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Understanding Quitclaim Deeds
Many homeowners encounter title companies and insurance during the home buying process, often dealing with various deed types including quitclaim deeds. These legal instruments serve specific purposes in real estate transactions but come with important limitations every property owner should understand.
Unlike warranty deeds that provide guarantees about property title, quitclaim deeds simply transfer whatever interest the grantor has in the property without any warranties. This fundamental difference makes them suitable for certain situations but potentially risky in others.
Ownership Transfers
While quitclaim deeds facilitate property ownership transfers, real estate investors must carefully consider their impact on title insurance policies. Transferring property into a trust, living will, or corporation via quitclaim deed may render the owner ineligible for future claims under their existing title insurance policy.
Quitclaim deed title insurance offers a streamlined method for transferring property titles with minimal legal expenses. These deeds prove particularly useful for gifting property to family members while potentially providing tax advantages to the grantor.
However, the absence of title guarantees means subsequent owners could inherit financial liabilities like unpaid mortgages or tax liens. This risk explains why most buyers prefer title insurance rather than relying solely on the previous owner’s financial standing.
Liens and Encumbrances
Although quitclaim deeds offer convenience, they provide no assurance regarding liens or encumbrances. This becomes problematic during resale when title companies require verification of clear ownership and absence of financial claims against the property.
Important note: Quitclaim deeds don’t automatically transfer mortgage responsibility. For instance, if someone transfers property to an LLC via quitclaim deed, the LLC assumes no mortgage warranty and remains liable for the outstanding debt.
These deeds work best in low-risk scenarios like transferring ownership between family members, adjusting marital property rights, clarifying inheritance matters, or managing living trust assets. For transactions involving financing or monetary exchange, warranty deeds remain the preferred instrument.
Transfers of Ownership
Quitclaim deeds rarely appear in standard real estate sales due to their lack of warranty protection. New owners accepting quitclaim deeds assume full liability for any title issues, potentially facing substantial financial losses if problems emerge later.
While useful for transfers between trusted parties, consulting a real estate attorney ensures compliance with state laws and mortgage requirements. Many lenders mandate recorded deeds to update mortgage information and confirm ongoing loan responsibility.
Ownership Changes
Investors frequently use quitclaim deeds to move property into business entities for liability protection. They also help bypass probate—the legal process for distributing assets after death.
While appropriate in these contexts, quitclaim deeds don’t resolve existing title issues. They work best when paired with warranty deeds that offer some grantee protection through title guarantees.
Without warranty protection, quitclaim deed recipients inherit all recorded mortgages and liens. This potential financial burden underscores why most transactions benefit from warranty deeds with complete title searches and insurance policies.
Title Insurance Considerations
Title insurance becomes particularly important when using quitclaim deeds. Standard owner’s policies typically don’t cover subsequent transfers via quitclaim, leaving gaps in protection. Special endorsements or new policies may be necessary to maintain coverage after ownership changes.
Three key title insurance aspects to consider with quitclaim deeds:
- Existing policies usually terminate when quitclaim transfers occur
- Lenders often require new title insurance for financed properties
- Chain of title issues may emerge without proper documentation
When to Use a Quitclaim Deed
Quitclaim deeds serve specific purposes well, particularly in non-sale situations with trusted parties:
- Adding or removing spouses from titles after marriage/divorce
- Transferring property to living trusts or family LLCs
- Correcting title errors or clarifying ownership interests
- Gifting property to family members
- Estate planning transfers
Alternatives to Quitclaim Deeds
For transactions requiring more protection, consider these alternatives:
- Warranty Deeds: Provide full title guarantees and covenants
- Special Warranty Deeds: Offer limited title protections
- Grant Deeds: Used in some states with implied warranties
- Executor’s Deeds: For property transfers from estates
Frequently Asked Questions
Does a quitclaim deed remove me from the mortgage?
No. Quitclaim deeds only transfer property ownership interest, not mortgage responsibility. The original borrower remains liable for the loan unless formally released by the lender through a separate agreement.
Can I reverse a quitclaim deed?
Reversing requires executing a new deed and recording it. The original grantee must cooperate, as quitclaim deeds convey immediate ownership rights upon proper execution and recording.
How does a quitclaim deed affect property taxes?
Quitclaim transfers may trigger reassessment in some jurisdictions, potentially increasing property taxes. Some states exempt certain transfers (like between spouses) from reassessment.
Is a notary required for quitclaim deeds?
Most states require notarization for recording. Some jurisdictions also require witnesses. Always check local recording requirements.
Can I use a quitclaim deed if there’s a mortgage?
Yes, but the mortgage remains with the original borrower. Many lenders include “due on sale” clauses allowing them to call the loan if ownership transfers without approval.
