The transfer of property ownership can be quick and easy, and via a quit claim deed, when selling a home. But, there are some risks and limitations to doing this. A quit claim deed process, advantages and disadvantages can be understood by both sellers and buyers so they can make an informed decision.
Big Texas Land Buyers outlines what selling your home with a quit claim deed is, when you can use a quit claim deed to sell your home, and the pros and cons of both selling through a quit claim deed and using a traditional contract.
1. What is a Quit Claim Deed?
A quit claim deed is a property document that transfers ownership of a property without warranties between one party and another. When a seller (grantor) ‘quits’ their claim to the property and transfers whatever ownership interest he or she has to the buyer (grantee) this takes place in this process. Unlike other deeds, a quit claim deed doesn’t ensure that the title is clear and titles of land may still be claimed, liened, or there may still be ownership disputes.
Quit claim deeds are usually used in conveying a piece of property to family members, divorcing spouses or into trusts. Because they provide little protection to the buyer in terms of the property’s legal history, they are not commonly used in traditional real estate transactions.
2. What happens when selling a home with a quit claim deed?
To sell a home using a quit claim deed is a relatively simple process, just be sure both parties know what it means.
- Drafting the Deed: A quit claim deed is drafted by the grantor, or their attorney. The document in this case consists of details regarding the property, parties of interest and the specifically legal language that assigns ownership interests.
- Signing the Deed: In this situation, the signing of the deed takes place in front of a notary public. This is a step to verify the grantor’s intent the transfer their interest in the property.
- Recording the Deed: After it is signed and notarized, this deed should be recorded with the county recorder’s office. With recording, the transfer is public and legally binding.
- Payment and Documentation: Sometimes there is no payment on a quit claim deed transfer, especially in family situations. Though, if money is involved, the amount is worked out beforehand when signing the deed, and both parties should also document the transaction thoroughly.
3. When should you use a Quit Claim Deed when you sell a home?
If you’re transferring ownership or simply need to get rid of the title to a property immediately, a quit claim deed may be just the ticket. And you know that buyer is making the assumption that he or she will have to fix any problems revealed after the deal is closed. Here are some typical scenarios:
- Family Transfers: But quit claim deeds are often used when family members wish to pass property between family members, for example, parents giving a home to their children or adding a spouse to the title following marriage.
- Divorce Settlements: A quit claim deed is useful in divorce cases where part of the property division agreement is to transfer ownership from one spouse to the other.
- Trust Transfers: A quit claim deed can be used to transfer property into a trust so that the owner may put the home into a family trust for heirs.
- Clearing Title Errors: A quit claim deed can solve for a minor title error. Also for example, if a person’s name is misspelled on the name in the title, this deed gets the issue fixed instantly.
The quit claim deed is used in these situations because the parties do or are assumed to do not trust each other, or where the transfer of interest is administrative rather than a regular sale.
4. The advantages of using a Quit Claim Deed in Property Sale
A quit claim deed to transfer a property can be helpful, for instance, because it can be done quickly and simply.
Simplicity and Speed: Simple quit claim deeds and quick property transfers make them relatively easy documents. Usually, it’s used when both parties want a no fuss transaction.
Lower Costs: Quit claim deed is given the least amount of money as compared to other deeds as there are slim chances of legal assurances and title checks. In cases where you don’t need a complete title search, this is especially useful.
Useful for Family Transfers: Intra family transfers tend to benefit from a quit claim deed when parties trust each other. So you can do a transfer without the usual buyer/seller, like gifting or inheritance.
Title Correction: A quit claim deed, however, can be a quick fix to an error on the title that will allow you to transit the title error free during the process.
5. Selling a Home with a Quit Claim Deed is not without its cons.
A quit claim deed does have its benefits, but so do its risks — including for the buyer.
No Title Warranty: Quit claim deeds are used to give up all warranties and whatever makes up the property title rests with the buyer. The property can be sold with any existing liens, claims or disputes and those can cause future legal or financial problems.
