Learn what a quitclaim deed means for you, and when you might consider signing one.
Thinking of signing a quitclaim deed? There are several instances when it may make sense for you to do so, but be sure you completely understand what a quitclaim is, and what signing such a deed could mean for you.
What is a quitclaim deed?
It’s a legal document that transfers ownership, interest or right to a property from one party to another. When you sign a quitclaim deed, you are simply transferring the title of that property. You are not guaranteeing that you actually own that property, and you are not stating whether others have any ownership or interest in that property. You are simply saying that if you do have ownership then you’re transferring that ownership and cannot later claim any interest on the property.
When would you use a quitclaim deed?
There may be several circumstances in which a quitclaim deed might make sense for you, but each could have unintended consequences if you aren’t careful.
1. You transfer your property interest as a result of a divorce.
This is a quite common use for a quitclaim deed. When one party is awarded a joint property, the other is asked to sign a quitclaim deed to relinquish interest in that property.
Be aware, however, that you’re only transferring title—not your mortgage responsibility. If both your name is on the mortgage loan, then you’re still responsible for that loan should your ex-spouse stop making payments. Which could do some serious damage to your credit.
If you’re asked to sign a quitclaim deed due to a divorce, do not do so until your ex-spouse has refinanced or acquired a new loan in their name only.
2. You transfer your property interest to a family member.
This is also another common use for a quitclaim deed. Parents may transfer property ownership to children or siblings to each other.
Just as with the divorce example above, if you sign a quitclaim deed to a family member and have your name on the mortgage, ask those who are retaining property ownership to refinance or acquire a new loan in their names.
If you’re being asked to sign a quitclaim deed and aren’t sure why, talk with an attorney. You may have been named an heir to that property and could unwittingly sign over that right.
3. Your property has gone into foreclosure.
Your bankruptcy attorney may advise you to sign a quitclaim deed if you are in bankruptcy and your property has gone into foreclosure. With foreclosures on the rise, it can take banks months or even one or two years to process your foreclosure. In the meantime, you’re still on the hook for any property taxes or homeowners association (HOA) dues—which can quickly become overwhelming.
Signing a quitclaim deed to transfer title of your property to the bank can eliminate your responsibility for the property’s taxes and HOA dues. You’ll want to speak with a bankruptcy or real estate attorney to help you navigate through this process.
This article contains general information. Individual financial situations are unique; please, consult your financial advisor or attorney before utilizing any of the information contained in this article.
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