Quitclaim deeds offer a quick and efficient method for transferring property titles between family members or to trusts.
However, these deeds do not offer buyers any protection. This blog post will explain why most title companies do not insure quitclaim deeds and what you can do about it.
Underwriting Guidelines
Deeds are legal documents used to transfer ownership from one person to another and must contain specific details, including date, location and a recording stamp or notary stamp that confirms its legitimacy. Once completed and signed and notarized by all involved – including both grantor (seller) and grantee – they should then be recorded with their county clerk’s office so as to protect new ownership against future claims on property ownership.
Most real estate sales require a warranty deed in order to guarantee a clear title, in order to reassure buyers. A warranty deed provides three guarantees to buyers: that the seller (grantor) is legally entitled to sell; no hidden liens or encumbrances exist against their property; and it should provide protection from future liability issues that might arise during ownership transfer. A warranty deed is commonly employed during property sales transactions and typically requires conducting an extensive title search as proof that ownership belongs solely with grantor (grantor).
Quitclaim deeds, on the other hand, are typically utilized when making property transfers between family members or correcting errors in titles such as misspelled names or incorrect legal descriptions. Though not providing as much buyer protection than warranty deeds do, they can often be useful when transactions rely on mutual trust between all parties involved and no consideration changes hands for the transference.
Quitclaim deeds provide an easy and quick way to transfer property titles among close family members; however, they do not transfer mortgages or tax liens and could leave the previous owner responsible for debt on the property – this may make obtaining financing more challenging and may adversely impact credit histories. Furthermore, original owners must work with their lender in order to be officially released from any mortgages attached to any assets transferred via quitclaim deed – this adds delays and may lead to the collapse of an important deal.
Legal Requirements
Quitclaim deeds are agreements used to transfer ownership of real estate or land between two parties quickly and cost-effectively, often used in divorce cases or as an effective way to bypass probate after someone passes away. They’re used when owners need to transfer title quickly without incurring significant delays from conducting a complete title search process. Quitclaim deeds have also proven useful as a way of avoiding probate proceedings after someone dies.
Quitclaim deeds don’t contain the usual guarantees associated with sales; therefore, there is no assurance that title to the property is free and clear of issues. Due to this lack of guarantee, many title companies won’t insure these types of deeds.
Although it is possible to transfer real estate using a quitclaim deed and still obtain title insurance, making sure the document is drafted accurately and is accompanied by a comprehensive title search and opinion by an experienced attorney is key to doing so. Furthermore, any mortgage must first be released prior to using such a document for ownership transfer.
Once a deed is executed, its original grantor must contact their bank in order to be officially released from their mortgage and transfer ownership of the property. Otherwise, they will remain liable for the mortgage debt and could experience credit issues as a result.
Quitclaim deeds should generally not be used for transactions that involve mortgage loans; mortgage lenders prefer deeds that include general or special warranties instead. A quitclaim deed does not provide guarantees of title or ownership, making it less appealing to mortgage lenders. Although quitclaim deeds are an effective means of transferring ownership, it’s wise to consult an experienced New York real estate attorney in order to ensure that this transfer goes as smoothly as possible and doesn’t lead to issues down the road.
Date Down Searches
Real estate sales typically involve a deed that transfers ownership to the new buyer and details the property and any improvements (buildings). Since most real property has been transferred multiple times over centuries, title companies typically only guarantee transactions insured by them in recent transactions; this process is known as date down search. If someone later transfers property via quit claim deed without their previous title company’s knowledge and guarantee, their latest title company may not be able to cover that transfer.
Quitclaim deeds can be used in the aftermath of divorce, when an elderly parent transfers ownership to their children or friends, to settle boundary disputes between neighbors or correct errors in titles; unlike warranty deeds which guarantee title ownership for sale and mortgageability – plus they do not require title searches and title insurance costs, which save money for grantees.
Expenses
Home buyers must purchase a title insurance policy when buying their homes. Title companies create these policies by researching past real estate titles and hunting down any issues that might impede sales of a property. Normally, deeds recorded with title companies feature stamps identifying who created them – this helps identify whether someone who claims ownership has actually created and recorded it appropriately.
Quitclaim deed transfers are considered “non-sale” transfers because they don’t involve selling property to anyone. Quitclaim deeds may be used to add or remove spouses after divorce proceedings, clarify ownership of inherited properties, transfer into (or out of) revocable living trusts, fix errors in existing titles and more.
Example of this would be when a parent quitclaims their home to their children and later sells it back, since their quitclaim deed did not guarantee that the property would be free from issues.
Quitclaim deeds can be extremely costly to use when planning to sell their property later, so most people avoid them as an option when selling real estate in the future.
Quitclaim deeds are frequently employed in non-sale transactions, including property transfers related to divorce, marriage or property ownership changes such as adding/removing spouse from titles post marriage and transferring property into or out of revocable living trusts. Furthermore, they can be used as gifts in lieu of probate proceedings to reduce estate tax bills and heirs/friends upon the death of relatives to make gifts while avoiding probate costs and taxes on estate assets.
Unfortunately, non-sale transfers often don’t come with the same guarantees that a warranty deed would bring. Therefore, title companies typically won’t insure quitclaim deeds in most real estate transactions; therefore if you are considering one it is essential that you discuss your options with a knowledgeable attorney first.