Hi, I have the opportunity to buy some parcels, where I see a great deal. I sent out a blind offer with an attached purchase agreement (LIM sample saying we will use a title company with title insurance) to the owner; he accepted it but sent the following email:
“I did receive the offer, signed it and returned it. I did have a question if we could do a quit claim deed rather than a warranty deed.”
I am new to the business, but I understand the differences between a quitclaim deed and a warranty deed. I know what a quitclaim deed is. I assume that there might be a problem with the title of the property, so my questions are:
Should I walk away from the deal?
What is the best way to proceed? What should I answer?
Do you have any other causes in mind why he would want to do that?
FYI: I contacted a local title company to receive an offer for closing the deal and title insurance before I received his email.
@niclas-hk good question. I’ve heard it said, “Never accept a quit claim deed,” and I can see why that’s the typical attorney answer, but from my non-attorney perspective, it’s just a question of how well you’ve done your homework to verify that the title is clear.
Also, keep in mind, there can be some title problems that come up in the futuyre even though they were never recorded, and that’s where I think title companies get hung up on this issue. You can never be 100% sure that the title is clear, but you can get pretty close if you know what to look for and where to find it.
So, if you’re confident in your title searching abilities (or whoever is doing the search for you) AND if you’re also planning to use a Quit Claim Deed when you sell it (because if you use a Warranty Deed, you’d be putting yourself on the hook when the person you bought from isn’t guaranteeing anything), then I could see how there’s a case to be made for doing this.
Either way, it’s one of those proceed-at-your-own-risk kind of things.
@niclas-hk Purchasing with a quit claim is not generally going to be a headache with a title co., but when you try to sell the property, and are not doing an in-house close, most title co.'s will refuse to write title insurance with a quit claim deed in the title chain, and will need that deed ‘converted’ to a warranty deed in order to proceed.
Since you are planning to potentially purchase, it’s worth asking the title co. if they can write title insurance with this in mind, at the point of you selling to another buyer. Otherwise you can get stuck with a tough situation.
@chrisduff and @retipsterseth Thank you for your answers! Do you have any tips for a reply to the seller?
I thought about things like: “Why would you want to do it?” or “We would like to close the deal with a title company and title insurance, so you don’t have the risk of a clear title.” or “I’m sorry, but we only close deals with a quit claim deed with title insurance. I hope that’s fine for you”.
Do you have any experience or suggestions for this situation? Thank you!
@niclas-hk First would confirm from title co. if you can purchase with QC, and if so, when you sell it, if they can write title insurance on a sale with QC in title chain.
Assuming not, would mention to seller that you can only buy with a WD per company policy or whatever, can mention title co. issue. If they refuse, that’s a big red flag anyway and would back away from the deal, likely a title issue.
@niclas-hk Not a lawyer or a title expert, just a C student in the school of hard knocks. Agree with Seth on it depends on your comfort with your title research abilities. Even with good research a QC leaves some open issues. With a QC the seller is only giving you his interest in title, just what he owns. It transfers title, often only a partial title interest subject to claims of other owners, lenders, lien holders, easement holders and likely many more suspects I do not recall.
Did the guy take title with an uninsurable QC? Does he have a former partner?, … an ex-wife?, … an open loan?, … judgement liens that have attached to the property? If so, you may be jumping in bed with all of them. That makes for a party. Proceed with caution.
@niclas-hk You said his reply was, “can we do a Quit Claim”. Not “I won’t sell it without it”. Find out why a Quit Claim is needed and his concerns could be benign. Then, you can move forward with a Warranty Deed.
Hi there! A quitclaim deed is a legal document that transfers any ownership interest in a property from one person (the grantor) to another person (the grantee), but without any warranties or guarantees about the quality of the title.
If the seller is requesting a quitclaim deed instead of a warranty deed, it may indicate that there are issues with the title to the property, such as liens or encumbrances. However, it’s also possible that the seller simply prefers a quitclaim deed for personal reasons.
Before deciding whether to walk away from the deal, I would suggest doing some research on the property’s title to determine if there are any red flags. You can also consult with your local title company to get their opinion on the matter.
In terms of how to proceed with the seller, you could ask for more information about why they are requesting a quitclaim deed and see if there is any way to address their concerns while still using a warranty deed. Alternatively, you could agree to the quitclaim deed, but be sure to do your due diligence to ensure that you are not taking on any unexpected liabilities.
Overall, it’s important to proceed with caution and make sure you fully understand the implications of accepting a quitclaim deed before moving forward with the deal.
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