Why Would You Use a Quitclaim Deed?

Quit claim deed

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. 

Photo by Leon Seibert on Unsplash

How Do You Resolve Title Issues?

Title Services in Murfreesboro, Smyrna, La Vergne, TN

Almost all properties go through a title search before a purchase. It’s an intensive research process that deep dives into public records looking for information that would prohibit a sale. Title searches are looking into past deeds, wills, divorce decrees, tax records, and more. Clearing up title problems is more common than expected. The goal is to identify anything outstanding and have it cleared, so a sale of a property can take place relieving the new owner of a potential financial burden.

Title searches are thorough. But what do you do if you find a claim on a property? 

The Most Common Title Problems 

Let’s take a quick look at some common title problems that might occur if you own a property. 

A mortgage lien on the property. 

When you take out a mortgage, one is put on the home by the lender until it’s paid off. However, once the mortgage has been paid, some counties don’t automatically release the lien until a request has been made. Not many people know about this and might be one of the most common title problems. 

Issues with a will. 

Estate issues are tricky, and they present themselves in many ways. Someone could’ve died without leaving a will, and the will hasn’t been probated. Just a quick note, probate means that someone is legally attending to a person’s will. The probate process confirms that it’s valid and authentic. “Issues” can happen when the property wasn’t mentioned in the will and needs to be secured before a sale. 

Another way you can have estate issues is if an heir is missing. Say a will was never made. Legally speaking, the property should be handed to kin. However, if they never find the sibling, cousin, or other family members the property can be settled and eventually sold. It has been seen, although very rare, that heirs pop up after a sale trying to stake a claim on a home. 

Judgments appear on the title. 

Credit card liens, tax liens, child support, and bankruptcy judgments are tied to a property title. If there is one out on a property, it will either prohibit you from selling or become your responsibility if you’re the new owner. 

Titles Errors

What could go wrong when filling out a title? A few. Sadly, clerical mistakes have been made in the past. A few examples could be an inaccurate legal description of the property, a poorly conducted survey, or a release that wasn’t filed correctly. 

Mechanic Liens 

Placed against a property by a general contractor, this type of lien is often filed by the contractor, or whoever starts work on making improvements to the home. They submit it to ensure they get paid. Once the work is complete, the contractor should present a “satisfaction” of the lien to release the property. 

What happens when there is a title claim against my property?

So, we have all of this information on some common title problems, but what happens when there is an actual title claim against the property? 

That would depend on when the claim appears. 

Most claims are caught during the title search. That deep dive into public records to find out more information on the property in question. A great title company will inspect records thoroughly, going back decades to ensure there aren’t issues with the title.

But, if that happens, what do you do? 

Find a Middle Tennessee title company you can trust. You’d be surprised how many liens and judgments appear and are taken care of without the buyer finding out. Why? Cause while rare, they aren’t too complicated to fix before the sale is complete. Several title issues can be resolved by filing a: 

  • A quitclaim deed – this would be used in the example of an heir needing to be removed
  • A release of lien – could be used to help eliminate child support or paid mortgages 
  • A deed of reconveyance – used to move payment of a mortgage to a deed of trust. 

The process is pretty straight forward. And, any title company that has experience helping homeowners buy and sell real estate will have the expertise to get them resolved. 

What happens when there is a claim after I purchase the property?

If the claim is brought to you after you’ve purchased the home, you have a few different courses of action that you can take. Often, they require the filing of some paperwork and, occasionally, the help of a real estate lawyer. 

The first thing you should do is contact your title company. Together you can work through the next steps. Back taxes or those pesky mortgage liens we were talking about can slip through the cracks and present themselves at unforgiving times. But, if you found the right title company before you purchased the property, they would’ve helped you buy title insurance to protect you. 

How does my title insurance policy protect me?

Title insurance is a form of indemnity insurance. It’s a “contractual agreement in which one party guarantees compensation for actual or potential losses or damages sustained by another party. Most commonly, it is an insurance policy designed to protect … owners when found to be at fault for a specific event such as misjudgment.”

You have two types of title insurance: owners and lenders. Lender’s insurance policies are usually non-negotiable when taking out a mortgage. It will protect the mortgage company from financial loss or burden if a claim creeps up. An owner’s policy is similar but bought by the seller of the house to protect the new buyer against any potential defects. 

In some cases, both policies need to come into play. But, ultimately, it’s designed to remove the financial burden from falling on the shoulders of the buyer. Let’s put how the title insurance would work into a real-life scenario. 

Property tax is something every Tennessee homeowner is going to have to deal with, and sometimes they aren’t filed correctly. Let’s say you buy a home and it appears after a title search everything looks fine. You complete the sale and reside in the home for the next 12 months. One day, you receive information that there are outstanding property taxes on your house. However, you’ve paid for everything and don’t understand the charges. After further investigation, it appears the previous owner failed to make payments. And, now there is a lien on the house. In the government’s eyes, the unpaid property tax must be paid by whoever currently resides in the home and on the property. 

Title insurance steps in to help resolve the issue, cover the financial burden, and prevent you from losing your home. 

Find an Experienced Title Company 

We’ve talked about the Nashville real estate market in 2020. With mortgage rates dropping, there is more incentive to buy a house. However, don’t lose your dream home because of a defect. Hire an experienced title company to help with title searches and to get you a comprehensive title insurance plan.