Is one owner of a house liable for an ELOCif the other owner obtained it without their signature?
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Is one owner of a house liable for an ELOCif the other owner obtained it without their signature?
A male and a female purchased a home together. The male obtained and ELOC without the female’s signature. The male later signed ownership over to the female by special warranty deed. Is the female still liable for the ELOC when selling the home?
Asked on February 20, 2012 under Real Estate Law, North Carolina
Answers:
Nate H
Answered 2 months ago | Contributor
- ELOC and Co-Signing: Typically, for someone to be personally liable for an ELOC, they must have signed the loan agreement. If the female co-owner never signed or agreed to the ELOC, she likely is not personally liable for the debt.
- Lien on the Property: Even if she is not personally liable, the ELOC may still create a lien against the property. Lenders often secure an ELOC by placing a lien on the home, regardless of who is on the loan. If the male co-owner obtained the ELOC, it may have been secured by the property itself. Therefore, when the female goes to sell the house, the lender could require the loan to be paid off from the proceeds of the sale to release the lien.
- Special Warranty Deed: The male signing over ownership via a special warranty deed does not automatically remove the ELOC lien. A special warranty deed typically guarantees that the property was free of claims or liens during the time the grantor (the male) owned it but doesn’t protect the grantee (the female) from liens that existed before or after the transfer unless specifically stated. If the ELOC lien was placed on the property before the transfer, it would likely remain.
- Title Search: A title search before selling the home will reveal any outstanding liens, including the ELOC. The lien would need to be addressed before the sale can proceed.
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