Quitclaim deeds are a form of property transfer that derive their appeal from being a quick, efficient, and cheap way to transfer real property. While this is true in certain limited circumstances, the nature of Texas law makes quitclaim deeds nearly useless in many circumstances. They are so limited in use, in fact, that title and insurance companies in Texas will often refuse to work with them.
Why are quitclaim deeds so useless in Texas? This article will briefly examine what a quitclaim deed is, the limited uses of this type of deed, and the reasons they are relatively useless in Texas. If you have questions or are involved with a transfer of property using a quitclaim deed in Austin, Pflugerville, or Round Rock, contact the real estate attorneys at the office of Sheehan Law, PLLC for a consultation.
What is a quitclaim deed?
There are three main types of deeds used in the sale of real property in Texas. Warranty deeds are the most common means by which to transfer property. A warranty deed, in addition to transferring title to property, warrants against certain defects of title. Most importantly, a warranty deed provides a guarantee that the seller actually holds title to the property being sold. You may also make warranties related to the absence of liens or other encumbrances on the property. With a warranty deed, a buyer can typically be very confident in what they are purchasing and its condition.
A quitclaim deed provides no such guarantees. It does not convey muniment of title. Instead, unlike a warranty deed, which conveys property, a quitclaim deed only conveys whatever interest the grantor has at the time of the transfer. A quitclaim deed can therefore transfer anything from a fee simple interested in a property to nothing at all, depending on what interest the grantor has at the time of transfer. A quitclaim deed can often not be used to establish title on its own. This is distinct from a warranty deed, which warrants that the title being granted is valid. By contrast, a quitclaim deed makes no warranties or promises about the quality or validity of the title. This means that the purchaser of property through a quitclaim deed cannot be confident they have valid title to the property.
Despite all of this, quitclaim deeds are still a valid, if unreliable, means of transferring title to real property in Texas. This is true even if they ultimately transfer nothing at all.
Reasons to be weary of using a quitclaim deed in Texas
The very nature of a quitclaim deed should make a buyer weary. Simply put, the buyer is being given a deed that claims to transfer some title to property, but makes no guarantees or warranties regarding that claim. It is possible for a grantee to pay valuable consideration for a quitclaim deed that does not provide title to anything, and have no recourse against the seller. Quitclaim deeds are the ultimate “buyer beware” of real estate transactions.
Buyers of property are not the only ones weary of quitclaim deeds. In Texas, title companies and insurers are very often unwilling to insure a quitclaim deed, and with good reason. Under Texas law, buyers using a quitclaim deed are charged with notice of any title defects, regardless of whether or not these defects appear in the record for the property. That means that even if a title search shows no defects on a property, a prior unrecorded transfer of interest will still be deemed to be superior to the quitclaim transfer, despite the buyer having no idea the prior transfer occurred. This makes title insurers weary for obvious reasons: it can be extremely difficult or even impossible to determine if a quitclaim deed is transferring a valid interest.
When can a quitclaim deed be used in Texas?
Despite the significant downsides of quitclaim deeds in Texas, they are not entirely useless. There are a few specific circumstances in which a quitclaim deed provides a quick and efficient means of transferring title. For example, even though it can be difficult to determine what a quitclaim deed actually conveys, it is clear what the grantor of a quitclaim deed relinquishes: any and all interest that they may have in the property. Therefore, a quitclaim deed can be useful in situations where a grantor is seeking to relinquish any interest they may have in a property, in order to clear the properties title. These situations are not extremely common, and generally occur in transfers involving family members or close relationships, and not in standard, arms length transactions. Buyers of real property in the normal course of business, such as a traditional home sale, should be extremely cautious if the seller seeks to transfer title using a quitclaim deed.
Sheehan Law, PLLC | Austin, TX Real Estate Attorneys
Real estate transactions can quickly become very complex, and often require the knowledge and experience of an attorney. If you have questions regarding a specific transaction, or have more questions regarding quitclaim deeds, please do not hesitate to set up a consultation with one of our experienced attorneys. Contact us today.