When real estate is transferred or sold, its title will transfer between the seller (or grantor) and buyer (or grantee). There are two ways the title can be transferred:
- Quitclaim deeds
- Warranty deeds
While these two types of deeds are both ways to convey an interest in a property, the primary differences between them are what a buyer receives in the transaction and what they can do if they do not receive everything they thought they were getting. Essentially, the difference between the two boils down to a guarantee.
Warranty Deeds Give Buyers Protection
The major difference between the two is that a warranty deed will give a buyer the right to take legal action against a seller if they do not get the full title they were expecting when they purchased the property. If you find out anytime after buying a property that you did not get the property you paid for, or even at all, you can hire a real estate lawyer to file a lawsuit.
Warranty deeds are used in most commercial and residential real estate transactions. They are the default type of deeds that are the basis for most standard transactions. In a warranty deed, the seller makes guarantees about the property. Namely, they are assuring the buyer that they own the property and have the legal ability to transfer it. They are promising that there are no:
Quitclaim Deeds Provide No Protection
Quitclaim deeds do not contain any type of guarantee. The “quit” in the word “quitclaim” literally means a seller is quitting any possible claim that a buyer could have. Essentially, the buyer is taking on the risk that the seller does not know the full extent of their property rights. The seller is conveying what they think they own or what they are telling you they own. There is little to nothing you can do about it. A quitclaim deed is essentially the “caveat emptor” of property deeds.
As a result, buyers do not have any recourse against the seller. A buyer can purchase a property only to find out later in time that the seller did not own all of it—or even any of it. If that were to happen, the buyer would be out of luck.
On May 24, 2021, Texas Governor Greg Abbott signed Senate Bill 558 into law, which amended Chapter 13 of the Texas Property Code by adding the new Section 13.006 relating to quitclaim deeds. This law went into effect on September 1, 2021, and provides that four years after recording a quitclaim deed, a subsequent purchaser or creditor for value without actual notice of other unrecorded claims on the property has good faith protection.
Warranty Deeds Are Used for Arm’s Length Transactions, But Quitclaim Deeds Are Not
Quitclaim deeds are often used when property is being gifted to another or transferred as part of a will. In these situations, it would not make sense for a grantor to legally put themselves on the line when they give someone else property. In addition, these deeds are used when the seller is unsure about the exact boundary lines for their property, and they do not want to be liable if they are wrong. Unfortunately, quitclaim deeds are also commonly used by fraudsters in real estate scams.
When a buyer receives a quitclaim deed to a property, there is an expectation that the purchase price will be less than if they were obtaining a warranty deed. After all, the buyer is getting less in the deal. The buyer is receiving what the seller thinks they are selling as opposed to an ironclad guarantee from the seller that they will make the buyer whole if they do not deliver in full. However, quitclaim deeds are almost never used in an arm’s length transaction.
Be Suspect of Quitclaim Deeds
In most transactions, buyers want no part of quitclaim deeds because they lack the certainty of a warranty deed. Quitclaim deeds are most commonly used when the property is staying in the family. For instance, one spouse may want to add the other to the deed without having to refinance their mortgage. They could easily do so through a quitclaim deed. It would be difficult to imagine a scenario where a buyer would buy a house and move in without knowing for sure whether they actually own it.
Contact an Attorney for Advice with a Transaction
Buyers or sellers who have any doubts about what type of deed should be used in a real estate transaction they’re contemplating should contact an experienced real estate attorney. If a buyer is offered a quitclaim deed, they should definitely ask further questions and get legal help. This could be a red flag that may cause them to walk away from the transaction.
Never buy a property without having an attorney thoroughly review the deed and perform a title search. Before entering into any real estate transaction, a buyer should know the difference between these two types of deeds. Sellers should also research the title before they sell when giving a warranty deed to the buyer.
To schedule a consultation, contact us today. The real estate attorneys at Feldman & Feldman can work for you to protect your best interests.