Quitclaim deed vs. warranty deed: What’s the difference?
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A deed is an essential piece of paperwork in any real estate transaction. This document is a written agreement that outlines the legal transfer of property from one party to another.
There are several different types of deeds, and when you buy, sell or transfer ownership of a property to someone else, it’s important to pay attention to which type is in play. Two of the most widely used deeds in real estate are quitclaim deeds and warranty deeds — we break down the differences below.
What is a quitclaim deed?
There are many uses for a quitclaim deed, but one of the most common is to convey ownership between people who are related, like spouses, parents or other family members.
This type of deed transfers the legal rights to a property, if any exist, that the grantor (the person transferring the stake) has — but without any representation, warranty or guarantee. In other words, a quitclaim deed makes no ironclad promise about the title status of a property, or any liens against it or encumbrances.
A quitclaim deed has its limits, but it can work well if the grantor truly has the legal rights to a property and there are no liens or other title issues. However, if it turns out the seller didn’t actually have the legal right to sell the property, the buyer has no warranty protections and would be left to defend themselves and their ownership of the property, potentially in a lengthy court battle. This underscores the importance of purchasing title insurance in case the ownership of the property is disputed.
Quitclaim deed uses
Quitclaim deeds are used in safer situations when there is little question about the ownership interest in a property — in particular when the ownership is being transferred without an actual monetary transaction. For example, they are often used when someone is transferring ownership interest of a property they own to a limited liability company (LLC) or trust they also control, or giving ownership of the property to a family member.
Some situations that call for a quitclaim deed may include:
- Adding a name to the title, such as a spouse or child
- Removing a name from the title, such as after a divorce
- Transferring ownership to a family member, such as a child, parent or sibling — a quitclaim deed does not affect the mortgage, so you can transfer ownership to another person without burdening them with a loan
- Transferring property interest to a business partner
- Amending defects on the title, from a misspelling to a wrong address
What is a warranty deed?
When you buy a home with the help of a Realtor or from a builder, you will most likely get a warranty deed. This type of deed is used in real estate situations involving monetary transactions between unrelated buyers and sellers, including getting a mortgage to buy a home.
With a warranty deed, the person transferring title of a property (the seller or grantor) is guaranteeing that they have a defensible ownership interest in the property and can therefore transfer their ownership interest to the other party (the buyer). Since the grantor is guaranteeing their ownership, the warranty deed provides more peace of mind and less room for trouble.
If the grantor of a warranty deed misrepresents their ownership of a property, they can be sued. For instance, if three siblings inherit a home from their mother, and two of them decide to sell without the permission of the third, the third sibling can sue to get back possession of the property. In this case, the current owners would be allowed to use the warranty they received under the warranty deed to bring the other two siblings into the lawsuit, since they sold the property without the permission of all involved parties.
Warranty deed uses
A warranty deed is used in most typical real estate transactions, where the buyer and seller are unrelated and money is changing hands. This can include:
- Buying and selling real estate, whether the transaction involves a mortgage or cash
- Buying a home directly from a builder
- Establishing free and clear ownership
Warranty deed vs. quitclaim deed
- Used for transferring ownership of a property without an actual sale
- Good for use between family members
- Does not guarantee seller’s ownership
- Used for buying and selling property between unrelated parties
- Good for most typical real estate transactions
- Guarantees seller’s ownership
Warranty deeds are the safer option when buying property versus simply transferring ownership. Most buyers will want this option. If it is discovered that the seller did not have complete ownership of the property, the buyer can sue for breach of warranty.
Keep in mind: There are many scenarios when ownership can come into question, including when transfers of real estate are taking place within a family (especially an extended family). It’s safer to use a warranty deed any time you are not entirely sure of your or someone else’s ownership stake in any property.
If you are transferring a property to your child or to a revocable trust agreement as part of an estate plan, then a quitclaim deed could do the trick. It accomplishes the change of ownership, but you are not providing any warranty that applies to the transaction.
The type of deed you should use depends on the type of transaction and your desired level of protection. Generally, a quitclaim deed is ideal for situations involving only transfer of ownership between parties that explicitly trust one another and have no doubts about the title of the property. For real estate deals involving financial transactions and mortgages, always use a warranty deed because of the protection it offers.
Using a quitclaim deed can expedite transfer of ownership when there is no actual monetary sale taking place, and provide adequate protections within a family or between known parties. Keep in mind that this type of deed does not guarantee that the grantor has full legal ownership of the property for sale. It is best used when there is a high level of trust between parties.
A warranty deed provides protection for the buyer, guaranteeing that the seller has the legal right to sell the property. If there is a property dispute later regarding the guarantor’s ownership stake, the buyer can sue for breach of warranty. This is the type of deed used in most typical real estate transactions.