Warranty Vs. Quitclaim Deed
On closing day, there is a mountain of paperwork that needs to be completed before you can receive the keys to your new home. One of the most important documents is the deed. There are two types of deeds involved in the process that you should be familiar with before signing. Signing the wrong one or restrictions placed on the deed could have a lasting impact on your home. Here is what you need to know.
What Are the Two Types of Deeds?
The quitclaim and warranty deeds both provide for the transfer of property from one party to the other. Warranty deeds are commonly used in real estate purchases, but there are some occasions that call for the use of the quitclaim deed. There are differences between the deeds that have an impact on your ownership of the property and what you can do with it.
How Do They Differ?
A warranty deed is detailed and explains exactly what you are getting for your purchase. In essence, it is a guarantee. The deed asserts that the seller is the owner of the property and has the right to sell it. It also guarantees that there are no loans or other outstanding claims on the property.
By contrast, a quitclaim does not offer the same guarantees. There is no reassurance that there are claims against the property. In fact, the deed does not guarantee ownership, but merely that the property is being transferred.
Quitclaim deeds are typically used in situations such as inheritances or divorces. However, the seller of a property might use both a warranty and quitclaim deed in the sell of a home. The owner of the property could choose to use a warranty deed to cover the main property and the quitclaim to cover areas where there is a question of ownership. A good example of this is the underwater land of a property that borders a lake.
Which Should You Use?
If possible, a warranty deed is the best possible option in most situations. It provides guarantees and legal options in case problems come up later. For instance, if a lien is on the home, you can sue the buyer for failing to disclose this information.
However, with a quitclaim, there are usually no legal recourses available if the property is not what the seller claimed. You also could face challenges in finding insurance because a quitclaim is riskier than the warranty.
Your residential real estate lawyer can help decide which deed would work best for you and ensure vital details are included in the closing day documents.