Of all the deeds, quitclaims offer the least amount of buyer protection. They have no warranties regarding the quality of the title. If you're about to buy a property with a quitclaim deed, be sure you understand what you're getting into.
Here's what you need to know:
What are property deeds?
During the Middle Ages, people transferred real property through a ceremony known as "livery of seisin." The person "selling" the land passed a twig or clod of turf from the land to the "buyer." That was enough to legally transfer title to the property.
Today, we use property deeds to transfer real estate. Deeds are physical, legal documents that transfer ownership from one person (the grantor) to another (the grantee). This ownership is called the "title" of the property. A title document shows who legally owns a property.
Property deed requirements vary by state, but to be legally valid, they typically contain these key elements:
- A signature from a legally competent grantor or grantors.
- An identifiable grantee. (The grantee doesn't need to be legally competent.)
- Delivery to and acceptance by the grantee.
- A legal description of the land.
- Some sort of consideration (money or something of value).
- Words of conveyance.
In most states, you must record property deeds in the appropriate county office. The grantee named on the last deed of record is recognized as the legal owner.
If your deed didn't get recorded -- for whatever reason -- you could run into problems if you sell or refinance your property. Double-check with the local county clerk's office if you have questions.
Types of property deeds
Deeds are categorized based on the legally binding promises ("covenants") and warranties the grantor makes. A general warranty deed, for example, warrants that the grantor owns the property and has a legal right to transfer title. Here are three common types of deeds:
|Type of Deed||Level of Buyer Protection||Grantor Conveys|
|General warranty||Highest||Specific covenants and warranties|
|Special warranty||Moderate||Limited warranties|
|Quitclaim||Lowest||No covenants or warranties|
What are quitclaim deeds?
Quitclaim deeds offer the lowest level of buyer protection. They convey whatever interest the grantor has in the property at the time the deed is executed.
Grantors "remise, release, and quitclaim" their interest in the property without making promises about the quality of the title. That means there's no guarantee the grantor actually owns the property or that they have the right to transfer it. Without warranties, the grantee has little recourse if there's a problem with the title.
When do you use a quitclaim deed?
Quitclaim deeds are a fast and easy way to transfer property without doing a title search or buying title insurance. They're commonly used when the property is transferred outside traditional sales channels.
Because they lack any warranties, quitclaim deeds are best for low-risk transactions, including those that don't involve the exchange of money. They're often used to transfer title between family members. They can also be used after marriage to add a new spouse to the title or after divorce to remove one of the parties from the title.
There are other situations where a quitclaim deed may be used to transfer title, including:
- when a property owner has a name change following marriage or divorce,
- when ownership is transferred to an LLC or corporation, and
- when ownership is transferred to a trust (e.g., as part of estate planning).
Removing title defects
Another use of quitclaim deeds is to remove title defects or "clouds." A cloud is any claim, unreleased lien, or encumbrance that puts a title into question. A cloud can also be due to:
- an issue with the wording on a document (e.g., it doesn't comply with state requirements),
- a missing signature, or
- an incorrectly recorded real estate document.
Clouds are usually found during a title search. Lenders typically require a title search (and title insurance) to protect against any claims from third parties. If a cloud is found, it's resolved through a quitclaim deed.
How do quitclaim deeds affect mortgages?
There isn't usually an exchange of money with quitclaim deeds. And without any money, it would be difficult for the grantor to pay off a mortgage. Therefore, most properties transferred by quitclaim deeds don't have an outstanding mortgage.
Still, it's possible for a grantor to have a mortgage and file a quitclaim deed. In these cases, the grantor remains legally responsible for the mortgage, even after ownership is transferred to the grantee. A quitclaim deed transfers ownership, but it doesn't have anything to do with debts or claims on the property.
Things can get tricky if the mortgage has a due-on-sale clause. This provision requires the full payment of the mortgage if the property is sold or transferred.
Say the grantor thinks the grantee will make the mortgage payments, but the grantee doesn't pay. Or the grantee sells the property to someone else. With a quitclaim deed, the grantor has no recourse. If this happens, the original grantor could be in legal trouble with the lender.
To avoid problems, the grantee can either assume the loan or refinance it and pay off the original mortgage.
Quitclaim deeds can be a fast way to transfer property, but they do have limitations. When in doubt, consult an experienced real estate attorney before making any decisions.
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