A quitclaim deed is a document that transfers ownership of real property from one person to another. They are useful in situations where you want to transfer ownership without money changing hands. Because a quitclaim does not guarantee a clear and marketable title, it’s best to only use quitclaims with people you know and trust.
What Is a Quitclaim Deed?
Quitclaim deeds are an easy way to transfer the title of real property to a new owner. These agreements are typically used when transferring property to family members or friends. Quitclaim deeds do not guarantee a clean and marketable title. They only transfer property ownership, and they do not remove liens such as mortgages.
How a Quitclaim Deed Affects a Mortgage
Most mortgages have due-on-sale clauses that require the mortgage to be paid in full when the property transfers. If there is an outstanding mortgage on the property, the grantor is still legally responsible for the mortgage because a quitclaim only transfers property ownership and not debts. The new owner will have the title to the property, but the original owner will still be responsible for the outstanding mortgage.
If you are buying a property with a quitclaim deed, it’s important for you to make sure there is no existing mortgage, due-on-sale clause, or that the seller is going to pay off the balance of their mortgage. If there is an existing mortgage, ask your lender if you can assume the existing mortgage. You can usually refinance later. The lender will likely require you to purchase title insurance.
When to Use a Quitclaim Deed
Quitclaim deeds are typically used to transfer property within a family, such as when an owner gets married or divorced and wants to either add or remove a spouse from a deed. Quitclaims are also used when transferring property from parents to an adult child or between siblings. As an investor, you might use a quitclaim deed to transfer property from yourself to an ownership entity such as a limited liability company (LLC) or realty trust.
Here is a list of occasions where a quitclaim deed might be used:
- Adding or removing a spouse
- Transferring to adult children
- Transfer between siblings
- Transferring into an ownership entity such as a realty trust or LLC
Because a quitclaim deed only impacts the ownership of the property and not any outstanding debts, you want to consider carefully when using a quitclaim deed where there is an existing mortgage and have a plan for the discharge or assumption of that debt. Quitclaim deeds are best used with people you know and trust.
Quitclaim Deeds vs Warranty Deeds vs Other Deeds
Because a quitclaim deed only transfers ownership and does not guarantee a clear and marketable title, you may want to consider using a different type of deed. Quitclaim deeds are generally used between spouses and family members. Although they’re typically faster and easier to create and record, they carry more risk.
Quitclaim Deeds vs Warranty Deeds
The difference between a quitclaim deed and a warranty deed is that a quitclaim deed only transfers property ownership and does not guarantee a clear title or any other interest by other parties in the property. A warranty deed guarantees or promises a clear title to the new owner of the property.
With a warranty deed, a title search is conducted to make sure the current owner is the valid owner, and nobody else has any claims to the real property. A quitclaim deed does not make this guarantee, so it carries a greater risk if someone comes along at a future date and claims that they are the valid owner or have title or interest in the property.
Quitclaim Deeds vs Interspousal Transfer Deeds
An interspousal transfer deed transfers property ownership between spouses. Interspousal transfer deeds are useful when someone marries and wants to add their new spouse to the deed, or if a couple is divorcing and wants to remove a spouse. Interspousal deeds are also used to remove a spouse from the title if he or she has poor credit, and they want to refinance their home.
An interspousal transfer deed is exempt from transfer taxes, which a quitclaim deed is not. Although interspousal and quitclaim deeds both transfer interest in a property, neither is exempt from mortgage debt. Investors may consider an interspousal transfer deed if they or their spouse have less than stellar credit. An investor might consider a quitclaim or interspousal transfer deed when they don’t want to hold property in their own name.
Other Types of Deeds
In addition to quitclaim deeds, warranty deeds, and interspousal transfer deeds, there are two other types of deeds real estate investors may encounter―special warranty deeds and bargain and sale deeds.
