Quitclaim Deeds Explained: Pros and Cons of Quitclaim Deeds

A quitclaim deed is a legal document that transfers property ownership rights from one person (a grantor) to another (a grantee). Quitclaim deed transfers contain a legal description of the property and the names of the grantor and grantee. They are filed with a county recorder's office and become part of the public record.

Quitclaim deeds—sometimes called quick claim deeds—are rarely used to transfer titles in commercial real estate sales. More commonly, they are used to transfer interest in a property when no money is exchanged. Examples include transferring real property between family members, transferring real estate to a living trust (often as part of estate planning), correcting errors and title defects from a previous transaction, or adding or removing a person from an ownership group.

While quitclaim deeds can quickly clear up property title disputes and provide easy property transfers among family members, they are less comprehensive than another legal instrument known as a warranty deed. Warranty deeds—including general warranty deeds and special warranty deeds (also called grant deeds)—are the property deeds that typically accompany sales from one property owner to another. They differ from quitclaim deeds in a couple of ways:

• Guarantee of ownership: Signing a quitclaim deed does not prove that a grantor has the right to deed, or transfer ownership of, a piece of property. In some cases, grantors deed property that both sides know the grantor does not own (often to clear up title errors). By contrast, only the legal owner of a property can issue a warranty deed.
• Guaranteed title clearance: A warranty deed confirms a clear title on a piece of property. It is prepared by a title company, which works to confirm the property is free from property tax liens, legal claims from past owners (such as a seller's ex-spouse), or other encumbrances. A general warranty deed will warrant the entire ownership history of the property. A special warranty deed (also called a grant deed) only covers the time period when the seller has had ownership of the property.

Both quitclaim deeds and warranty deeds should be stamped by a notary public and filed with a county recorder, city recorder, or county clerk. Some municipalities assess a transfer tax on such transactions.

Quitclaim deeds appeal to grantors and grantees for several key reasons.

1. 1. Simplicity: Most quitclaim deeds are short and straightforward. Templates for such deeds can be found on legal and real estate websites. Seek professional legal advice before deeding any property to someone else.
2. 2. Good for internal transfers: Quitclaim deeds make it easy to transfer interest in property among family members or from individuals to a living trust.
3. 3. Legally binding: Despite their simplicity, quitclaim deeds are legal documents that can help provide proof of ownership in a title search.

Quitclaim deeds can be practical and simple, yet these types of deeds will not suffice for many transactions on account of several flaws.

1. 1. No proof of ownership: The grantor in a quitclaim deed does not need to provide proof of title or title insurance to sign the deed, making it possible for someone to use such deeds to grant property they do not actually own.
2. 2. No guarantees to the new owner: Unlike a warranty deed, a quitclaim deed does not guarantee that a property is free from title defects such as tax liens or title claims from third parties. For this reason, it is a poor legal instrument to use when selling a piece of property for cash considerations.
3. 3. Considered insufficient by commercial lenders: Mortgage lenders insist upon warranty deeds as opposed to quitclaim deeds when backing loans on a piece of real estate. The lenders need the assurance of property ownership that a warranty deed provides.

All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.

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