If you are a real estate investor, you are always looking for properties that look attractive with an even more attractive price tag. Let’s say that a family member has offered you a quitclaim deed for their property.
What should you do in this case? Should you take it or not? What things do you need to consider before making a decision?
Before you accept or reject it, you need to know what quitclaim deeds are and five important facts about quitclaim deeds for real property transfers.
What Are Quitclaim Deeds?
A quitclaim deed is a legal document that is often used for non-monetary transfer of real estate properties and is done between family members or a trust.
The deed discusses the release of the seller’s interest from the property without any warranty for it. However, it prevents the grantor from showing any interest in the property again.
Quitclaim deeds do more than property transfers. There are a few more things to know about them.
What does the quitclaim deed include?
- The legal description of the property;
- Name of the person who is transferring their property (the grantor);
- Name of the person or trust who is receiving the property (the grantee);
- The date of transfer;
- Notarized signatures of both parties involved.
If you’re a real estate investor in California, Florida, Georgia, or Texas, and are looking for a quitclaim deed form in Georgia, for example, then you should know these five facts about quitclaim deeds for real property transfers.
5 Important Facts About Quitclaim Deeds
Before you offer someone a quitclaim deed or you accept someone else’s offer of the deed, you should consider these five facts discussed below.
1. It Gives the Least Amount of Protection
Quitclaim deeds don’t guarantee the grantee that there aren’t any liens or encumbrances once the property transfer happens. It also doesn’t prove that the grantor was the owner of the property before transferring it.
The grantor only talks about the property, states the release of the property, and, as the name already suggests, quits any claim on the property. It doesn’t give you protection from any inherent risk regarding the property.
2. Accept It Only from a Grantor You Trust
Because quitclaim deeds don’t provide any warranty that it’s free from liens and provides the least amount of protection, it’s best to accept the deed from someone you trust. A good practice is to accept it from a family member you trust.
Couples who have married recently can use quitclaim deeds to add a spouse to their property. Conversely, couples who are heading for divorce can use the deeds to take off the name of a spouse.
If a trust wants to accept a quitclaim deed, it should do it carefully and only if they know and trust the grantor.
3. It Doesn’t Affect the Mortgage
Doing a quitclaim deed will only transfer the property from the grantor to the grantee. It will not affect the mortgage on the property in any way. In this case, the grantor will remain responsible for paying off the mortgage even after the property transfer.
Usually, quitclaim deeds don’t take place if there is an outstanding mortgage. Even if the transfer happens with the mortgage, the grantee demands warranties of the mortgage until it is paid off entirely and also asks for a warranty deed.
4. You Can Clear a Title Defect with a Quitclaim Deed
If you have a defect in the title, say a spelling error, then you can use a quitclaim deed to correct it. It will only change the title and will not affect the property or anything related to it whatsoever.
You can also use it to correct information about an improperly transferred property. In case there was an issue with the signature, you can use this deed to correct it. You can also use it to correct the wordings in your property papers.
5. The Title Has to Be Good Enough
A quitclaim deed can provide the protection of a warranty deed only if the title is good and has no error in it. If the title has any defect, the buyer can’t take any action for it against the grantor.
Sometimes, while investigating the deed for title insurance, the title company may find what is known as a ‘cloud’ in the title. This means that there may be someone who has an interest in the transferred property, but their name wasn’t accounted for in the title.
To prevent such situations, the title of the quitclaim deed needs to be clear.
Conclusion
Transferring properties can be complicated, especially if you’re not clear about what you should do, which deed to use, and you don’t have much idea about the deeds you’re dealing with.
A quitclaim is something essential that you should know as a real estate investor so that you can understand properly what you will be dealing with.
Hopefully, this short but informative article on five important facts about quitclaim deeds for real property transfers has given you a basic idea.
FAQs
1. Can I make profits out of the property I got with quitclaim deeds?
Yes, you can. If you want to use that property as a rental property and realize capital gains, you’ll need to get a 1031 exchange. This can be very complicated if you try to do it on your own. So do research the rules and tips, and work with an expert on it.
2. Can I transfer my property to a corporation using a quitclaim deed?
Yes, you can transfer it to a corporation or to an LLC by using a quitclaim deed. You should keep in mind that if you have outstanding loans, the due on sale clause can get activated if you have outstanding mortgages. This means you can give the condition to the corporation to pay off the remaining mortgage.
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