It is possible to obtain a quitclaim deed when there is a lien on the property. Whether you gain anything of value by virtue of the quitclaim deed will depend on the grantor's actual interest in the property as of the date he issues it to you. If he does have title to convey, you may need to pay off the lien or risk losing the property you have just acquired.
Grantor and Grantee
The party obtaining or receiving the deed is the grantee, and the party issuing the deed is the grantor. For example, if Mr. Smith sells Mrs. Jones a house, the deed is the instrument used to convey title. Mr. Smith is the grantor of the deed and Mrs. Jones is the grantee. In a quitclaim deed, the grantor may or may not have actual title to convey.
Deeds are the written documents used in real estate transactions to convey title or interest in property from one party to another. There are a number of deed form types, with some providing warranties that the person issuing the deed has title in the property to convey and guaranteeing that the property is free of encumbrances. Yet, the quitclaim deed is not one of these, which makes the quitclaim the deed form providing the least amount of protection to the grantee. The quitclaim deed conveys whatever interest the grantor may have in the property, yet does not guarantee the grantor has title to convey.
Before accepting a quitclaim deed from a grantor who does have title to the property, and the property does have a lien, consider the possible implications. Mortgage agreements typically forbid the transfer of title to another party without paying off the lien. If you obtain a quitclaim deed with such a lien, the lender will probably demand full payment of the loan, which means you will need to refinance immediately or come up with the funds to pay off the grantor's lender.
Filing the Quitclaim Deed
The quitclaim deed is a written instrument and requires the grantor's signature. While it is notarized, many states also require the grantee to file the quitclaim deed. Filing procedures vary by state, yet even in states that do not require filing, filing helps protect the interests of the grantee.
While quitclaim deeds offer the least amount of protection to the grantee, compared to other deed types, they have a viable function in real estate transactions. They are often used to transfer title from one family member to another, used to release equitable title claims and to clear title defects.
- "Modern Real Estate Practice"; Galaty, Allaway and Kyle; 2006
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