.  If the modified loan would create more cash flow, then the loan will be modified and or restructured. 

6.  The plan will offer loan servicers with incentives to extinguish second lienslike home equity lines of credit. 

7.  The plan may or may not work.  (Not the most satisfying conclusion, I know).  

2008_05_07_-_Baltimore_-_Bank_of_America_1Please refer to the full US News and World Report  article by Luke Mullins here