- Special warranty deed: Only guarantees what happened during the time of property ownership. It cannot warrant against anything that occurred before ownership. Special warranty deeds are sometimes used in commercial real estate transactions.
- Bargain and sale deed: Used in tax sales and foreclosure auctions. This deed only guarantees that the deed holder has a valid title to the property and does not guarantee against any liens, deed restrictions, easements, or encroachments.
Quitclaim Deed Costs
The costs to do a quitclaim deed vary depending on the property location, whether you prepare and file the deed yourself, hire a title company, or hire an attorney to do it for you. Lawyers typically charge $200 to $400 per hour, and title companies generally charge $150 to $250 for a simple quitclaim deed.
If you do it yourself, find a template online. Templates cost from $0 to $50 and up. The higher cost templates sometimes come with additional services such as document review by an attorney. You will also need to pay a notary public to witness your signature and notarize the deed. Notary fees can run from $30 to $100 or more for a real estate document.
Some quitclaim deed costs include:
- Online template cost (free): If you decide to create your own quitclaim deed, you can usually find a template online for free. However, you may still want to have an attorney check the deed to make sure everything looks in order.
- Online template with attorney review ($50-plus): Some online deed preparation programs offer an attorney review of your document for a fee.
- Hiring a local attorney ($200-$400 per hour): You can have a local attorney create your document or bring them your online template for review.
- Hiring a title company ($150 to $250 plus recording fees and tax stamps): A title company is typically less expensive than hiring an attorney, and they’re well-versed in preparing and recording deeds.
- Notary public ($30 to $100 and up): Quitclaim deeds must be notarized to be valid. A growing trend is an online notary. They don’t cover all states, so make sure your state is covered should you hire one.
- Recording fees: Recording fees vary. Expect to pay either a $12 to $15 flat fee or $65 to $85 for the first page and $1 to $6 for each additional page.
- Transfer tax stamps: Tax stamps are a fee paid for transferring title from one owner to another. They are calculated typically as a percentage. Most states charge transfer tax. It can vary by the state tax rate and mortgage amount recorded on the deed
If you intend to write a quitclaim deed yourself, it is helpful to use a form or template that has the right legal jargon your registry of deeds expects to see. It is also a good idea to consider using online software document preparation programs that have done the hard work for you.
Quitclaim Deed Recording Costs
Next, you will need to record the deed at your county office and pay a recording fee. Recording fees can range from a flat fee of $12 to $15, or $65 to $85 for the first page and $1 to $6 for each additional page. Depending on your state, you may pay a real estate transfer tax. A transfer tax is typically a percentage of the purchase price specified in the deed.
Quitclaim Deed Providers
Using an online deed prep software program is a good choice if you’re unfamiliar with the legalese of quitclaim deeds since these templates are typically prepared by licensed and vetted attorneys. Online software programs range in what they offer. Some have free trials or free forms with additional fees if you want a lawyer to review your document. Many of these websites give free information in their blogs and articles.
Quitclaim Deed Comparison
Quitclaim Deed Provider
What They Offer for Deeds
Customized quitclaim and other deeds, document dispute defense with an on-call attorney
Title search, create deeds, file with the county; Express Gold - expedited processing and filing
Creates a “project” for your deed creation, connects you with a vetted attorney
Offers various deed forms and access to an online library
Library of printable and electronic deed forms,
monthly/annual fees include unlimited access
Free legal info, paid DIY forms, software, books and eguides; free lawyer directory
Rocket Lawyer is an affordable way to get a simple legal quitclaim deed and legal advice from a vetted attorney. It offers step-by-step instructions to help you customize your deed. It’ll help you find answers from a lawyer in the area your property is located. There’s a seven-day free trial. Prices start at $9.99 to $149 for nonmembers and $39.99 a month for Premium members. It offers additional products and services.
LegalZoom can handle your deed forms and filings. All you have to do is fill out its deed form. It’ll conduct a title search, create the deed, and file it with your county recording office. Express Gold membership expedites processing in as little as two days. Fees for standard service start at $249 plus fees, and Express Gold is $289 plus fees.
