Deeds are legal instruments used to transfer real estate, and almost everyone will encounter a deed of some sort at one time or another. There are three main types of deeds:
The difference between each type of deed has to do with the types of warranties the grantor (the party selling or otherwise transferring ownership of the property) is making to the grantee (the person buying or otherwise receiving ownership of the property).
With the other two types of deeds, the grantee is receiving certain warranties when he or she receives ownership of the property. Usually, these warranties include the promise that the grantor has proper ownership and the right to sell the property, as well as the warranty that the grantor will defend the grantee against adverse claims to ownership from other parties that may arise.
However, the grantee of a quit claim deed receives no such assurances. In this case, the grantor is simply “quitting” all claim to the property by giving the grantee whatever ownership interest the grantor has, if any. The deed simply transfers ownership without making any warranties. Thus, if the grantor never had proper title to the property to begin with, then the grantee is receiving nothing.
Just because the grantor is not making any warranties does not mean that you should never accept a quit claim deed. First of all, in many situations the grantee does not need (or care about) warranties. For instance, quit claim deeds are useful where there is strong trust between the parties, such as transfers between family members or to business subsidiaries. Perhaps you want to put your own property into a trust or transfer it to a sibling. They are also useful when dividing property after a divorce.
Quit claim deeds are also commonly used to remove title defects or “clouds.” Clouds often arise when a title search reveals that the property was improperly transferred. For instance, maybe a previous owner failed to follow the correct legal requirements and format for the deed. Other times a cloud may arise when someone may have an unexpected interest in a property, possibly a grantor transferred property without their spouse’s consent, who also had an interest. In this case, the spouse who still has a possible interest may be asked to execute a quit claim deed to relinquish any right to the property that he or she may have.
Usually, quit claim deeds are not used to transfer property that has an existing mortgage on it. This is because usually they are used with property that is not being sold, but simply transferred. Where property does have an existing mortgage the buyer usually insists on receiving the transfer warranties from the grantor that are contained in a general warranty deed.
However, this does not mean that quit claim deeds are never used to transfer property that has an existing mortgage. In such situations, though, it is important to keep in mind that the quit claim deed will not affect the mortgage. This means that whoever is named as the responsible party for the mortgage must continue to repay it unless the new property owner assumes responsibility for the repayment by signing a mortgage assumption agreement.
As alluded to above, quit claim deeds are an excellent vehicle for land transfers to business subsidiaries and parent companies. Because the parties already trust each other (after all, what subsidiary would dare sue its parent company?), the relative ease of drafting, executing, and filing a quit claim deed makes it an effective way to handle such transactions.
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