WHAT IS A QUIT CLAIM DEED? THE COMPLETE GUIDE
April 29, 2020
"Bring a pen and be prepared to get a cramp in your hand!" This advice from a real estate agent might sound a little facetious, but it's not too far off from the truth. There is a lot of paperwork involved in a real estate transaction.
In the midst of all this paperwork, there is one document that actually officially transfers ownership of the property from the seller to the buyer. This is called a deed.
There are three types of real estate deeds, the general warranty deed, special warranty deed, and quit claim deed. Let's explore a little more about the quit claim deed.
Types of Deeds
The quit claim deed, often mistaken as a quick claim deed or non-warranty deed, is one of three types of deeds. A deed is the specific paper that legally transfers ownership of real estate from the seller to the buyer.
The general warranty deed and special warranty deed include protections for the buyer. The "warranties" can vary but typically involve assurances for the buyer that a third-party will not be able to take legal action against them challenging their right to ownership of the property.
The quit claim deed is sometimes referred to as a non-warranty deed for that very reason, it doesn't include any warranties. The only purpose of a quit claim deed is to transfer ownership. That's it.
The name comes from the idea that the current owner is simply "quitting" all claim to the property and handing over their interest to the buyer.
From Humble Beginnings
Back in the day, people literally transferred real estate property by the seller handing a stick or a clod of dirt to the buyer. This ceremonial act represented the legal transfer. This was referred to as the "livery of seisin". It was usually accompanied by a verbal or written contract, but this was the only way of representing the legal transfer.
Things have gotten a little more sophisticated since then.
Quit claim deeds have been very useful at several points in history when people were looking for a good way to transfer property quickly. One such example is the California Gold Rush.
When Would You Use a Quit Claim Deed?
Since quit claim deeds don't come with any buyer protections, you may wonder why people would choose to use them. This type of deed transfer is very quick and useful in a variety of situations. Let's take a look.
Transferring Property Between Family Members
Quit claim deeds are often used when transferring property between two parties who already know and trust each other. They are particularly common when there is no money being transferred.
For example, an aging parent may use a quit claim deed to transfer their house to their child. Presumably, the child is already aware of any issues with the home and would not require any warranties.
Transferring Property to Subsidiaries
Likewise, businesses and their subsidiaries may use quit claim deeds to transfer ownership between companies. Presumably, a subsidiary company fully trusts their parent company and would have no problem accepting a transfer without warranties. On the flip side, the parent company can be fairly certain that the subsidiary would not be filing a lawsuit against them over a problem with the property.
Removing Someone's Name from the Title
Quit claim deeds are a handy tool when you want to remove one person's name from the title but the property is not being sold. This is commonly seen in divorces where one spouse is quitting their claim to the house and handing over full ownership to the other. The reverse is also true. A person getting married after they already own a home may wish to add their new spouse's name to the title.
Removing Title Defects
Quit claim deeds can also be used to remove a defect from the title. For example, say a seller has already transferred the property to a buyer with a warranty deed. However, it is discovered that there is a mistake such as a misspelled name or a missing signature. A quit claim deed can be used to perfect the title, the advantage being that this type of deed is relatively fast and easy to execute.
A Note About Mortgages
Quit claim deeds are most often used when there is no mortgage involved. This is because they only affect the ownership of the property, not the mortgage.
It is possible for a grantor to give up the rights to their property and still be stuck paying the mortgage on it, which is why other types of deeds are usually used in this case. Additionally, most mortgages have a due-on-sale clause, meaning the entire balance of the mortgage comes due upon transfer of the property. Lenders do this to protect themselves since the property serves as collateral for the loan.
Obviously, this is not an ideal situation for the grantor.
However, quit claim deeds may be used when a grantor wants to transfer both the property and the mortgage to the receiving party. In this case, the grantee must also sign a mortgage assumption agreement and agree to take over the mortgage. Not all lending companies will allow this so you'll need to check the terms of your loan.
Clear as Mud? Hire a Real Estate Attorney
Real estate agents are great at what they do, selling houses, they aren't legal experts. To ensure that all your paperwork is in order, that you have addressed tax consequences and how a deed transfer may affect hazard insurance and title insurance, it is an excellent idea to hire a real estate attorney to oversee closing.
Unsure whether you can use a quit claim deed or if you need a warranty deed to complete the transfer? That's one of a million questions your real estate attorney can definitively answer for you.
For more answers about real estate law, contact us today for a free consultation!