Quitclaim Deeds: When to Use Them

Understanding Quitclaim Deeds

A quitclaim deed transfers whatever interest the grantor (the person giving up the property) currently has in the property. It does not promise that the grantor actually owns the property or that the title is clear. This is different from a warranty deed, which guarantees that the title is free of defects.

The key phrase in a quitclaim deed is 'remise, release, and quitclaim.' The grantor simply gives up any claim they might have. If the grantor has no ownership interest, the grantee (the person receiving the property) gets nothing. This makes a quitclaim deed a useful tool in specific situations, but it is not suitable for most real estate purchases.

• No title search or title insurance is typically required.
• The grantor makes no warranties about the property's title.
• It is often used between family members or in divorce settlements.
• It is not recommended for buying a home from a stranger.

When to Use a Quitclaim Deed

Quitclaim deeds are commonly used in situations where the transfer is not an arm's-length sale. For example, transferring property between spouses during a divorce or adding a family member to the deed. In these cases, the parties usually know each other and the property's history, so the lack of warranties is less of a concern.

Another common use is to clear up a title defect. If there is a mistake in a previous deed, such as a misspelled name, a quitclaim deed can correct it. Also, if someone has an interest in a property but is not on the title, a quitclaim deed can formally give up that interest.

You might also use a quitclaim deed to transfer property into a living trust. This is a common estate planning move. The transfer does not involve a sale, and the grantor is often the same person as the trustee, so the lack of warranties is not a problem.

• Transferring property between spouses or ex-spouses.
• Adding or removing a family member from the title.
• Correcting a name or legal description on an existing deed.
• Moving property into a living trust or LLC.
• Settling an estate or distributing inherited property.

When to Avoid a Quitclaim Deed

Do not use a quitclaim deed for a standard real estate purchase. If you are buying a home from an unrelated seller, you need the protections of a warranty deed. A quitclaim deed gives you no recourse if there are liens, unpaid taxes, or other claims against the property.

If you are the buyer, you should insist on a title search and title insurance. These protect your investment. A quitclaim deed does not provide any such protection. You could end up with a property that has a mortgage or tax lien, and you would be responsible for paying it off.

Also, avoid a quitclaim deed if you are unsure about the property's history. For example, if the property has changed hands multiple times or there is a dispute over ownership, a quitclaim deed is not enough. You need a full title examination.

• Purchasing a home from an unrelated seller.
• Any transaction where you need financing from a bank.
• When there are known title issues or disputes.
• If you are not familiar with the property's history.

How to Prepare a Quitclaim Deed

Preparing a quitclaim deed is straightforward, but it must meet your state's legal requirements. Most states require the grantor's name, the grantee's name, a legal description of the property, and the grantor's signature. Some states also require notarization and witnesses.

You can find free quitclaim deed forms online or at your local county recorder's office. However, it is wise to have an attorney review the deed before you sign it, especially if the property is valuable or the situation is complex. State rules vary, so check your local requirements.

After signing, you must file the deed with the county recorder or clerk in the county where the property is located. This makes the transfer public record. There is usually a filing fee, which varies by county.

• Obtain a form that complies with your state's laws.
• Fill in the legal description exactly as it appears on the current deed.
• Sign the deed in the presence of a notary public (if required).
• Record the deed with the county recorder's office.

Potential Risks and Consequences

The biggest risk of a quitclaim deed is that you might not actually receive the property. If the grantor does not own the property or has only a partial interest, you get only what they have. You cannot sue the grantor for breach of warranty because there is no warranty.

Another consequence is that a quitclaim deed does not clear up existing liens or encumbrances. If there is a mortgage on the property, the deed transfers the property subject to that mortgage. The new owner may be responsible for the debt, depending on the circumstances.

Also, be aware that a quitclaim deed can affect your property taxes. In some states, transferring property between spouses or into a trust may trigger a reassessment, which could increase taxes. Check with your local tax assessor to understand the implications.

• No guarantee of a clear title.
• Potential for undisclosed liens or debts.
• Possible tax reassessment.
• Limited legal recourse if problems arise.

Alternatives to a Quitclaim Deed

If you need more protection, consider a warranty deed. This type of deed includes guarantees that the grantor owns the property and that there are no hidden claims. Warranty deeds are standard in real estate sales and provide legal recourse if the title is defective.

Another option is a special warranty deed, which offers limited warranties. It only covers claims that arose during the grantor's ownership. This is often used in commercial transactions or when a seller is not willing to give a full warranty.

For estate planning, you might use a transfer-on-death deed (TOD deed) or a beneficiary deed. These allow property to pass to a beneficiary without probate. They take effect only upon the owner's death and can be revoked at any time.

• Warranty deed: full protection for buyers.
• Special warranty deed: limited protection.
• Transfer-on-death deed: avoids probate.
• Quitclaim deed: only for low-risk transfers.