A staple when buying and selling property is the deed. Deeds are multifaceted documents integral in the sale. They are, at the core, written contracts offering a range of securities. Different types of deeds in real estate can impact the purchase. And, it’s wise to choose the best for your needs.
Quitclaim Deed vs. Warrant Deeds
As a buyer you want a property with a clear title. The title means that you, as the new owner, can live/work on the property as you see fit. But, for that clear title to mean anything, a deed must be present. Consider it the vessel required to initiate the transfer. The deed is the binding agreement lawfully stating the title has changed hands.
We want to put into perspective what a quitclaim deed can do for you. But to get that done, we need to talk about the most common deeds you’ll find in a real estate transaction: general and special warranty deeds.
General Warranty Deeds
Arguably the most popular, the warranty deed offers the most protection for the buyer. When a general warranty deed is in play, the seller agrees to protect the new owner if their right to ownership is ever challenged. And this “protection” is transcendent. It could date back decades and cover the buyer even if the current seller didn’t own the property at the time.
Special Warranty Deeds
Where the general warranty deed protects the new buyer from the time the property in question came into existence, the special warranty covers the new buyer only from the time the current seller owned the property. Still a good source of protection. Just not as comprehensive as the general warranty.
How is a quitclaim deed different?
A quitclaim is still a process of transferring titles, but it doesn’t offer the new buyer protection. The deed only transfers the interest and the type of property owned. For example, if two people own a commercial real estate property, and one of them decides to quitclaim their half, the new owner of that title will only get the half in the quitclaim.
Additionally, the deed also relieves the seller from liability. Any issues that might pop up that could challenge the new owner would not fall back on the seller. The deed itself is relieving that person of any responsibility.
We can almost hear you asking, why would such a deed exist? And, who would want one as part of their transaction?
The quitclaim has quite a history and does hold value and efficiency. Quitclaims were brought into existence when land claims needed to happen fast. Think of the settlers who moved west hundreds of years ago. Many of them relied on quitclaims to obtain property. By creating these documents which in turn inadvertently shaped the economy.
Should I use a quitclaim deed?
There are several ways a quitclaim deed is the most effective method in transferring property. They are used the most during non-traditional real estate sales.
Transferring property between family members.
In an instance, when a property is moving from one family member to another, the quitclaim is helpful. An example could be a parent wanting to leave their house to a child. These deeds aren’t uncommon in wills, and when parents want to ensure their children have an easy time coming into possession of the real estate.
Adding and removing spouses.
Quitclaims can be used between spouses. Say a new couple gets married. If the wife had owned her property and the husband moves in, the wife can transfer part of the ownership to her new husband.
The deed can also work the same but in reverse. A couple that is getting divorced can utilize a quitclaim. If one of the parties is moving out of the home, that spouse can quitclaim their half of the ownership to the other.
Clear a title defect.
Title defects can challenge any owner’s rights. If there is an instance where an error presents itself, a quitclaim can help. However, it should be noted that it can’t help with everything, but there are some things like issues with wording, incorrectly recorded documents, or missing signatures where it is most effective.
Here are real-world examples. If a grantee’s name was misspelled on a document, a quitclaim could be issued to correct the spelling and ensure there aren’t any hiccups and to keep the title clear. Small things like a misspelling can and have affected ownership.
Let’s say a title search shows a past deed wasn’t correctly executed, which means a previous owner is showing some interest in the property. A quitclaim can release them of any interest and transfer it to the present owner.
A Quitclaim Deed and a Mortgage Deed
While a quitclaim has the power to move interest in property fast, it does not have any impact on the mortgage. In the instance where a couple is divorcing and one issues a quitclaim for their half, it doesn’t release them from the mortgage deed. That document is entirely separate.
Takeaways: Issuing a quitclaim
Deeds are essential when transferring titles. Various options exist, but the sole purpose is to determine the different levels of protection for the buyer and obligations for the seller.
Quitclaims, while offering the least amount of protection, are valid and legal. They are often used between family members, spouses, and clearing defected titles.
If you are unsure whether or not your title defect can be cleared with a quitclaim deed, consult a trusted title company.