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Understanding quitclaim, warranty deeds on property

By Holden Lewis
Quick: What's the difference between a warranty deed and a quitclaim deed? Maybe you thought that the term was "quick" claim deed. Here is everything you wanted to know about deeds, but never got around to asking.

A deed is a document that conveys, or passes, real estate from one party to another. Whether you buy a house from a stranger, inherit it from your parents or add your spouse to the home's title, a deed accomplishes the, uh, deed of transferring the title.

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A deed isn't a sales contract, says Jeff Eisenshtadt, president of Title Source, a subsidiary of Quicken Loans that provides title insurance and settlement services nationwide. A sales contract is a promise to convey property in exchange for something (usually money). In contrast, a deed isn't a promise to convey; it is the conveyance itself.

What a deed includes

A deed contains a legal description of the real estate being transferred. In urban or suburban locales, the legal description identifies which lot the property occupies in a platted subdivision. Deeds in rural areas might use meets-and-bounds descriptions of the boundaries, which identify where the property lines are in relation to landmarks.

The deed must identify who is handing over an interest in the property (the grantor) and who is accepting it (the grantee). Most counties require the deed to have the addresses of all the parties involved. And a deed wouldn't be a deed without words of conveyance -- a passage that says that the grantor intends to convey an interest in the property to the grantee.

If the information on the deed is inaccurate or out of date, it can cause headaches. The legal description could be incorrect, for example, saying that the property line is 150 feet north of the house, when it's actually 145 feet, misleading the buyer into thinking that he can build a fence on his neighbor's property.

More commonly, people's names are wrong. This often happens when a woman changes her last name after marriage or divorce. Take the example, Eisenshtadt says, of a single woman named Mary Jones who buys a house. Then she gets married, changes her name to Smith, and sells the house. If the deed doesn't identify her as Mary Smith, formerly Mary Jones, the document has some ambiguity that would best be avoided.

Types of deeds

There are two main types of deed: warranty and quitclaim.

"A warranty deed is one in which the seller, when transferring the title to you, warrants that he owns the property free and clear of all liens," says David Eagan, a lawyer with MacLachlan & Eagan LLP in New York.

A warranty deed is used in most sales of property. The warranty deed says that the grantor is the rightful owner and has the right to transfer the title; that there are no outstanding claims on the property from lenders using it as collateral, or from other creditors, and that the property can't be claimed by someone with a better claim to the title. If any of those claims are wrong, the buyer is entitled to compensation.

A title insurance policy backs up the claims of the warranty deed, protecting the lender or buyer from disputes about ownership or liens.

A quitclaim deed typically is executed when the property isn't sold -- when the owner dies and bequeaths it to someone, or when the owner gets married and wants to add the spouse's name to the title, or when a former spouse's name is removed as part of a divorce settlement or when the property is transferred to a living trust.

"A quitclaim deed is a deed that says, 'I'm not warranting what I own, but I'm transferring what I do own to you," Eagan says. "So it's a much lesser level of protection."

With a quitclaim, the grantee has no legal recourse if problems with the title turn up, or if a forgotten lien holder emerges from the woodwork. There isn't a title policy. That's why it's riskier. On the other hand, a lot of quitclaims are executed when the property stays in the family, and that reduces the risk.

Eagan says there also are cases in which a seller might execute a warranty deed on the main part of the property and a quitclaim deed on another part of it. This might be the case with properties that border rivers and lakes, where the owner sells underwater land, where it's not particularly clear who owns it.

-- Posted: Aug. 26, 2004

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