LawTrades is an on-demand legal talent platform that can help connect you with a vetted attorney. When you fill out its online form, you will be contacted by a representative, who will discuss your case briefly, and give you a fixed-fee quote for your project. Upon payment through its secure website, you’ll be introduced to your lawyer who will immediately begin your online legal consultation. Prices vary but start around $250 per hour.
LawDepot provides legal forms and answers to legal questions. It covers real estate, family law, and business law. Real estate services include document creation for residential and commercial rentals, tenant evictions, selling or transferring real estate, including deed preparation. It offers free document creation and a free one-week trial. Prices range from $7.50 to $39 per document, or less than $99 for a One Year Pro membership.
eForms is the largest free online document library. eForms has a fillable forms service that allows users to create custom agreements online for $15 per month. Subscribers can have their forms stored online with eForms. After a free seven-day trial, prices are $15 per month for unlimited documents, $45 for a single document, or an annual fee of $120 for unlimited access.
Nolo offers DIY documents, books, legal forms, and software. It also offers a “Find A Lawyer” service for free. Users who need in-depth guidance can purchase a book or an e-book, which ranges from $25 to $40 depending on the topic. Customizable legal forms and contracts are also available for an annual subscription of $35 to $44. Quitclaim deed preparation with Nolo is $34.99.
While all of these online programs offer deed preparation services, they also offer numerous other services as well. Some offer landlord forms, purchase and sales agreements, letters of intent, and other business products and services. Some of them have attorneys who will do the work for you, some are best suited for DIY, and others offer both.
How to Create a Quitclaim Deed in 3 Steps
If you prefer to prepare a quitclaim deed yourself, there are three steps you need to take from creating to recording the deed. First, you need to gather the required documentation so that you can move to the second step, which is writing the deed. The final step is to sign and record the deed at the registry of deeds where the property is located.
1. Gather the Required Documentation
Before you begin creating a quitclaim deed, you will first need to gather the necessary information and documentation. Preparing before you begin writing or filling out a form will save you time from having to hunt for needed information.
Here is what you will need:
- Quitclaim deed form
- Property address
- Legal description of the property
- Transfer date
- Names of grantors and grantees, or entity, such as LLC if applicable
- City, county, ZIP code, and state where the property is located
- Tax parcel ID number
- Price being paid for the property, even if it is $1
You can use the property description from the existing deed, and you can get the tax parcel ID number on the property’s tax bill or from the tax collector’s office in the city where the property is located. Some municipalities give online access to tax cards. Once you’ve gathered all the necessary information, you can begin to write the quitclaim deed.
2. Draft the Quitclaim Deed
If you write the quitclaim deed yourself, make sure you are using the right legal jargon and presenting the information in the right order. You can look for quitclaim deeds to use as a sample at the registry of deeds where the property is located. It is easier to use one of the ready-made templates offered online. The information you previously gathered will go into the appropriate sections of the quitclaim deed.
To save you time and potential error, it is a good idea to use a ready-made quitclaim deed template where you can simply enter the information you previously gathered. If you want to create a quitclaim deed, check out Rocket Lawyer. It offers simple step-by-step instructions, and you can have your legal document reviewed by an attorney at no extra cost.
3. Recording the Quitclaim Deed
The next step is to have both grantors and grantees meet with a notary public to sign the deed. Notaries do not review your deed for inaccuracies, so you may want to have an attorney review your document before signing. Once all parties have signed the quitclaim deed, the final step is recording the deed.
You will record your deed at the county registry of deeds where the property is located. Depending on which state you’re filing in, you may need to fill out a form. You’ll also have to pay the recording fee and any tax stamps owed. Once the deed is filed, you can give a copy to the new owner and keep a copy for your records.
