Question 10. Does a "Quit Claim" deed release me from liability on my mortgage?
A "Quit Claim" Deed is used everyday in the real estate industry. Many people are under the impression this deed is the proper way to convey ownership or title to another person or entity. It is also not called a "Quick Claim" Deed, as many people refer to it. However, in many states a "Grant Deed" is used, instead. Make sure you know the term and what it means when using either.
There is a significant difference in these two recording instruments. The Quit Claim Deed is used in the transfer of title or ownership, without any warranties. The title is transferred "as is". It is usually used to clear the "cloud" on title, but comes with no guarantees. It is often used by a husband or wife to transfer ownership to one or the other parties. Again, both are used very widely depending on what state you're in.
States that use the Quit Claim Deed also use a "Warranty Deed" to transfer title. The Warranty Deed does warranty the title. It is best to use a Warranty Deed as apposed to a Quit Claim Deed in these transfers. The Grant Deed is used to transfer title or ownership also, and it warranties the title. In signing a Quit Claim
deed, you are giving up (quitting) your claim of ownership to the subject
property and letting the other person on title (often a spouse or other
relative) have title only in their name. Make no mistake, you will no longer be an owner on
the property unless the other person agrees to put you back on title at
some later point in time. It's a very
simple process and most people can to do it themselves. Almost any office supply store has blank Quit
Claim Deeds. Fill it out with the owner's
names and property description, sign, have it notarized, then record at the
courthouse. It's done! Even if you do not record this Deed with the
People fall into this "sounds easy to do" trap every day. It is easy to do, but if you don't understand all the facts about the use of this deed, it can cause you problems. As mentioned above, divorcees often mistakenly use this Deed to convey ownership or title of their home over to the other. However, it is better to use an Interspousal Transfer Deed for this purpose. Example: a couple own their home jointly, as most couples do. At the time of their divorce, the judge may award the entire home to the wife. So the husband Quit Claim?s his ownership to his soon-to-be ex wife. Now she owns the home 100%. By transferring title in this manner, she owns 100% of the property, but is still only liable for 50% of the mortgage according to the terms of the contract for the mortgage, although the Family Law judge almost always assigns responsibility for the mortgage and taxes on the property to the person who is awarded the property. The judge can order one party to pay the mortgage, but since the mortgage company is not a party to the divorce action, the judge cannot order them to assign the debt to one party or the other. If at all possible, it is better for the party keeping the house to refinance and ?buy out? the interest of the ex-spouse. That way, the person who owns 100% of the house is responsible for 100% of the debt. Consulting an attorney on how to proceed in your divorce is always the most prudent course of action to avoid legal trouble.
There is another problem which can occur when using a Quit Claim Deed. All liens and judgments that are attached to the property go with the transfer. As stated above, the property is transferred "as is". Investors who do not do a thorough title search before taking title to a property through a Quit Claim Deed can find they are stuck with a property that has more encumbrances against it than the property is worth. Be very careful when using the type of deed and consult an attorney to answer any questions you may have.
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