Mortgage Deed Used in Divorce CDLPTransferring ownership of real property incident to divorce? Most divorce professionals request a Quit Claim Deed when transferring property for a divorce sale. A basic understanding of the various real estate deeds, i.e., Quitclaim deed vs. Warranty deed, is a must when transferring title and ownership to real estate during a divorce.

A real estate deed is a legal instrument (document), almost always in writing, that passes an interest in real estate from one person to another person. In short, when real estate is sold or given to someone, it is done with a deed. The new real estate owner receives their rights to the property and any title warranties transferred by the previous owner from the deed.

The deed is the most formal type of private instrument. It requires an executing party (grantor/grantee, transferor/transferee) and witnesses as signatories and acknowledgments from a notary public. Therefore, a deed has a greater presumption of validity and is less rebuttable than other types of real estate documents.

Understanding the Quitclaim Deed

The quitclaim deed is a legal document used to transfer interest in real estate from one person or entity (grantor) to another (grantee). Unlike other real estate deeds, it conveys only the grantor's interest at the time of the deed's execution. It does not guarantee that the grantor owns the property or has a good title.

Without warranties, it offers the grantee little or no recourse against the seller if a problem with the title arises in the future. This lack of protection makes a quitclaim deed unsuitable when purchasing real estate from an unknown party. It is, however, a helpful instrument when conveying property from one family member or spouse to another, and it is commonly used in divorce proceedings or for estate planning purposes.

Title companies may require a quitclaim deed to clear up what they consider a cloud on the title before issuing title insurance. Similarly, before funding a loan, lenders may ask someone who will not be on loan, such as a spouse, to complete and record a deed quitclaiming their interest.

Common Uses For Quitclaim Deeds

Real Estate Transfers Between Family Members. Quitclaims are used to transfer property to and from family members. Transfers between parents and children, between siblings, and between other closely related family members are quickly done with this type of deed.

Adding or Removing A Spouse From Title. Whether resulting from a divorce or a marriage, a real estate owner can use a quitclaim deed to add a spouse to or remove a spouse from the property's title.

Transferring Real Estate To An LLC Or Corporation. With the holding of real estate in the protection of LLCs and Corporations becoming more common, so are quitclaim deeds. Corporate transfers are usually done with this type of deed as it is generally a transfer between closely related entities.

Transferring Real Estate To A Trust. As with corporate transfers of real estate, transfers to a Trust are equally common. In addition, family planning deals with property meant to carry on through generations often involve an initial transfer from a family member into a trust.

Removing A Cloud On Title For Title Insurance. In insuring title to real estate, companies may find a "cloud" in the title. Generally, this means that there appears someone may or may not have an interest in a property that has not been accounted for, and it is causing a break in the chain of title. It is common for the company insuring the title to require the person in question to quit claim their interest in the property before issuing the title insurance

Understanding the Warranty Deed

Of all the real estate deeds, general warranty deeds provide the most protection to the grantee (buyer). This type of deed guarantees that the grantor (seller) holds clear title to a piece of real estate and has a right to sell it to the grantee. The guarantee is not limited to when the grantor owned the property as with a special warranty deed; rather, it extends back to its earliest title. As such, earlier grantors occasionally find themselves confronted by issues from future grantees. The grantors also guarantee that, during their period of ownership, they did not encumber the property in a way prohibiting transfer.

Incorporate express references to any easements, restrictions, or other agreements of record that relate to the specific parcel of land into the text of the deed. Providing this information puts the grantee on notice of the warranty's limitations and upholds the covenant against encumbrances.

Need Help Determining Whether to Use a Quitclaim Deed vs. Warranty Deed? Contact a CDLP Right Away!

So the question is: "Should you use a Quitclaim Deed or a Warranty Deed when transferring ownership of real property in a divorce situation? Determining whether to use a Quitclaim deed vs. Warranty deed will undoubtedly depend upon the individual case; however, having a thorough understanding of the risks and protection of each type should be discussed with your attorney.

Divorce Mortgage Planning is a holistic approach to the process of evaluating mortgage options in the context of the overall financial objectives as they relate to divorcing situations. As a divorce mortgage planner, a CDLP™ can help you identify any potential conflicts between the divorce settlement, financial planning, and home equity solutions, as well as any real property issues involved in your case.

The role of the CDLP™ is to help integrate the mortgage selected into the overall long and short-term financial and investment goals to help minimize taxes, minimize interest expense, and maximize cash flow. In addition, our goal is to help divorcing homeowners make more informed decisions regarding their home equity solutions and mortgage financing opportunities during and after the divorce.

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. In addition, a CDLP™ can assist in taking 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 in such a manner that 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 ultimately result in a better solution and better outcome for the divorcing couple.

Involving a Certified Divorce Lending Professional (CDLP™) early in the divorce settlement process can help the divorcing homeowners set the stage for successful mortgage financing in the future. 

 

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.

Copyright 2022—All Rights Divorce Lending Association

 

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