Aug. 13, 2020
Quitclaim deeds offer very limited buyer protection — they're used most often for transferring property between family members. Are they right for your situation? Click through to learn more about these contracts.
Property deeds are written and signed legal documents used to transfer ownership of real property from a previous owner, or grantor, to a new owner, or grantee. Deeds can be official or private. General warranty deeds offer the highest level of buyer protection, while quitclaim deeds typically provide the least protection. So why are they used?
Quitclaim deeds are most often used for transferring property between family members. These deeds are relatively common, and most real estate agents have experience dealing with them. Because the parties know each other, they're more likely to accept the risks associated with the lack of buyer protection. Quitclaim deeds are used when no money is involved in property transfer ownership.
What are you getting into when you obtain property this way?
- A quitclaim deed also is called a nonwarranty deed and conveys whatever interest the grantor currently has in the property, if any. The grantor only "remises, releases, and quitclaims" his or her interest in the property to the grantee. There are no warranties or promises regarding the quality of the title.
- Accept a quitclaim deed only from grantors you know and trust. Quitclaim deeds are best for low-risk transactions between people who know each other. Quitclaim deeds are commonly used to transfer property from a parent to an adult child or between siblings or when a property owner gets married and wants to add his or her spouse to the title. Married couples who own a home together and later divorce also use quitclaim deeds. When one party acquires the home in a divorce settlement, the other may execute a quitclaim deed to eliminate his or her interest in the property.
- Quitclaim deeds can be used to clear a title defect, also known as a cloud on the title, in the recorded history of the real estate title. Title defects include issues with wording, like not complying with state standards, missing a signature or even failing to properly record the real estate documents.
- Quitclaim deeds are as effective as warranty deeds to transfer titles but only if the title is good. It's the lack of any warranties that makes a quitclaim deed less attractive from a grantee's perspective. If the title contains a defect, the grantee has no legal recourse against the grantor.
- A quitclaim deed affects ownership and the name on the deed but not the mortgage. If there's still a mortgage on the property, the grantor may remain liable for the mortgage even after ownership is transferred through the execution of a quitclaim deed. Quitclaim deeds transfer titles but don't affect mortgages. For this reason, a quitclaim deed may not be a good idea when a property still has a mortgage.
Think of quitclaim deeds as a fast way to accomplish real estate transfers among family members or to place real estate into a trust. Of course, this is just an introduction to a complicated legal issue. Let us know if you're involved in a property transfer and think this might be right for you.