Deeds are legal documents that act as a way to transfer real estate. There are three types of deeds: general warranty, special warranty, and quitclaim deeds. So, what is a quitclaim deed and how is it different than others? To understand what a quitclaim deed is, it’s best to start at the beginning.
History of Quitclaim Deeds
At times when land claims were quick and efficient, the quitclaim was a great tool to take title. The California Gold Rush is the best example of a historical period where the quitclaim was an essential factor in shaping the economy and social hierarchy of the day. Today, the quitclaim deed can remove apparent defects in a title without the time and expense of litigation.
No Warranties Included with a Quitclaim
The difference between each type of deed relate to the types of warranties the grantor is making to the grantee. With the other two types of deeds, certain warranties are offered to the grantor when he or she receives ownership of the property. Usually, these warranties include the promise that the grantor has legal ownership and the right to transfer the property. Additionally, there is a warranty that the grantor will defend the grantee against claims to ownership from other parties.
However, the grantee of a quitclaim deed receives no such warranty. In this case, the grantor is simply “quitting” all claims to the property by giving the grantee whatever ownership interest the he or she has. The deed transfers ownership without making any warranties.
Even though the grantor is not making any warranties, this doesn’t mean you should never accept a quitclaim deed. First, in many situations, the buyer does not need warranties. For example, quitclaim deeds are useful where between known parties. This would include transfers between family members or to business subsidiaries. Some may use it to transfer a property to a trust as well.
Removing Title Defects
Quitclaim deeds are also instrumental in removing title defects. These defects arise when a title search reveals the property was improperly transferred. A previous owner may not have corrected legal requirements and format for the deed. A defect may also arise if there is an unknown entity with an interest in the property. A quitclaim deed could be necessary for that third party to relinquish any claims.
No Affect on Mortgages
If a property has an existing mortgage, a quitclaim deed is not usually the document used to transfer the property. The difference is the quitclaim deed transfers property with no “sell” involved. When a property does have an existing mortgage, the grantee usually insists on receiving the transfer warranties in a general warranty deed.
However, this does not mean that quitclaim deeds are never used to transfer property that has an existing mortgage. In such situations, the quitclaim deed will not affect the mortgage. This means whoever is the responsible party for the mortgage must continue to pay it unless the new property owner assumes responsibility for the repayment with a mortgage assumption agreement.
If you have questions about quitclaim deeds and their role in transferring property, contact the real estate experts at Moore & Alphin.