Deeds: Transferring Ownership of Real Estate

In a real estate transaction, ownership transfers through a deed.  That deed is a written document that, when recorded, legally conveys real property from one person or entity to another.  Whether you are buying or selling real estate, it is important to know that different kinds of deeds can be used to accomplish that conveyance.  Here is a brief recap of the most common types of deeds as they are usually defined:

General Warranty Deed
A general warranty deed is a type of deed contract that transfers ownership with promises or guarantees. It is called a warranty deed because it spells out the warranties being made.  They typically include the following:

The seller (grantor) warrants that he/she owns the property and has a right to sell it to the buyer (grantee).

The grantor guarantees that the grantee will have good title to the property and ownership of the property following the transfer.

The grantor warrants that there are no encumbrances on the property other than those that are evident in public records.  Encumbrances would include liens, judgments, and debts that have not been paid in full.

The grantor promises that if the title is challenged, he/she will defend the title against reasonable and lawful claims.  Note that despite this promise, most buyers have a title search performed to determine if there are any problems that might impact the title.  These problems are usually resolved before the purchase is completed, and buyers purchase a title insurance policy as protection from losses related to title problems that surface later.

Quit Claim Deed
A quit claim deed contains no warranties.  It transfers only the interest of the person who signs the deed.  And it transfers whatever interest that person has, whether it be all, part, or none.  With this type of deed, the grantor makes no representation that he/she actually has any rights in the property.  Nor does this deed offer any guarantee against the possibility that other people have an interest in the property.  If others do have an interest, they would retain it in spite of the execution of a quit claim deed. In addition, there are no guarantees of clear title.

With the absence of guarantees or warranties, when would a quit claim deed be useful?  Quit claim deeds are often used to clear up problems or settle disputes with a title.  They are also used when an owner simply wants to transfer their interest in a property to someone else.  Examples of situations where quit claim deeds might be used:

Dividing up real estate as part of a divorce -- A quit claim deed is a quick and simple way that one spouse can sign over all ownership rights to the other spouse.

Clearing up a defect discovered during a title search  -- On occasion, an attorney or title company performing a title examination for a real estate transaction will discover that a relative of a prior owner has a claim on the property that was overlooked.  A quit claim deed would be used to clear up this defect or "cloud" on the title.

Keep in mind that deed definitions may vary by location.  When completing your real estate transaction, you should have your attorney answer any questions you have and provide advice on the type of deed most suitable for your specific need and circumstances.

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.