Warranty Deed Vs. Quit Claim Deed

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“Property owners have a right to know about deeds and are responsible for understanding them. A deed can alter the ownership of a piece of land completely. It can transfer the property from you to your parents or a new buyer. Two types of property deeds cause more confusion than others: the Warranty Deed Vs. Quit Claim Deed.”

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Warranty Deed Vs. Quit Claim Deed

The following is a guide to identifying these two deeds so that you know which one to use when transferring your property.

 

The Deed Process

The deed is a legal document that gives you ownership rights to a piece of land. It describes the property in detail and any special rights you will receive or not receive. The person who transfers property rights is the grantor, while the recipient is the grantee.

It is important to note that deeds usually contain several important pieces of information.

  • Title: It identifies who owns the title and whether it is joint or individual.
  • Rights: This refers to whether you own the property completely or whether it has rights possessed by others (known as “ownership in fee simple” among lawyers).
  • Description: The property is defined as follows.

It must describe the property transfer, the owner’s specific intent to transfer the property, and the person to whom it will pass. All jurisdictions require written records for real estate transfers.

A deed is not a contract. The deed is an action between two parties agreeing to take an action for the other.

Property owners transfer that property through a separate document (the deed). During a real estate transaction, the parties outline the terms of sale in one document (the contract).

A modern deed often refers to public records and plat divisions to define the property transferee. However, older deeds may use a wider variety of descriptions. Measurements, historical records, and landmarks can describe a property.

Historic deeds may refer to landmarks that no longer exist or documents that no longer exist, which is confusing when trying to define a modern piece of land’s boundaries.

Regarding property transfer, lawyers typically use two main documents: quitclaim deeds and warranty deeds.

 

Quitclaim Deed: What Is It?

Quite often, quitclaim deeds occur when the grantor transfers everything they have in the property to the grantee. As their name suggests, the grantor has become free from all claims on the property.

A quitclaim deed has the advantage of finality. Besides being structurally simple, a quitclaim deed can also be written on a cocktail napkin since it doesn’t say anything other than the grantor cannot claim any future interest in the property. The grantee has received all title to the property.

  • Here is the property.
  • I will transfer my rights and title to the property as a grantor.
  • You receive all my rights and title to this property, the grantee.

When property rights are old, contested, or uncertain, a quitclaim deed is a popular transfer choice. The quitclaim deed guarantees that the grantor’s rights will now belong to the grantee.

 

Certify the grantor’s rights.

A quitclaim deed does not, however, certify the grantor’s rights. You get what the grantor has. Those who own the property outright get it. Those who do not have a legitimate claim at all will get nothing.

Because land ownership can change over time in a variety of ways, this is particularly complicated. The grantor’s land will have those restrictions if he doesn’t own it, shares it with someone else, or only has partial rights. Under a quitclaim deed, the grantee cannot sue regardless of the outcome.

You only have recourse against a grantor if you get the expected property rights. You can’t get your money back, and you can’t get any other remedies.

There are several ways the legal system deals with this issue. As a result, the buyer can sue under the sale contract if the seller needs to provide more details to clarify their property ownership.

The buyer can sue under that contract if they receive anything less than the seller described. Generally, a quitclaim deed is used for property sales to protect the buyer, although a warranty deed is also an option.

There are limitations to quitclaim deeds, but they can still be effective if the grantor truly has legal ownership and there are no liens or other issues with the title.

 

Uses Of a Quitclaim Deed

The Quitclaim Deed indicates when there is little doubt about a property’s ownership interest.

When someone gives property ownership to a family member, or if a limited liability company (LLC) or trust they own and control is transferring ownership interest, quitclaim deeds typically apply.

A quitclaim deed is appropriate when transferring ownership without a real estate transaction. In some cases, a quitclaim deed is appropriate.

  • The addition of a spouse or child’s name to the title
  • Divorce or any other reason for removing a name from the title
  • It is possible to transfer a home to a child, parent, or sibling without burdening them with a mortgage since a quitclaim deed is not affected by the mortgage.
  • Business partner transfers property interest.
  • Correcting title defects, from a misspelling to an address error

 

A Warranty Deed: What Is It?

Like all deeds, a warranty deed transmits property ownership from one owner to another. It combines contract and conveyance and entails the grantor’s ownership rights to the property.

As an additional measure, a warranty deed guarantees the grantor’s rights to the land (or “warranties” the grantor’s rights). As a result, the warranty deed certifies the grantor owns the property outright, in “fee simple,” and that no other parties have a claim to it.

As part of this, there are no other ownership stakes, no liens or other debt obligations, and no access rights for third parties. Third-party claims are detailed in the warranty deed if they exist.

The grantor assumes legal responsibility for the title to the land in a warranty deed. As a result, they are effectively saying, “I promise that I own this land, and you are now entitled to these ownership rights.”

