This is a situation where you should use an experienced, local real estate attorney to prepare the documents. If you do not do this correctly, there is a very good chance that you can cost yourself an immense amount of time, money and irritation when you try to sell your house.
As you may recall, when you sell your house, the buyer will almost always obtain a title report on the property. The title report should list all relevant recorded documents affecting ownership of and rights in the property, something known as the chain of title. If there is a quitclaim deed in the chain of title, the buyer’s lawyer will, at the very least, ask questions.
There are three basic types of deeds in common use in this country, general warranty deeds, special warranty deeds, and quitclaim deeds. (In some areas, like downstate New York, bargain and sale deeds with covenants and bargain and sale deeds without covenants may be used in place of special warranty and quitclaim deeds and general warranty deeds are virtually never used, but I digress.) The deeds differ in the degree to which the grantor (the person selling or giving away the property) warrants the title he or she is giving to the grantee (the person getting the property).
In a general warranty deed, the grantor promises “to ‘warrant and forever defend’ to the grantee . . ., the title thereby conveyed, against the claims of all persons whatsoever.” (Black’s Law Dictionary, 6th ed. 1990, p. 1588.) In other words, the grantor says: I’m giving you the property identified in the deed (subject to any exceptions listed therein), and if anyone comes around later making a claim that to all or part of the property, I’ll compensate you for the damages you suffer as a result of the claim.
In a special warranty deed, the grantor gives a somewhat less comprehensive warranty. He promises “to ‘warrant and forever defend’ the title . . . against all persons claiming ‘by, through or under’ the grantor.” (Black’s, p. 1589.) In other words, the grantor says: I’m giving you the property identified in the deed (subject to any exceptions listed therein), and if anyone comes around later making a claim that to all or part of the property, I’ll compensate you if the claim is based on something that I did (or allowed to happen). For instance, if the grantor had previously sold or granted the property or an interest in the property to someone else, he or she would be responsible for the damages to the grantee. Similarly, if there were a lien on the property due to a debt of the grantor, the grantor would be responsible for clearing the lien. If there is a claim on the property resulting from something a prior owner did, however, the grantor would not be responsible for it.
The grantor of a quitclaim deed, on the other hand, takes no responsibility for the property at all. The grantor says: I’m releasing to you the all of the interest I have in the property, if any, but I’m not making any claims about what I’m giving you. Because the grantor makes no promises about his title in a quitclaim deed, it is strongly disfavored for a transfer of title under normal circumstances. Essentially (oversimplifying), if someone purports to sell you real estate under a quitclaim deed, but in fact has no interest in the property at all, the purported seller might not held liable for fraud, because he didn’t make any promises about what he was selling you. Quitclaim deeds may be appropriate in some instance, like the resolution of a title dispute, but seeing a quitclaim raises a red flag, at the very least.
Real estate law (and, as important, real estate practices and customs) vary significantly by locality. Personally, I feel comfortable handling real estate transactions in New York City and four or five surrounding counties, but if the property is at all upstate, I’d generally advise a client to get local counsel. (If you think that’s crazy, I’ve heard of instances where Manhattan law firms have gotten local counsel for matters in Brooklyn.)
If you have a quitclaim deed in your chain of title, there’s nobody standing behind that particular transfer. Depending on local practice, this may not be an issue, be considered a cloud on the title that has to be resolved, or worst of all, cause the title to be considered “unmarketable.” In every standard real estate sale contract, the seller promises to deliver “marketable” (or in some instances “insurable”) title. Marketable title can be considered title “which readily can be sold or mortgaged to a reasonably prudent purchaser or mortgagee.” (Black’s, p. 971.) The definition is a bit circular (marketable title is title which you can readily market), but what it means in reality is that the seller has the kind of documentation of his or her title that is acceptable under local law, custom and practice. A bank will not normally take a mortgage on a property with unmarketable title, and the value of the property could therefore be significantly depressed.
I have no idea what the practice with regard to quitclaim deeds is in your part of Kansas, but if I were betting the value of my house on it, you can be damn sure I’d get experienced, local counsel. I would certainly not rely on the advice of unhelpful bank employees or the clerks at the county recorder’s office.
In addition, you have to consider the effect the deed would have on your mortgage. Almost all residential mortgages have a “due on sale” clause, which says that the entire mortgage will become due and payable if title to the property changes hands. Even if the bank waives it’s right to call the mortgage because of the transfer, it is unlikely that it would simply release your ex- from liability on the mortgage. A bank would not really have any reason to give up its rights to go after your ex- in the event of default, unless it’s credit department determined that you had sufficient credit and financial resources to carry the whole loan, and a bank normally wouldn’t do such a credit analysis unless the transaction is (as mentioned above) part of a refinancing.
Whatever you do, you should make sure that the transaction is approved in advance by a responsible bank officer (or bank counsel). Simply sending in a quitclaim deed and hoping that the bank will release your ex- is not a course I would recommend.
In summary, this is one of the times when you really don’t want to do it yourself, because there is too much at stake and there are too many subtle ways you can screw up and injure yourself in the end. Real estate law can be incredibly detailed and picayune, though it developed that way for the protection of buyers, sellers, and lenders. Like power plant engineering, this is one area that should be left to the experts.
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