Transferring Quitclaim Deeds
Compared to other types of deeds, quitclaim deeds carry the most risk. Some investors may want to use a quitclaim deed because it is easier and faster to prepare and record than with a warranty deed. If you use a quitclaim deed to transfer property, it is best to use this type of property transfer with people you know and trust since a quitclaim does not guarantee clear title.
The risks of a quitclaim deed can be minimized if there are no existing liens on the property, and if a title search is conducted, but this still does not provide a guarantee to a clean title. It only minimizes the chances of someone laying claim to the property. If you are going to do a title search anyway, a warranty deed is the better choice.
Another case where an investor might use a quitclaim deed is when they purchase an investment property in their own name and wish to transfer it to a different legal entity such as a real estate trust or LLC.
Quitclaim Deeds & Legal Entities
A quitclaim deed is a good option if you purchase a property with a warranty deed, close the transaction in your own name, and move the property into an LLC or trust. Some lenders don’t allow you to close into an entity since it carries greater risk to them but would consider your moving the property into an entity after closing. A lender may require you transfer back out of the LLC when refinancing.
If you want to close the transaction into a legal entity, check with your lender to be sure you can do this and that it won’t trigger a due-on-sale clause. In most cases, it won’t since federal law prohibits lenders from doing so. You also will not have to pay transfer taxes when you are transferring property to yourself as the trustee or LLC manager.
Tax Implications of Quitclaim Deeds
Quitclaim deeds aren’t taxed when they are used to transfer property to a spouse or qualifying charity. However, they are taxed in other cases. Quitclaims also do not avoid paying property taxes, and the new owner cannot get clear title to the property unless the back taxes are paid. Tax liens on the property also have to be satisfied before transfer.
If a new owner buys the property with back taxes owed, he or she assumes responsibility to pay those taxes. This is important for investors who consider buying distressed and foreclosed properties. As part of their due diligence, they want to make sure there are no back taxes or other liens owed since they would assume this debt burden.
Federal gift taxes also apply to property transferred with a quitclaim deed and are reported as income on the federal tax return. Individuals are allowed an exclusion of $13,000 and married couples a $26,000 exclusion. The gift tax is applied to the amount of value above these exclusion amounts.
Quitclaim Deed Frequently Asked Questions (FAQs)
We’ve answered, “What is a quitclaim deed?” Now, we are going to answer some of the commonly asked questions about quitclaim deeds. However, if you have additional questions that we didn’t answer or would like to comment about quitclaim deeds, please visit our forum.
1. What kind of deed should I use for my investment property?
Typically, a warranty deed is a better choice when purchasing an investment property since a warranty deed guarantees a clear title and a quitclaim deed only transfers property. You can use a quitclaim deed if you are transferring property to your trust or LLC. It is also useful when transferring property between spouses.
2. Is a quitclaim deed a good choice?
A quitclaim deed is a quick way to transfer property, but it is best used with people you know and trust such as spouses, family, and friends. It’s a good choice when no money is exchanged, and when the property is transferred, it is not a taxable event, so no additional costs are incurred.
3. Can a quitclaim deed be challenged?
A quitclaim deed can be challenged. In some states, there is a two-year statute of limitations. Check with the registry of deeds in the state where your property is located. The person challenging the deed carries the burden of proving the deed contains false information, was forged, or signed under duress.
4. Can a quitclaim deed stop a foreclosure?
A quitclaim deed won’t prevent foreclosure. Check with your lender to see if you can transfer your property back to them using a quitclaim deed by doing a “deed in lieu of foreclosure.” It’s not an easy thing to do. Most lenders don’t want the property and may prefer that you short sale instead.
Quitclaim deeds are an easy way to transfer property to a new owner, but they are not always the best choice. A quitclaim deed is best used when transferring property between family and friends. Quitclaim deeds cannot guarantee you’ll receive a clear and marketable title. A better choice for transferring investment property is a warranty deed because warranty deeds do guarantee a clear title.