Legal Question in Real Estate Law in California

Re: temporary removal of party on trust deed for refinancing purposes

I consider this unwise for several reasons. One is that the taxing authorities - property tax appraiser and assessor, and federal and state income tax agencies -- will not consider the brief change of ownership trivial at all. The half interest that changes hands will be (or at least should be) reappraised at current market value. This doesn't happen with an interspousal transfer. Also, you will expose yourself to capital gains/capital losses and/or gift tax depending on original value, current value and how the sale and repurchase are priced and reported.

The tax authorities monitor recording of deeds, so the transactions are not very likely to escape official notice.

It would be possible to avoid the most obvious pitfall -- that your brother wouldn't deed back to you -- by preparing the reconveying deed in advance, and having a neutral party hold it for you until after the refinancing closes.

However, there's another problem. The loan may contain a "due on sale" type clause that would be triggered by the reconveyance.

All in all, I would prefer that you instruct the loan broker to find you a lender that believes having a second obligor on the loan is better than having only one, even if the second obligor has weak credit. Some credit is better than none.

By the way, both being "on the trust deed" isn't what makes you legal co-owners. Trust deeds are financing instruments and do not convey legal title, only an equitable interest and a conditional power of sale. Legal title is conveyed by a deed such as a quitclaim deed or grant deed. If you are both "on the trust deed" that means each of you has put up his or her half interest as collateral for the existing financing.