This gives the grantee an action for damages should a third party come up with an unexpected claim against him. This type of action differentiates a warranty deed from a quitclaim deed.

 

What Is the Importance of a Warranty Deed?

The grantor of the warranty deed can be held liable if they do not represent ownership as they had promised about a property that made the transfer possible.

For example, if three siblings inherit a house as a gift from their mother, and two siblings decide to sell it without the third party’s permission, that third party can sue the third party to gain possession of the home.

As a result of the fact that several siblings sold the property without the consent of all parties involved, the current owners could bring in the other siblings to the lawsuit using the warranty they received under the warranty deed.

 

The Use of Warranty Deeds

The Use of Warranty Deeds

 

In contrast, a quitclaim deed does not provide such protection for the buyer. If the ownership of the property is in dispute, it is important to purchase owner’s title insurance to protect yourself and your ownership. This is why they must defend themselves in a lengthy court battle.

  • Involving a mortgage or cash transaction in the purchase or sale of real estate
  • Creating a clear and free ownership system

In a real estate sale or transfer, title transfers between the buyer (or grantee) and the seller (or grantor).

  • A quitclaim deeds
  • A warranty deeds

In both cases, the buyer receives what they expect in the transaction and can take action if they don’t receive everything they expected. Although these two types of deeds convey interest in a property, their main differences lie in what they deliver to the buyer. A guarantee is the major difference between the two.

 

The warranty deed protects the buyer.

One of the major differences between warranty deeds and a lease is that if a buyer does not receive the full title they expect when they purchase the property, they can take legal action against the seller. If you do not receive the property you paid for or the expected property, you can file a lawsuit against the seller with a real estate lawyer.

Almost all residential and commercial real estate transactions use warranty deeds. In a warranty deed, the seller guarantees the property. It is a default type of deed that forms the basis for most standard transactions. The seller assures the buyer they own and can legally transfer the property. They assure the buyer that there are no:

  • Facilitations
  • Legal liens
  • Charges and encumbrances

 

The Quitclaim Deed provides no protection.

Deeds of Quitclaim do not contain any guarantee, as the “quit” in the word “quitclaim” means the seller quits all possible claims a buyer may have. By purchasing the property, the buyer is taking the risk that the seller must fully understand their property rights.

Quitclaim deeds are essentially the “caveat emptor” of property deeds. You cannot do anything about it. If the seller does not own all or even any of the property, the buyer will have no recourse against the seller. In that case, the buyer is out of luck.

 

There Is an Arm’s Length Transaction for Warranty Deeds, But Not for Quitclaim Deeds

It is not a good idea for a grantor to legally put themselves on the line when giving property to another person or as part of a will, so they often use quitclaim deeds. A seller may also use a quitclaim deed when they need clarification on the boundary lines for their property and wish to avoid assuming liability if they make a mistake.

In addition, quitclaim deeds offer a convenient way for fraudsters to commit real estate scams. If a buyer obtains a quitclaim deed to a property, they expect the purchase price to be lower than if they obtained a warranty deed.

After all, the buyer gets less for the purchase. It is more common for the buyer to receive what the seller believes they are selling than an ironclad guarantee that if the seller fails to deliver, they will make the buyer whole. Quitclaim deeds rarely occur when a transaction occurs at arm’s length.

 

Be wary of quitclaim deeds.

Typically, buyers avoid purchasing quitclaim deeds since they need more certainty of a warranty deed. Most people use quitclaim deeds when the property remains in the family.

For instance, one spouse may wish to include the other in the deed without refinancing their mortgage. With a quitclaim deed, they could easily accomplish this. It would be impossible for a buyer to move into a house and not know if they own it before buying it.

 

A Quitclaim Deed and a Warranty Deed have some similarities.

Despite their vast differences, there are some similarities between warranty deeds and quitclaim deeds. Here are a few of them:

  • Transferring ownership of a property is done through both of these legal documents.
  • Courts require that warranty deeds and quitclaim deeds be filed.
  • An estate plan can use either of these methods to transfer property to another person.
  • Defining property boundaries, describing the property, providing proper documentation, and ensuring all parties sign the conveyance are some elements of a quitclaim or warranty deed.
  • For both types of deeds to remain valid, they must be legally binding and written down.

 

Bottom Line

In a quitclaim deed, one’s rights in the underlying property pass, but the rights are not guaranteed. It transfers full ownership if the person owns the property outright, but nothing happens if they don’t own the property at all.

If the person transferring the property does not own it, it gives you a cause of action. A warranty deed transfers rights and guarantees that the person transferring them owns the property.

Hedy Ghavidel

HEDY GHAVIDEL Managing Attorney  Roseville Office  1-866-471-6981  info@attorneysre.com Bio...

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