General Rule

Adding or removing a person from title during a refinance can trigger Washington Real Estate Excise Tax (REET) review. Whether REET applies depends on the specific facts of the transaction, not merely the deed language.

WAC 458-61A-215 Co-Signer Exemption

A REET exemption may apply when:

• A person is added to title solely as a co-signer or co-borrower to help qualify for financing.
• The co-signer contributes no purchase funds.
• The co-signer receives no consideration.
• The primary borrower makes all mortgage payments.
• The co-signer is not a true purchaser or beneficial owner.
• The co-signer is later removed from title after refinancing or payoff.

Important Note

The regulation's example uses parents as co-signers, but the exemption is based primarily on the purpose of the transfer and lack of consideration, not necessarily blood relationship.

Lower-Risk Scenario

Borrower A owns the property and adds Co-Signer B solely to qualify for financing. Co-Signer B contributes no funds, receives no consideration, and makes no mortgage payments. After refinancing or payoff, Co-Signer B is removed from title.

This fact pattern may support a REET exemption if properly documented.

Higher-Risk Scenario

Borrower A removes Co-Signer B from title and simultaneously adds Borrower C to title as part of a refinance.

This fact pattern does not fit squarely within the co-signer examples and may be viewed as a transfer of ownership interest. REET review is likely, and REET may be assessed depending on the circumstances.

Documentation to Support an Exemption

• Signed narrative explaining the transaction.
• Affidavit from all parties.
• Evidence showing who made mortgage payments.
• Evidence that the co-signer contributed no purchase funds.
• Evidence that no consideration was paid.
• Documentation showing the co-signer was added solely for financing purposes.

Practical Rule of Thumb

• Remove co-signer only: Potential exemption available.
• Add co-signer only for financing purposes: Potential exemption available.
• Remove one person and add a different person at the same closing: Expect REET review and possible REET assessment unless escrow or the Washington Department of Revenue approves an exemption.

Key Takeaway

The critical issue is generally not whether the parties are related, but whether the transaction represents a true transfer of ownership interest and whether any consideration is being exchanged.

Many homeowners assume that a refinance is only a loan transaction. In many cases, that is true. However, when a refinance also involves adding or removing someone from title, the transaction may become more complicated.

In Washington State, changing who owns an interest in real property can raise questions about Real Estate Excise Tax, commonly known as REET. This can be especially important when a co-signer, co-borrower, family member, or another party is being added to or removed from title during a refinance.

Why Title Changes Matter During a Refinance

A refinance replaces or modifies financing on a property. But when ownership changes at the same time, title and escrow may need to evaluate whether there has been a transfer of an ownership interest.

Even if no cash is exchanged, Washington may still consider whether there is “consideration.” In some cases, consideration may include the assumption of existing debt or the addition of new debt connected to the property.

Common Situations That May Require Extra Review

• Removing a prior co-signer from title
• Adding a new co-borrower to title
• Adding a family member to ownership
• Changing title due to divorce, separation, or estate planning
• Using a quitclaim deed as part of a refinance transaction

Key Takeaways for Homeowners, Agents, and Loan Originators

1. A Refinance Does Not Automatically Avoid REET Review

If the refinance includes a change in ownership, escrow and title may need to determine whether the transfer is taxable or exempt.

2. A Quitclaim Deed Is Not Always Simple

A quitclaim deed may transfer ownership rights. Depending on the facts, that transfer may require review by title, escrow, the county, or a qualified attorney.

3. Co-Signer Situations Can Be Fact-Specific

Sometimes a person was added to title only to help qualify for financing and did not contribute toward the down payment, mortgage payments, taxes, insurance, repairs, or other property expenses. Washington rules may provide certain exemptions in specific circumstances, but documentation and professional review are important.

4. Debt May Be Considered Valuable Consideration

When a new person is added to both the loan and title, title or escrow may view the transaction as involving valuable consideration because the new party may be assuming or becoming responsible for debt connected to the property.

5. Early Review Can Prevent Closing Delays

If a refinance involves changing title, it is best to raise the issue early. Waiting until the end of the transaction can cause delays, additional fees, or unexpected tax questions.

Helpful Washington REET Resources

For more information, you may review the following Washington State resources:

• Washington Department of Revenue – Real Estate Excise Tax
• WAC 458-61A-215 – Clearing or Exiting Title and Additions to Title
• Washington DOR REET Tax Topics

Before You Change Title During a Refinance

Before adding or removing someone from title, homeowners should consider discussing the transaction with:

• A mortgage professional
• The title company
• The escrow officer
• A Washington real estate attorney, when appropriate
• A tax professional, when tax consequences may be involved

Bottom Line

Changing title during a refinance can create legal, title, escrow, and tax considerations. While some transactions may qualify for an exemption, others may require payment of Real Estate Excise Tax. The answer depends on the facts, documentation, and how the applicable rules are interpreted by the parties handling the transaction.

Lending Disclaimer: This content is for informational and educational purposes only and is not legal, tax, or financial advice. Real Estate Excise Tax treatment depends on the specific facts of each transaction and should be reviewed by the appropriate title, escrow, legal, and tax professionals. This is not a commitment to lend. Loan programs, guidelines, rates, terms, and conditions are subject to change without notice. All loans are subject to completed application, credit approval, income and asset verification, acceptable property valuation, underwriting approval, and applicable lender guidelines. Pacific Coast Financial LLC, NMLS #78982. Equal Housing Lender.