The real estate industry in the United States is currently booming, and there’s a few things every new real estate investor should know. One of the most complicated components of being a real estate investor is knowing your way around deeds. Deeds can be private or official, although in homeownership almost all deeds are private. Within the category of private deeds there are warranty deeds and “quitclaim deeds.” If you’re dealing with a quitclaim deeds you should exercise caution, as they’re the weakest type of deed in real estate.

Quitclaim Deeds Offer Only a Small Amount of Protection

Quitclaim deeds, also called non-warranty deeds, only convey the interest of the grantor of the current property. In other words, they only “remise, release, and quitclaim,” their interest, meaning there are no promises regarding the quality of the title.

Grantors of quitclaims make no real claims as to the quality of their property, making them far less liable in the event something is seriously wrong with the property. Sometimes the grantor of a quitclaim has no interest in the property, and will thereby give the grantee nothing by virtue of the quitclaim deed. That is, they acquire no right of warranty against the grantor.

Quitclaims Should be Accepted from Only a Select Few

As quitclaims offer the least amount of protection, you should agree to a quitclaim only from grantors you know well and trust with certainty. Quitclaims can be useful, but only for extremely low-risk transactions between people who know and trust each other.

Additionally, quitclaim participants often don’t involve the exchange of money with each other because of the nature of the deed. As such, quitclaims are usually used to transfer property within a family, such as between a parent and adult child, ro between siblings. Some divorcing couples also use a quitclaim deeds to expediate the process.

They Can be Used to Clear a Title Defect

Sometimes, there are “defects” in the recorded history of a real estate title. These can include things like issues with wording, a missing signature, or the failure to properly record certain documentation in past exchanges.

These things aren’t common, as real estate is an extremely thorough and litigious business, but they do sometimes slip through the cracks. In the event of something like this happening, quitclaims can be used to grant a “quitclaim” for the previous owner and transfer ownership to the future owner without too much hassle.

They’re Only as Effective as a Warranty Deed if the Title is Good

Remember, a warranty deed is essentially a more ironclad and safer version of a quitclaim deed. There are times, however, when a quitclaim deed can convey title as effectively as the former, but only if the grantor has a good title when the deed is delivered.

The reason many don’t use a quitclaim deed is because of the lack of warranties it grants and holds. If the title has a defect, the grantee has no legal recourse against the grantor under the deed. This is why a quitclaim is usually only used if the grantor is sure of the title status or if they wish to assume no liability for the transfer.

A Quitclaim Has No Bearing on the Mortgage

To reiterate, quitclaim deeds are often used between family members because there is no exchange of money and both members are, often, well aware of the title that the deed grants. Due to this fact, quitclaims are often not used in situations where the property has a mortgage outstanding.

There are exceptions to this general rule, however, but the important thing to keep in mind is that the use of a quitclaim deed will not affect the price of the mortgage. The grantee often assumes the responsibility for paying the mortgage or refinancing it with the permission of the lenders in play. If the grantor wants extra protection, a legally enforceable agreement can be drawn to document the terms of payment.