Kenneth has a JD, practiced law for over 10 years, and has taught criminal justice courses as a full-time instructor.
What is a Deed?
Mace just won an epic game of poker, and he got quitclaim deed to a ranch as payment. After making sure the deed was not a forgery, Roger headed out to the property to see his prize. When he got there, he found a full working ranch, cattle and all. When you show the supposed owner the deed, he laughs and kicks you off the property. What's going on?
A deed is a legal document that, if written correctly, transfers the ownership of real property (estate or land) from one person to another. The giver of the property is the grantor, while the receiver of the property is the grantee.
The idea of a deed is to document the transfer of real property from the grantor to the grantee and to satisfy the legal requirement that all land sold or given to another person has to be in writing. There are a few exceptions, but it holds true for almost all land transfers in the U.S.
Warranty Deed v. Quitclaim Deed
A warranty deed is the most common deed used when buying or selling real estate. This deed warrants or guarantees that the title will be free of any mortgages, liens and other problems with the title.
If land is sold using a warranty deed, the grantor will have to defend the grantee from any claims made or unpaid liens. This typically means that the sellers (or the title insurance company if they bought title insurance) will have to foot the bill for any legal representation needed to make the title clean.
Unlike a warranty deed, the receiver of a quitclaim deed gets only the interest, rights and ownership that the grantor had, and there is no guarantee that the title is clean.
For example, if you and your three siblings inherit your parents' property, and you quitclaim your property to another, the grantee only gets what you had: twenty five percent. The reason? Since there were other owners of the property, you cant give a third party your siblings' ownership without their signature. You can, however, transfer whatever rights you had to that person.
Back to the poker player. Whether Mace gets anything out of that deed depends solely on what interest the losing poker player possessed. If he owned a 50 percent share, then that's what Mace would get. So even though he got laughed off the property, the last laugh might be Mace's if he can prove the poker player owned anything.
Advantages and Disadvantages
The advantage of a quitclaim deed is that it's quick (which is why it's often mistakenly called a 'quick claim deed'), as there are few documents, and can be done with just some signatures and a notary or witnesses. The disadvantage is, the grantee has no idea what he/or she is getting. The property might have been sold already or even condemned by the city.
For example, if you bought some land using a quitclaim deed, and the property was about to be foreclosed for back taxes, you would have no recourse against the seller. If you had received a warranty deed, then the seller would guarantee that the title was free and clear, and those encumbrances would have to taken care of before you received the deed.
Types of Quitclaim Deeds
Another common usage today is what's loosely termed a divorce deed. In a divorce, quitclaim deeds are often used to give one spouse or another full ownership of the house and land. Since both parties know about any encumbrances or title problems, it isn't necessary to guarantee anything. However, if there still is a mortgage on the property, this will not release the grantor of any mortgage obligation.
Divorce isn't the only time married couples might want a quitclaim deed. Lets say both want to refinance, but one has poor credit. In some states, you can use a quitclaim deed to transfer the property to the spouse with the good credit to get a better loan rate. This could be a problem, however, if they later divorce.
Sheriff's deeds and tax deeds are also forms of quitclaim deeds. In many states, a sheriff will handle a judicial foreclosure, and then use a quitclaim deed, often called a sheriff's deed to convey the property.
The intention of this process is to pay off all liens and encumbrances, including back taxes, so that the buyer gets a clean title. However, that doesn't always happen, and since a sheriff's deed does not warrant a clean title, the buyer might get stuck with the debt or ownership problems.
Similar to a sheriff's deed, a tax deed is another form of quitclaim deed. If you buy a home at a tax auction, you make arrangements to pay off the taxes and any other encumbrances before you get title.
However, often there is not enough money to pay off all of the liens, and the new buyer might be responsible for those. Also, there might be some person with a claim on the land, and the new buyer will have to defend their title to the property without any help from the previous owner.
A quitclaim deed is used to transfer property from one party to another. The are typically simple to execute, thus making the process quick. However, a quitclaim deed only gives the grantee whatever ownership interest the grantor had. There are no warranties of a clean title and no guarantee that the buyer will not have to deal with liens and other owners' interest.
Unlike a quitclaim deed, a warranty deed does guarantee that the title is free and clear of any liens, taxes, mortgages and anyone else with an ownership interest.
Quitclaim deeds are often used in sheriff's auctions, tax auctions, and marital couples wishing to grant one party full ownership of the property either during the marriage or in a divorce.
- Divorce deed - one spouse gives the other full ownership of the house and land in a divorce.
- Sheriff's deed - a buyer at a sheriff's sale gets property for the price of the previous owner's judicial process fees.
- Tax deed - auctioned property where the sale usually covers back taxes.
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