Limited Buyer Protection: With a quit claim deed, buyers get very little contract protection because there’s no title search and they can’t be certain the seller owns it. Because of this reason, the deed of this type is usually avoided in traditional home sales.
Risk of Hidden Liens or Claims: The buyer cannot buy a property they in fact can inherit liens unpaid tax and other claims over the property without warranty. Take for instance, when the buyer paid the transfer in case it is assigned an unpaid tax lien on the property it comes to become the buyer’s responsibility.
Difficulty in Selling Later: A quit claim deed can make it difficult to sell later. Future buyers may shun away the property without clear title insurance if the title is tainted as well as any issues with the title or not yet resolved as to support that you are clear with the title.
6. What Sellers Need to Know About Using a Quit Claim Deed
Here are some things to know if you are a seller, thinking about a quit claim deed.
Disclose Any Known Issues: Because the quit claim deed contains no title warranty, it’s important to be transparent with the buyer. Knowing title issues, liens or claims demonstrate that you are disclosing known problems, to build trust and avoid future disputes.
Consult a Real Estate Attorney: While quit claim deeds are straightforward enough, it’s probably wise to consult an attorney in the case of any transfer with payment involved. On the other hand, if they help draft the deed accurately and make sure that the transfer correctly meets state and local laws.
Keep Documentation: Keep copies of all of the documents (or deeds) pertaining to the transfer, including the payment receipts (if any) and anything involving legality. If there are any issues with the title, these records will be useful again in future reference.
Understand the Limitations: A quit claim deed makes the seller think they’re protecting a buyer, but in reality a quit claim deed does not protect the buyer. A legal transfer of interest may not clear any outstanding claims on the property.
7. The Quit Claim Deed: Important Considerations for Buyers of a Property
When you buy a home with a quit claim deed, you need added caution as a buyer.
Conduct a Title Search: If a title warranty isn’t offered by the seller, a title search can still show who has a lien, claim, or title defect against the property. A title company can make these issues known in time to prevent closing on them.
Consider Title Insurance: Buyers buying property with a quit claim deed either are or should be buying title insurance. Insurance on this level can cover what is lost financially in case the problem of the title which remains undisclosed and only recognized after the purchase.
Understand the Risks: A quit claim deed does not guarantee the status of the property. Those who buy must be ready to deal with any claims or disputes and become responsible for the payment of still unresolved liens.
Hire a Real Estate Attorney: In particular, the value of consulting with an attorney increases where there are no protections in a real estate transaction. If you’re not a real estate attorney or don’t have one on your team, take your time to review the deed, see that it complies, and evaluate the risk.
8. Other Than Quit Claim Deeds
Other types of deeds are available if those walking away with the quit claim deed aren’t the ones that a buyer or seller would prefer. Here are some alternatives:
Warranty Deed: A full guarantee that the property title is clear. In sales tradition, it is the most common deed and gives buyers complete protection.
Special Warranty Deed: The seller takes a clear title during his or her possession under this deed, it however doesn’t cover previous issues. It’s something in between a warranty deed and a quit claim deed.
Grant Deed: By signing a grant deed, the seller assures the buyer that there was nothing sold about that property to other persons and that there are no unknown liens that are hindering the free management. More protection than a quit claim deed but less than a warranty deed.
Conclusion
For intra family transfers or administrative correction, selling a home with a quit claim deed is quick and cost effective. But it has huge risks, especially for the buyer. A quit claim deed does not give you any warranty of clear title like other deeds do. Given such, both the parties must be conscientious and screen the transaction well, looking well to consult a real estate attorney to ensure the transaction is smooth.
Big Texas Land Buyers is important to sellers, but to buyers it’s important to take measures to protect themselves, such as paying for a title search or even title insurance. If you take all these precautions, a quit claim deed is a viable tool for property transfers if it is the proper situation.
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