Attorneys practicing in and around the Chicagoland area. Experienced in the practice areas of Real Estate Law, Mortgage Foreclosure Defense Litigation, Social Security Disability, Business Law, & Estate Law.

 - Attorneys practicing in and around the Chicagoland area. Experienced in the practice areas of Real Estate Law, Mortgage Foreclosure Defense Litigation, Social Security Disability, Business Law, & Estate Law.

Quitclaim Deed vs Warranty Deed – The Differences You Need to Know

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In this post, we discuss the differences between two of the most widely used deeds in real estate: quitclaim deeds and warranty deeds.

When buying, selling or transferring ownership of a property, it is critically important to pay attention to the paperwork of the transaction.

This is why people employ real estate agents and real estate attorneys, in order to help them navigate the unfamiliar contracts and paperwork.

You need to know what type of deed a property has, and the correct type of deed to use when transferring your interest in a property to another person.

The two most commonly used deeds when transferring real estate are quitclaim deeds and warranty deeds.

 

What is a quitclaim deed?

mortgage applicationA quitclaim deed is a type of deed that transfers the actual legal rights to a property if any exist, that the grantor — the person who is transferring a stake in a property to another person — has without any representation, warranty or guarantee.

In other words, a quitclaim deed gives no guarantee of the title status of a property, any liens against it or any encumbrances.

 

What is a warranty deed?

A warranty deed is a type of deed that is generally used in more complex situations, including when someone is getting a mortgage to buy a home.

With a warranty deed, the person transferring title of a property (the seller) 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), Sian says.

Since the seller or “grantor” is guaranteeing their ownership, the warranty deed provides more peace of mind and less room for trouble.

 

When is a quitclaim deed used?

Home lending daysA quitclaim deed may work just fine if the grantor truly has the legal rights to a property and there are no liens or problems to be aware of. For the most part, quitclaim deeds are used in safer situations where there’s little question about the ownership interest in a property.

Quitclaim deeds are often used when someone is transferring ownership interest of a property they own to a limited liability company or trust they also control.

Quitclaim deeds can be used when someone is transferring ownership of the real estate to family members. For instance, maybe a couple is getting married and one spouse wants to add the other to the deed as a result.

In the event of a divorce, one spouse can quitclaim their interest in the property to the other spouse as well.

 

When is a warranty deed used?

If the grantor of a warranty deed misrepresents the ownership they promised in a property that made the transfer viable, they can be sued.

An example of how this could work in a situation that may seem “safe.” is as follows.

Say a few siblings inherit a home from a parent. They don’t need the house and they decide to sell it. However, one of the siblings didn’t sign off on the sale and decides they want to keep the house after the fact.

That sibling can sue to get possession of the home back, but the current owners would be allowed to use the warranty they received under the warranty deed to bring in the other siblings to the lawsuit.

In this case, the warranty protects the people who bought the home since some of the siblings sold the property without the permission of all siblings involved.

With a quitclaim deed, however, the buyer of the property would have no such protection. Instead, they would be left to defend themselves and their ownership of the property, most likely in a lengthy court battle. This underscores the importance of purchasing an owner’s title insurance in case the ownership of the property is disputed.

 

What are the differences between quitclaim deeds and warranty deeds?

Model Home TaxWarranty deeds are a safer option when buying a property. If you are the seller, you should also expect most buyers to request this option. Buyers want to be sure you own the property and will want you to sign a warranty deed.

If it comes out at a later date that you don’t own the property, the buyer will be able to sue you for a breach of the warranty.

There are many scenarios where this could happen, including when transfers of real estate are taking place within a family or extended family.

Even scenarios that seem inherently safe may be anything but, so you may want to use a warranty deed in any scenario where you’re not entirely sure of you or someone else’s ownership stake in any property.

When transferring the property to your child or your revocable trust agreement as part of an estate plan, then in that case a quitclaim deed could be the right choice. It will accomplish the change of ownership, but you are not providing any warranty that applies to the transaction.

It’s up to you, as a buyer or seller, to know and understand the kind of transaction you need and how much protection you want.

 

Original source: Quitclaim vs Warranty Deeds

 


The Law Offices of Lora Fausett P.C. provides real estate law services including loan modificationsbuying and selling legal assistanceshort sales and deeds in lieumortgage foreclosure defense, and more.

Located in Glen Ellyn, Illinois and serving clients in DuPageCookKane, Will, and Kendall Counties.

For Information Call 630-858-0090

 


Category: Deeds In Lieu