When you buy, sell, or transfer ownership of a property to another, you need to be aware of what type of deed a property has and whether to use a quitclaim deed or a warranty deed when you transfer your interest in a property to someone else.
Bankrate explains in its recent article, “Quitclaim vs. warranty deed: What you need to know,” that a quitclaim deed is a deed that transfers the actual legal rights to a property (if any exist) that the grantor has to another person. That is, without any representation, warranty, or guarantee. A quitclaim deed gives no guarantee of the title status of a property, any liens against it, or any encumbrances. It really means that you get only what a grantor may have—nothing more. Therefore, if the grantor has nothing, you get nothing.
A quitclaim deed may work well if the grantor indeed has the legal rights to a property, and there are no liens.
Quitclaim deeds are used in safer situations where there’s little question about the ownership interest in a property. They can be used when a person is transferring ownership of real estate to family members. However, a warranty deed is generally used in more complex situations, including when someone is getting a mortgage to buy a home.
With a warranty deed, the seller is guaranteeing that she has a legally defensible ownership interest in the property and can transfer her ownership interest to the buyer.
Warranty deeds are the wiser option when you’re purchasing property. Buyers want to be certain that you own the property, so they want you to sign a warranty deed. If you don’t actually own the property, the buyer can sue for a breach of warranty.
If you’re transferring property to your spouse, child, or your revocable trust agreement as part of an estate plan, a quitclaim deed may be just fine because it accomplishes the change of ownership, but you’re not providing any warranty for the transaction.
Generally, all real estate transactions that are arm’s length transactions should use warranty deeds.
Don’t just rely on a simple fill-in-the-blank quitclaim deed. The deed is actually the least of your concerns; transferring real estate has many income tax, estate tax, gift tax, estate planning, and Medicaid planning implications to the grantor and the grantee. Talk with an estate planning or real estate attorney before potentially making a costly mistake.
Reference: Bankrate (September 4, 2019) “Quitclaim vs. warranty deed: What you need to know”
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