Any time you buy or sell real estate a deed will be involved.
A deed is a legal document that’s used to transfer ownership from property from one person, or legal entity, to another.
There are various types of deeds that are used for different purposes. The most common types of deeds are warranty deeds and quitclaim deeds. Even though both are used for essentially the same function, the legal implications of using one or the other can be significant.
Here are the basics of warranty and quitclaim deeds — and what’s different about each of them.
What Is a Warranty Deed?
There are different types of warranty deeds, and they give the purchaser of a property a guarantee that the seller owns the property and there are no other liens or claims against the property. The average homebuyer will almost always end getting some form of warranty deed. “In most states, the typical instrument for conveying real estate is a special warranty deed, in some states it’s known as a limited warranty deed,” says Andrew McGuire, commercial real estate attorney and partner at MKB Attorneys. “In a limited warranty or special warranty deed, the seller says that they’re going to defend the buyer against any other party who might lay claim to that land.”
There are different types of warranty deeds that offer various levels of protection.
With a special warranty deed, the seller’s guarantee (known as the guarantor) covers only the timeframe that they owned the property. In some cases, the buyer may also get what is known as a general warranty deed. “A general warranty deed is a more beefed up version of a special warranty deed,” McGuire says. This type of deed offers the most protection for the buyer, its protections apply to the entire history of the property.
What Is a Quitclaim Deed?
Sometimes known as a non-warranty deed, a quitclaim deed is also used to transfer ownership of real estate property from the current owner (the grantor) to a new owner (the grantee) — but it grants much less protection to a buyer. “With a quitclaim deed, the transferor is saying to the transferee, I’m giving you whatever rights I may have to this property, if any at all,” says Tali Raphaely, president of Armour Title Company, title company for Realtors, lenders, and homeowners.
So with a quitclaim deed, the seller isn’t making any legal promises about who owns the property or has legal claim to it. This provides much less legal protection for any party that’s receiving the property.
Quitclaim vs. Warranty Deeds
Both quitclaim and warranty deeds are used to transfer legal ownership of property, and must be filed with your county court to make the transaction official. But beyond that, they are very different legal documents.
One thing to note is that in some states the naming of quitclaim and warranty deeds can be confusing. “There are some states, Massachusetts and Maine for example, where the typical instrument for conveyance of property is a quitclaim deed,” McGuire says. But in those states quitclaim deeds include language that makes it “basically the same as what you find in a warranty deed,” he says. In those cases, even though it’s called a quitclaim deed, it’s functioning as a warranty deed.
When to use a warranty deed
Almost any time real estate is being sold a warranty deed will be used. This is especially true when the buyer is borrowing money to make the purchase. “A lender is going to be fine with a limited warranty deed, but that’s not the case with a quitclaim deed,” McGuire says. Banks will want to see a warranty deed and also require the buyer to purchase title insurance to protect its interest in the property.
When to use a quitclaim deed
Quitclaim deeds are typically used only in situations where the person transferring ownership between entities they control or among family members. “If I own a piece of property, in my name individually, and I want to transfer that property to an LLC that I own … I don’t need any extra protection that a warranty deed would provide,” Raphaely says. When a quitclaim deed is used in a property transfer, there’s usually no requirement for a title search to be completed.
In limited circumstances, property may be transferred using both a warranty deed and a quitclaim deed. This could happen in a situation where, over time, the legal description of the property has changed. For example, as survey equipment has become more precise, the old way of describing the land boundaries may no longer be as accurate. “It’s good practice for the seller to only transfer property with a legal description that is the same as when they bought it,” McGuire says. In that case, a seller could use a special warranty deed to transfer ownership of the property with the original legal description, and use a quitclaim deed for any new description or the property, he says.