If you are tasked with transferring property and real estate holdings between family members or spouses, you may encounter the term "quitclaim deed."
This particular deed is typically included in documents signed when you purchased the property and acts as proof of ownership for the buyer. That being said, a quitclaim deed offers the lowest level of buyer protection.
Here's everything you need to know about this document, including how it functions and when you might need it.
What Is a Quitclaim Deed?
A quitclaim deed is an important legal document used in real estate transactions to transfer property ownership from one party to another. As mentioned, a quitclaim deed offers minimal protection for the buyer. This is because the person transferring the property, known as the grantor, "quits" any claim they have to the property and passes it to the recipient, called the grantee.
However, it's crucial to understand that a quitclaim deed doesn't guarantee that the grantor actually owns the property or that the title is free from defects. It also does not offer buyers protection from existing liens or encumbrances. This means quitclaim deeds can be used fraudulently.
When Do You Use a Quitclaim Deed?
Quitclaim deeds are typically used in situations where the parties involved trust each other or when the property transfer doesn't involve a traditional sale. Some common scenarios include transferring property between family members (such as parents to their children), divorce proceedings (one spouse to the other), or transferring property into a trust.
Some other situations that may use quitclaim deeds include adding or removing a spouse from the property title following marriage or divorce and cleaning title issues such as an old claim or lien.
What Are the Alternatives to Quitclaim Deeds?
For most property transactions, especially those involving a sale to an unrelated party, sellers can use other types of deeds, including:
Warranty Deed
A warranty deed is a legal document that provides the highest level of protection for the buyer. When a seller (grantor) issues a warranty deed to a buyer (grantee), they guarantee that they have clear title to the property and the right to sell it. This deed assures the buyer that the property is free from any undisclosed liens, encumbrances, or claims except those explicitly stated in the deed. It also guarantees that the seller will defend the buyer's title against any future claims, even those that may have arisen before the seller's ownership.
Special Warranty Deed
Unlike a general warranty deed, a special warranty deed offers limited protection to the buyer. With this type of deed, the seller only guarantees that there are no title defects, liens, or encumbrances on the property that occurred during their period of ownership. The seller did not make any promises about the property's title status before they owned it.
Special warranty deeds are commonly used in commercial real estate transactions, foreclosures, and estate sales.
