If you own property, like a house, and want to give it to someone else, you’ll make this transfer legally through a property deed. A deed is a legal document that transfers, or conveys, ownership of property from one person to another. (Said another way, a deed conveys a property title.)
But how do you know that the person transferring property really owns the property or has the legal right to give it to you? That’s why certain types of deeds have a warranty, which gives you legal protection.
A quitclaim deed however doesn’t come with such a warranty. The property passes between two people without any guarantees about the property or details about its ownership. The grantor of a quitclaim deed is not liable for anything. They make no promises that the property can be transferred, that there aren’t other interested parties involved or liens on the property.
Quitclaim deeds may seem unsafe or risky, and they can be, but they can also prove useful and efficient — especially when time is of the essence. We’ll discuss why you would ever need a quitclaim deed and when you shouldn’t use one.
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How does a quitclaim deed work
When discussing property deeds, there are a few terms to keep in mind. The grantor is the person transferring property and the grantee is the person receiving the property. When you hear the word title it just simply means ownership of the property — deeds convey titles, meaning that deeds convey ownership.
There are two different types of deeds, which also have different levels of warranty.
Warranty deeds
Warranty deeds convey ownership of property and come with a warranty of the title. This type of deed ensures that the grantor transferring property is in fact allowed to transfer the property to you and that you can legally own and use it. A general warranty deed provides the most security, while a special warranty deed or grant deed provides slightly more limited protections.
Quitclaim deed
A quitclaim deed is a non-warranty deed, which offers no protections or warranty of the title. While a grantor can transfer property to another person with this type of deed, there are no guarantees that the grantor had the right to do this in the first place.
It does not guarantee that:
the grantor legally owns the property title
the grantor has the legal right to transfer ownership
there are no liens or claims against the property
there are no other encumbrances (for example: zoning laws that restrict what you can do with the land or an easement that allows hunters onto your property)
Other deeds, like an executor’s deed lets the executor transfer property from a deceased person’s estate to its rightful heirs according to a will. When there is no will, an appointed person called the administrator will transfer property using an administrator’s deed.
How to make a quitclaim deed
You can actually draw up a quitclaim deed on your own without a lawyer, though you should visit a notary public and get the form notarized.
As with the creation of other legal documents, like a last will and testament, you may be able to find a quitclaim deed form online that you can easily fill out. The quitclaim form must include some basic information for it to hold up as legally binding in court, like the address and description of the property, the names of the grantor and grantee, their signatures, and the date at which ownership will transfer.
Once you’ve notarized the deed, you should file it at the county recorder’s office.
Why would someone use a quitclaim deed?
Quitclaim deeds don’t offer the same protections as deeds with a warranty. However, there are some circumstances when it makes sense to use a quitclaim deed:
1. Transfer property between family members
Quitclaim deeds are most commonly used between family members or people who trust each other, since there is a level of risk when you don’t know all the details about the property. Think of a quitclaim deed as a transaction without a verification for what you’ve purchased. You’re more likely to engage in this type of blind transaction with someone you trust.
2. Transfer property between spouses
After getting married, you may want to add your spouse to the property deed. A quitclaim deed makes it fairly quick and simple to do this without getting stuck in legal morass. A quitclaim deed can also remove your spouse if you get divorced.
It can also be convenient in community property states, where all property is owned equally by both spouses. You can use this type of deed to quit claim or relinquish your ownership to a property so that it’s solely owned by your spouse. (Another way to give property to your spouse is through an interspousal transfer deed, which may provide some tax benefits. Speak with an attorney to see what might work better in your situation.)
4. Transfer property to a trust
As part of your estate plan, you may have created a trust to hold onto your assets for future use by your heirs. You can fund the trust by using a quitclaim deed to transfer your property into the trust (which is the grantee in this scenario).
5. Remove defects on a title
There may be a defect on the property title (called a cloud on a title), like a lien, or a mistake like a spelling error. You can easily clear this defect with a quitclaim deed.
Downsides to a quitclaim deed
The greatest risk to receiving property with a quitclaim deed is that you may not have a true right to the property title. The grantor might not own the property title at all, so if you purchase property through a quitclaim deed and it wasn’t their property to sell you won’t own the property at all, no matter how much money you paid for it. If you don’t know this, it’s possible that you could end up trying to move into someone else’s house or erecting a building on someone else’s land and effectively stealing their property.
Also, in the event that the grantor had any outstanding liens against the property, then it’s possible that foreclosure might happen. If you already moved into the house and it is foreclosed on you’ll have to leave.
Even if the grantor is truthful about a property and has the legal right to transfer the title, a quitclaim deed may fall short in some circumstances. For example, if you received property through a quitclaim deed, but it was also quitclaimed to someone else, or bequeathed to someone else in a will, then a court will decide what happens.
Does a quitclaim deed affect your credit?
A mortgage isn’t automatically transferred with a quitclaim deed, so your credit isn’t necessarily impacted if you transfer a property title or get a property title transferred to you. The original owner of the property must work with their bank to be officially released from their mortgage if they are transferring the property to someone else and, until they have successfully terminated their mortgage, they are on the hook for those payments and any effect that may have on their credit.
Does a quitclaim deed affect your homeowners insurance?
Homeowners insurance cannot be transferred from one person to another. If you purchase a home, whether that is through a warranty deed or a quitclaim deed, you must purchase your own homeowners insurance policy for the property.
Keep in mind that the price of your homeowners insurance policy is based on the cost to repair or replace your home, not how much you paid for the property. That means that if your parent or sibling uses a quitclaim deed to give you their house at no cost you’ll still pay full price for home insurance.
Can you sell a house with a quitclaim deed?
Quitclaim deeds are typically not used to transfer property during a real estate sale — though this may differ by state — since the buyer would have little protection. (A title search is usually conducted as part of the mortgage process and mortgage lenders often require buyers to get title insurance, for things the search may have missed.)
Quitclaims usually only transfer property owned outright and already paid off. If you use a quitclaim deed to transfer your house, which still has a mortgage, your mortgage lender may require you to repay the entire loan balance, thanks to the due-on-sale clause. Included in most conventional mortgage agreements, this clause prevents mortgages from being transferred or assumed by someone else. However, there are exceptions like transferring property between spouses.
What is a due-on-sale clause of a quitclaim deed?
A due-on-sale clause of a deed requires the grantee to pay any amount due in full if the property is sold or transferred. This is why you get a mortgage, so the bank pays the total amount due for the house upfront and you make monthly payments on your mortgage until you have paid the total amount for the house plus any accrued interest. You cannot just take over someone else’s mortgage when you take ownership of a property.
