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  2. Warranty deed vs. quitclaim deed

Warranty deed vs. quitclaim deed

Both transfer ownership of property, but a warranty deed comes with guarantees

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When you buy or sell a home, you'll encounter a stack of paperwork at closing. This includes the deed to the property, which is used to transfer ownership to the new owner.

The most commonly used deeds in real estate are warranty deeds and quitclaim deeds. They're both legal deeds — but only a warranty deed guarantees that the seller has the full right to transfer ownership without any liens or judgments.

Warranty deeds are more common, but quitclaim deeds can be used to quickly transfer a property’s ownership from one individual (called the grantor) to another (the grantee). However, this type of deed is generally used among family members to facilitate a quick transfer of property in cases where money doesn't change hands (if the property is a gift, part of an inheritance or claimed in a divorce, for instance, or when a family member’s name is added to or from a title).

“I’ve used quitclaim deeds twice,” said Matt S. from Demotte, Indiana. “Both times to add my wife to a property I bought. The first time was adding her to the house after we got married. So she wouldn’t have to have closing meetings at the bank, I just quitclaimed her closing on the property. I used a lawyer I trust who has worked with my family for decades. It was only a 10 minute process or so. Very simple.”

Key insights

  • A quitclaim deed can be just as good as a warranty deed to transfer a title — if the title has no issues.
  • A quitclaim deed carries no guarantee on the state of the title, so a purchaser may have difficulty obtaining title insurance, which almost all mortgage lenders require.
  • Because quitclaim deeds are riskier, they’re generally used among family members when there’s no exchange of money.

What’s the difference between a warranty deed and a quitclaim deed?

Quitclaim deeds are quick, convenient and usually not problematic when used in the right circumstances. Aside from family situations, you may encounter a quitclaim deed if you purchase a home in foreclosure, says David Reischer, real estate attorney and CEO of LegalAdvice.com. “It is not uncommon when a buyer purchases a property at a foreclosure sale to obtain a quitclaim deed that then requires hiring a real estate attorney to investigate the chain of title and extinguish any outstanding interests or defects,” he explained.

Even when you're receiving property from family via a quitclaim deed, it’s advisable to conduct a title search.

If you’re receiving property transferred via a quitclaim deed (even in family situations), Reischer advises you to conduct a title search, which is a thorough review of public documents, to see if there are any potential issues with liens or encumbrances.

Title issues sometimes arise on properties inherited from aging family members, he explained. “Mechanic’s liens, judgments or other types of secured obligation are sometimes forgotten about when people advance in age and the grantor may genuinely be ignorant of the defects surrounding the transfer of the property.”

He added: “A person who receives a property from someone via a quitclaim deed really must be thorough in their investigation and/or should hire an attorney to do a title search. Otherwise, they are basically relying on the trust of the seller blindly.”

A quitclaim deed is generally not used for the sale of a property, even in family situations, as it carries no guarantee on the state of the title. There could be liens or other ownership claims on the property that would prevent the successful transfer of ownership. In fact, if a buyer intends to get a mortgage to purchase a property, the lender will almost always require that a warranty deed be used to transfer ownership, and it’ll probably also require a title search and the purchase of title insurance.

A warranty deed offers buyers a much higher level of protection than a quitclaim deed. It ensures that the purchaser owns the property without any mortgages or outstanding liens and that the property can be successfully transferred to another owner. A quitclaim deed does not offer such guarantees.

Why are quitclaim deeds used if they don’t carry guarantees?

Quitclaim deeds are used between parties with mutual trust, so there may not be a need for such a guarantee of the title. They are fast to obtain and may be preferable when there are no questions regarding who has ownership of the property.

When a warranty deed is absolutely essential

A deed is a legally binding document that is used to declare a person’s ownership of a specific property. In a real estate deal, a warranty deed is practically essential because it offers legal protection for the buyer that a quitclaim deed does not. If you’re using a mortgage to buy your home, you can expect your lender to require a warranty deed anyway, so you might not have much choice in the matter.

Can you convert a quitclaim deed into a warranty deed?

You can convert a quitclaim deed into a warranty deed, but the process will vary depending on your state. “Most states provide relief via an 'Action To Quiet Title' or similarly named judicial mechanism that would enable a person to convert a quitclaim deed into a warranty deed,” explained Reischer.

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    What are the disadvantages of a quitclaim deed?

    The most significant disadvantage to a quitclaim deed is that there are no legal guarantees that the title being transferred is free and clear of any judgments or liens. If there is a judgment or a lien, another party has an ownership claim on the property that could cause the grantee major problems.

    When can you not use a quitclaim deed?

    You generally won’t be able to use a quitclaim deed when taking out a mortgage to purchase a property. Your lender will almost always require a warranty deed.

    How are quitclaim deeds used in divorce?

    A quitclaim deed may be used to remove a spouse’s name from the title in the event of a separation or a divorce agreement. The quitclaim deed will allow one party to be the sole owner of the property so they can sell it or obtain a mortgage for it without the other party’s permission or consent.

    Bottom line

    A quitclaim deed allows parties with mutual trust, such as family members, to transfer a property’s ownership rights from one person to another. However, a quitclaim deed does not guarantee there are no title defects or other ownership claims on the property. So, if you plan to receive property this way, you may want to consider hiring an attorney or a company to conduct a title search before you sign a quitclaim deed.

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