Quit Not Quick

I've always been amazed that our school system does not better prepare us to take on life's more costly situations. One such situation is buying a home, and it's arguably our most expensive purchase in life. How I recall, no one ever discussed real estate terms when I was in high school, although it would seem to be an excellent guest speaker opportunity for a Realtor, attorney, or title company employee to share in the classroom.

In any event, while there are many important documents in a real estate transaction, deeds are the most powerful documents in real estate in my opinion because they transfer ownership. When referring to various types of deeds, I've found that it is common to hear someone incorrectly say or write, "quick claim deed." Although it may sound very similar, it is actually called a "quitclaim" deed. It is called a "quitclaim" because it does exactly that: quits a claim to the property it refers to.

Quitclaim deeds transfer the ownership interest or rights in real estate to the recipient without stating what exactly the interest or right actually is in the property. This type of deed also does not provide any warranty of ownership, and that is key.

Commonly, they are used to clear up "clouds" on the title of a property, but can be used to transfer complete ownership -- of course without any warranties. (A "cloud" on the title is any potential lien, encumbrance, or claim that could impair the owner's title to the property, and a "clear title" has no clouds.) It's also common to see them used after a divorce when one of the former couple deeds their share of a property to the former spouse. Sometimes, you'll see them used when people deed property into a trust or a company they own.

By comparison, a warranty deed provides a guarantee that there are no issues in the chain of title (chain of title = way back when the government gave to Owner A, who sold to Owner B, who died and left it to Owner C, who divorced and transferred it to Owner D, who sold to Owner E… and you get the picture.) The seller can provide this guarantee because normally he or she is relying on the previous warranty deed given to them, which contains the same or similar warranties.

Title insurance also allows them to provide this warranty because if something does become an issue in the future, the policy covers the actual loss, subject to the limitations and exclusions listed within it. You'll note that I said "actual" in that last sentence. Just because there is a title issue, it seems most title insurance policies will typically only pay for actual losses.

Title insurance is a whole new topic though!