As a probate and commercial real estate attorney, located in Summerville, South Carolina, I am often asked to explain the difference between and warranty and quitclaim deeds. Buying a home or other real estate is exciting, but it comes with a seemingly endless maze of paperwork. One of the most important documents in the process is the deed, which specifies ownership of the property. However, there are different kinds of deeds; the most common are warranty and quitclaim deeds. In this article, I will define the term deed and discuss the differences between warranty and quitclaim deeds in South Carolina.
What are Deeds in South Carolina?
A deed contains a legal description of the real estate being transferred. In urban or suburban locales, the legal description identifies which lot the property occupies in a platted subdivision. Deeds in rural areas might use meets-and-bounds descriptions of the boundaries, which identify where the property lines are in relation to landmarks.
The deed must identify who is handing over an interest in the property (the grantor) and who is accepting it (the grantee). Most counties require the deed to have the addresses of all parties involved. And a deed wouldn’t be a deed without words of conveyance — a passage that says that the grantor intends to convey an interest in the property to the grantee.
In acknowledgment of the transfer of a piece of property, a deed tells the new owner the location of the property:
• True address
• Coordinates of property
• Shape and size of property
• Names of previous and new owners
What is a Warranty Deed in South Carolina?
A warranty deed is a document that provides the greatest amount of protection to the purchaser of property as it pledges or warrants that the owner owns the property free and clear of any outstanding liens, mortgages, or other encumbrances against it. A general warranty deed provides the grantee with the highest form of protection as it assures the following basic warranties:
- The grantor warrants that they are the rightful owner of the property and have a legal right to transfer the title.
- The grantor warrants that the property is free and clear of all liens and that there are no outstanding claims on the property from any type of creditor using it as collateral.
- There is a guarantee that the title would withstand any third-party claims to ownership of the property.
- The grantor will do whatever is necessary to make good the grantee’s title to the property
With a general warranty deed, the grantor would be responsible for a breach of any of these conveyed warranties and guarantees – even if the breach occurred without their knowledge or during a period when the grantor did not own the property. The general warranty deed places a great amount of risk upon the grantor as he or she is responsible for any breaches that may have occurred well beyond their knowledge or ownership of the property. For this reason, title insurance is used in most transactions to guard against possible claims and liens. A title company would provide a full title search and explore any other possible breaches before the property is transferred.
What Are Quitclaim Deeds in South Carolina?
Quitclaim deeds are used when the transfer of ownership in the property does not occur as the result of a traditional sale. For instance, quitclaim deeds are common when real estate is conveyed through a Will or as a gift when the property is placed in a trust, or to distribute property as part of a divorce settlement. They are also common when someone wants to sell a property but they are not entirely certain what the property boundaries are or whether any other claims can be made on the property.
What Should I Know About Quitclaim Deeds in South Carolina?
You are buying the least amount of protection of any deed. A quitclaim deed conveys whatever interest the grantor currently has in the property if any. The grantor only “remises, releases and quitclaims” his or her interest in the property to the grantee. No warranties or promises regarding the quality of title are made. The deed will clarify this by including language such as, “The Grantor makes no warranty, express or implied, as to title in the property herein described.”
A quitclaim deed affects ownership and the name on the deed, not the mortgage. Because quitclaim deeds expose the grantee to certain risks, they are most often used between family members and where there is no exchange of money. Due to this, quitclaim deeds typically are not used in situations where the property involved has an outstanding mortgage. After all, it would be difficult for many grantors to pay off a mortgage without proceeds from the sale of the property.
In some instances, however, quitclaim deeds are used when the grantor has a mortgage. In this case, the grantor remains liable for the mortgage even after ownership has transferred through the execution of a quitclaim deed. This is because quitclaim deeds transfer title but have no effect on mortgages. This situation can be made worse if the mortgage contains a due-on-sale clause, a common provision stipulating that the entire loan becomes due as soon as the title is transferred and not just if the property is sold with an exchange of money, as the term “due-on-sale” would seem to imply.
If the grantor has quitclaimed the property with the belief that the grantee will make the mortgage payments, the grantor has no recourse if the grantee stops making payments or sells the property to another party. To mitigate potential financial and legal troubles, the grantee can assume the mortgage with the lender or refinance the property and pay off the original loan. To add protection to the grantor, a legally enforceable agreement can be drawn to document the terms of payment.
They are as effective as a warranty deed to transfer title – but only if the title is good. A quitclaim deed can convey title as effectively as a warranty deed if the grantor has a good title when the deed is delivered. It is the lack of any warranties, however, that make a quitclaim deed less attractive from a grantee’s perspective. If the title contains a defect, for example, the grantee has no legal recourse against the grantor under the deed. A quitclaim deed is often used if the grantor is not sure of the status of the title (whether it contains any defects) or if the grantor wants no liability under the title covenants.
Only accept a quitclaim deed from grantors you know and trust. Because quitclaim deeds make no warranty about the quality of the grantor’s title, they are generally used for low-risk transactions between people who know each other and typically involve no exchange of money. Quitclaim deeds, therefore, are commonly used to transfer property within a family, such as from a parent to an adult child, between siblings or when a property owner gets married and wants to add his or her spouse to the title. Quitclaim deeds are also used when a married couple owns a home together and later divorces. When one party acquires the home in a divorce settlement, the other may execute a quitclaim deed to eliminate his or her interest in the property and to comply with the court’s decision.
They can be used to clear a title defect. A quitclaim deed is often used to cure a defect, known as a “cloud on the title,” in the recorded history of a real estate title. Title defects include items such as issues with wording such as a document that does not comply with state standards, a missing signature or failure to properly record real estate documents.
Deeds, be it warranty or quitclaim can be confusing. The Watts Law Firm can take the confusion out of the process with a detailed, understandable, explanation. Should you have any questions regarding deeds or other real estate matters, contact the Watts Law Firm.