Deeds are legal instruments used to transfer real estate, and almost everyone will encounter a deed of some sort at one time or another. Property deeds are the documents used in real estate transactions to transfer ownership, and quit claim deeds are one type of property deed.
There are three main types of deeds:
The difference between each type of deed has to do with the types of warranties the grantor (the party selling or otherwise transferring ownership of the property) is making to the grantee (the person buying or otherwise receiving ownership of the property).
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Introduction to Quit Claim Deeds
A quit claim deed is a legal document used to transfer property ownership from one person to another quickly and efficiently. Unlike other types of deeds, a quit claim deed does not guarantee a clear title or that the grantor actually owns the property being transferred. Instead, it simply conveys whatever interest the grantor may have in the property at the time of the transfer. Quit claim deeds are most commonly used to transfer property in non-sale situations, such as between family members, to correct errors in a property’s title, or to resolve issues that arise during estate planning. Understanding quit claim deeds is essential for anyone involved in transferring property ownership, as they are a straightforward tool used to transfer real estate but come with unique risks and limitations. Whether you are transferring property between family members or need to clear up a title issue, knowing how a quit claim deed works can help ensure a smooth property transfer.
Types of Deeds
When transferring real estate, it is important to understand the different types of deeds available. Quit claim deeds, warranty deeds, and special warranty deeds each offer varying levels of protection for the new property owner. A warranty deed provides the highest level of assurance, guaranteeing that the grantor owns the property outright and that there are no hidden claims, liens, or title issues. Special warranty deeds offer a more limited guarantee, ensuring that the grantor has not caused any title problems during their period of ownership, but not before. Quit claim deeds, on the other hand, provide no guarantees or warranties at all. The grantor simply transfers whatever interest they may have in the property, if any, without making any promises about the property’s title. Understanding these differences is crucial when choosing the right deed for your property transfer.
What Is a Quit Claim Deed?
A quit claim deed, sometimes referred to as a quit claim deed or claim deed, is a type of legal document that allows a property owner (the grantor) to transfer any ownership interest they may have in a property to another person (the grantee). Unlike other deeds, a quit claim deed does not guarantee that the grantor has valid ownership or that the property is free from other claims. Instead, it simply releases whatever interest the grantor holds, if any, to the grantee. Quit claim deeds are often used in situations where the parties know and trust each other, such as during a divorce, when one spouse transfers property to the other, or as part of an estate plan. Because a quit claim deed does not provide any warranties or guarantees, it is important for both parties to understand that the deed only transfers the grantor’s interest—if the grantor owns nothing, the grantee receives nothing.
No Warranties Are Included
With the other two types of deeds, the grantee is receiving certain warranties when he or she receives ownership of the property. Usually, these warranties include the promise that the grantor has proper ownership and the right to sell the property, as well as the warranty that the grantor will defend the grantee against adverse claims to ownership from other parties that may arise.
However, the grantee of a quit claim deed receives no such assurances. In this case, the grantor is simply “quitting” all claim to the property by giving the grantee whatever property interest the grantor has, if any. The deed simply transfers ownership without making any warranties. Unlike warranty deeds, quit claim deeds do not guarantee ownership rights or the validity of the property interest being transferred. Thus, if the grantor never had proper title to the property to begin with, then the grantee is receiving nothing.
Just because the grantor is not making any warranties does not mean that you should never accept a quit claim deed. First of all, in many situations the grantee does not need (or care about) warranties. For instance, quit claim deeds are useful where there is strong trust between the parties, such as transfers between family members or to business subsidiaries. Perhaps you want to put your own property into a trust or transfer it to a sibling. They are also useful when dividing property after a divorce.
Use Them to Remove Title Defects
Quit claim deeds are also commonly used to remove title defects or “clouds.” Clouds often arise when a title search reveals that the property was improperly transferred. For instance, maybe a previous owner failed to follow the correct legal requirements and format for the deed. Other times a cloud may arise when someone may have an unexpected interest in a property, possibly a grantor transferred property without their spouse’s consent, who also had an interest. In this case, the spouse who still has a possible interest may be asked to execute a quit claim deed to relinquish any right to the property that he or she may have. Sometimes, only one spouse is required to sign the deed, especially if the property is not community property. When the property is being transferred, the spouse who receives the property is referred to as the receiving spouse.
They Don't Affect Mortgages
Usually, quit claim deeds are not used to transfer property that has an existing mortgage on it. This is because usually they are used with property that is not being sold, but simply transferred. Where property does have an existing mortgage the buyer usually insists on receiving the transfer warranties from the grantor that are contained in a general warranty deed.
However, this does not mean that quit claim deeds are never used to transfer property that has an existing mortgage. In such situations, though, it is important to keep in mind that the quit claim deed will not affect the mortgage loan. This means that whoever is named as the responsible party for the mortgage loan must continue to repay it unless the new property owner assumes responsibility for the repayment by signing a mortgage assumption agreement.
They Are Great for Transfers to Subsidiaries
As alluded to above, quit claim deeds are an excellent vehicle for land transfers to business subsidiaries and parent companies. Because the parties already trust each other (after all, what subsidiary would dare sue its parent company?), the relative ease of drafting, executing, and filing a quit claim deed makes it an effective way to handle such transactions. A quit claim deed serves as a legal tool for transferring property between related business entities, providing a formal and recognized method for these transactions.
Family Member Transfers
Quit claim deeds are a popular choice for transferring property between family members because they offer a simple and cost-effective way to change property ownership without a traditional real estate sale. For example, a parent might use a quit claim deed to transfer property to a child, or one spouse may transfer their interest in a property to the other during a divorce. Quit claim deeds can also be used to add or remove a family member from a property title, making them a flexible tool for managing family real estate.
However, it is important to understand the potential implications of using a quit claim deed for family transfers. Transferring property ownership with a quit claim deed can affect property taxes, and may impact the availability of title insurance, which protects the new property owner against title defects or claims. In some cases, the new owner may be responsible for capital gains tax if they sell the property in the future. Because quit claim deeds do not guarantee a clear title, there is also a risk that unresolved title issues could arise later. Before using a quit claim deed to transfer property between family members, it is wise to consult a real estate attorney or tax professional to ensure you understand all the potential consequences and requirements. By taking these steps, you can help ensure a smooth and secure transfer of property ownership.
How to Create a Deed
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