A Quitclaim Deed is a legal document used to quickly transfer ownership of real estate during a homebuying process from an owner or seller (the “grantor”) to another person or party (the “grantee”).
However, quitclaim deeds include no protections or guarantees for the buyer. This means the buyer will only ever get what the seller owns, which may be nothing.
In this post, we’ll delve into the key repercussions of a quitclaim deed to help you make informed decisions regarding property transfers.
- A quitclaim deed is used for amending or changing the title to real property.
- It is common for property transfers when no money is being exchanged, like those occurring between family members.
- It doesn’t guarantee the grantor’s ownership of a property; it simply says that if they do own it, they’re giving up those rights.
- General warranty deeds offer the highest level of buyer protection, while quitclaim deeds provide the least amount of protection.
What Is the Purpose of a Quitclaim Deed?
A quitclaim is used when a name has to be added or removed from ownership or no sale (transfer of money) is involved in the property changing hands. Here are some of the most common uses:
- Transferring real estate within a family
- Changing ownership after a divorce or marriage (remove or add a spouse to property title)
- Correcting property title issues or defects (missing signature, wording issues, etc)
- Moving property into trusts and estates
- Moving property into business Entities
- Avoiding the probate process when transferring property ownership before someone’s death
Because quitclaim deeds don’t guarantee the seller has a full property ownership interest, buyers and sellers often use warranty deeds to transfer property.
Knowing the differences between these and other deeds can protect you from risky property transactions.
Repercussions of a Quitclaim Deed
While a quitclaim deed can be effective in certain situations, it’s crucial to understand the potential repercussions that accompany its use.
1. Lack of Warranty Protection
One of the significant repercussions of a quitclaim deed is the absence of warranty protection.
Unlike warranty deeds, which guarantee that the grantor has legitimate ownership and that there are no liens or encumbrances on the property, quitclaim deeds offer no buyer protection and do not guarantee that the interest in the property is valid.
As such, grantees must assume all risks related to the property’s title when signing the quitclaim deed form, including any outstanding liens or legal issues.
2. Potential Title Issues
A quitclaim deed typically includes a legal description of the property and outlines the involved parties. Due to the lack of thorough real estate title searches or title insurance associated with quitclaim deeds, there is an increased risk of undiscovered property title issues.
This means the grantee may be responsible for addressing any existing liens, mortgages, or other claims on the property. It could potentially lead to unanticipated financial obligations or legal disputes for the grantee if any liens, mortgages, or other claims exist on the property.
Therefore, it is imperative to complete due diligence and ensure the property has a clear title before accepting property through a quitclaim deed.
3. Inadequate Protection for Grantees
Although a quitclaim deed allows the grantor to transfer their interest in the property, the grantee (or buyer) receives little protection from it. The new property owner may have some limited legal remedy against the previous owner in cases of disagreements or title problems involving the property.
Quitclaim deeds are less suitable for real estate purchases because of this lack of security; warranty deeds are often favored because of their extensive promises.
4. Mortgage and Financial Obligations
Transferring property through a quitclaim deed does not absolve the grantor of any existing mortgage or financial obligations tied to the property. Any unpaid loans or debts related to the property still fall under the grantor’s control following the transfer.
Both parties must properly communicate these commitments to prevent issues or misunderstandings throughout the transfer process.
5. Family and Relationship Dynamics
Quitclaim deeds are often used in family-related transfers or between parties with a certain level of trust. However, these transactions can have significant repercussions on family dynamics and relationships.
Conflicts can arise when a family transfers property ownership, especially if there are questions about the impact on finances or ownership.
To reduce any repercussions, it’s crucial to approach such transactions with open communication, openness, and legal counsel.
Should You Use a Quitclaim Deed?
A quitclaim deed is a simple method to release one’s interest in real property, though it doesn’t detail the specific nature of those rights and comes without any guarantees. Before opting for a quitclaim deed to transfer a property, it’s important to understand potential risks and explore safer alternatives.
If you’re transferring property ownership to a family member or trusted friend, a quitclaim deed might suffice. However, for real estate transactions involving strangers, it is advisable to use a Warranty Deed, which offers more protection and assurances.