Transferring ownership of real property incident to divorce often involves the use of a Quitclaim Deed. Divorce professionals frequently request this deed when transferring property in a divorce settlement. A basic understanding of various real estate deeds, such as Quitclaim Deed vs. Warranty Deed, is crucial when transferring title and ownership during a divorce.
What is a Real Estate Deed?
A real estate deed is a legal instrument that passes an interest in real estate from one person to another. When real estate is sold or given, it is done with a deed. The new owner receives rights to the property and any title warranties transferred by the previous owner through the deed. A deed requires an executing party (grantor/grantee, transferor/transferee), witnesses, and a notary public acknowledgment, making it a highly valid and less rebuttable document.
Understanding the Quitclaim Deed
A Quitclaim Deed is a legal document used to transfer interest in real estate from one person or entity (grantor) to another (grantee). Unlike other deeds, it only conveys the grantor's interest at the time of execution without guaranteeing ownership or good title. This lack of protection makes a Quitclaim Deed unsuitable for purchasing real estate from unknown parties but useful for transfers between family members, such as in divorce proceedings or estate planning.
Title companies may require a Quitclaim Deed to clear up title issues before issuing title insurance. Similarly, lenders may ask someone not on the loan, like a spouse, to complete and record a Quitclaim Deed.
Common Uses for Quitclaim Deeds
- Real Estate Transfers Between Family Members: Quitclaims are used to transfer property to and from family members, such as parents to children or between siblings.
- Adding or Removing a Spouse from Title: A Quitclaim Deed can add or remove a spouse from the property's title due to marriage or divorce.
- Transferring Real Estate to an LLC or Corporation: Quitclaim Deeds are common for corporate transfers of real estate, often between closely related entities.
- Transferring Real Estate to a Trust: Family planning involving property often uses Quitclaim Deeds to transfer real estate into a trust.
- Removing a Cloud on Title for Title Insurance: Title companies may require a Quitclaim Deed to resolve potential claims on the property before issuing title insurance.
Understanding the Warranty Deed
General Warranty Deeds provide the most protection to the grantee (buyer). This deed guarantees that the grantor (seller) holds clear title and has the right to sell the property. Unlike a Special Warranty Deed, this guarantee extends back to the property's earliest title. The grantor guarantees no encumbrances that prohibit transfer during their ownership.
Incorporate express references to easements, restrictions, or other agreements of record into the deed text to inform the grantee of any warranty limitations and uphold the covenant against encumbrances.
Choosing Between Quitclaim Deed vs. Warranty Deed in Divorce
Determining whether to use a Quitclaim Deed or a Warranty Deed when transferring ownership of real property in a divorce situation depends on the individual case. A thorough understanding of the risks and protections of each type should be discussed with your attorney.
How a Certified Divorce Lending Professional (CDLP®) Can Help
Divorce Mortgage Planning is a holistic approach to evaluating mortgage options within the context of overall financial objectives related to divorce. A CDLP® can help identify potential conflicts between the divorce settlement, financial planning, and home equity solutions, as well as any real property issues.
The role of a CDLP® is to integrate the selected mortgage into long and short-term financial and investment goals to minimize taxes, interest expense, and maximize cash flow. This approach helps divorcing homeowners make more informed decisions regarding their home equity solutions and mortgage financing opportunities during and after divorce.
Benefits of Incorporating Divorce Mortgage Planning
Incorporating divorce mortgage planning into the settlement process makes it easier to identify possible solutions and assists both parties in letting go of counterproductive positions and emotions. A CDLP® can help take stock of possibilities, resources, and answers regarding the marital home, other real property, and mortgage financing opportunities.
A successful divorce settlement results from effective communication and strategic negotiations, ensuring both divorcing parties come out whole or at least on the road to recovery. Working together as a team and incorporating divorce mortgage planning into the settlement cycle with a Certified Divorce Lending Professional will result in better solutions and outcomes for the divorcing couple.
Get Started with a CDLP®
Involving a Certified Divorce Lending Professional (CDLP®) early in the divorce settlement process can help set the stage for successful mortgage financing in the future.
For more information, contact a CDLP® today for a copy of the "Divorcing Your Mortgage Homeowner Workbook," a guide to credit, real estate, and mortgage financing after divorce. This workbook will help you get organized, be prepared, and understand your mortgage financing position whether you need to refinance the marital home in an Equity Buy-Out situation or prepare to sell and purchase a new home post-divorce.
This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations. The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.
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