Why is the Type of Deed Used for Your Real Estate Transaction So Crucial?

When a property is transferred in Arizona, the buyer or recipient receives a deed that establishes their ownership. Similar to a receipt that provides proof of an item’s purchase, a deed document demonstrates your legal right to a specific piece of real estate. Several types of deeds exist that can be used for different situations.

Homeowners should carefully consider their options when transferring property, as the choice between a quitclaim deed and a warranty deed can have significant legal and financial implications. Understanding the key differences between these deeds is essential for making an informed decision that aligns with your unique circumstances and goals. An experienced Phoenix-area real estate attorney can answer your questions and help you determine if a quitclaim deed is a suitable option for your needs.

How Do a Warranty Deed and a Quitclaim Deed Differ?

The majority of real estate transactions utilize warranty deeds, and this is likely the document most individuals think of when they hear the word “deed.” A warranty deed provides substantial legal protections for the buyer, as it includes promises or warranties from the seller regarding the property’s title. When using a warranty deed, the seller guarantees that they have clear title to the property as described in the document and possess the right to sell it. This type of deed assures the buyer that there are no undisclosed encumbrances, liens, or other claims against the property that could cause future problems. If any issues do arise with the title after the transfer, the grantor may be held legally liable.

In contrast, a quitclaim deed offers no such guarantees or warranties. Arizona Revised Statute (ARS) 33-402 outlines the form necessary to quit one’s claim to a property. With a quitclaim deed, the grantor simply transfers whatever interest they may have in the property to a grantee without making any promises about the quality or status of the title. Due to the risks the buyer assumes under a quitclaim deed, it is typically used under limited circumstances.

When Should a Phoenix Homeowner Consider Using a Quitclaim Deed?

Despite the lack of protections offered by a quitclaim deed, it can be an attractive option for some homeowners. Quitclaim deeds often require minimal paperwork and are generally more cost-effective than other types of deeds, making them ideal for simple property transfers or corrections. While discussing your plans with a legal representative before embarking on any transfers is crucial, several situations exist where a quitclaim deed may have distinct advantages over a warranty deed.

Property Transfers Without a Sale

Quitclaim deeds are beneficial when transferring property between family members or close associates without a purchase. For example, if you’re gifting a property to a child or transferring ownership to a spouse as part of a divorce settlement, a quitclaim deed can be an appropriate and straightforward option that can save time and money. If you are retiring from a joint business venture, a quitclaim deed may also be used to smoothly transfer your interest to your business partner(s). In these cases, the parties typically have a pre-existing relationship and an understanding of the property’s history that may make them more comfortable with the reduced legal protections.

Adjusting Names on the Title

Another situation where a quitclaim deed is typically used is when adding or removing a name from a property title. This variety of change may be needed in certain situations, including:

  • Adding a new spouse or family member to the title
  • Removing a former spouse’s name following a divorce
  • Removing an individual with poor credit prior to refinancing the property
  • Transferring property into or out of a trust for estate planning or Medicaid eligibility purposes

In these instances, the main goal is to change the ownership structure rather than to facilitate a traditional sale, making a quitclaim deed a potentially appropriate choice.

Correcting Title Errors

When a property title has minor defects or errors, such as misspellings or incorrect information, a quitclaim deed can be used to fix these issues quickly and efficiently. Rectifying these problems solidifies ownership rights and prevents potential complications in future property transactions.

Can You Buy or Sell a Property Using a Quitclaim Deed?

While it is technically possible to purchase or sell real estate using a quitclaim deed, it is generally not recommended unless you are acting under the advice of a knowledgeable and trusted real estate attorney. The primary risk of a sale using a quitclaim deed is that the grantee receives no guarantees about the quality of the title or the grantor’s right to sell the property. If any issues arise after the transfer, such as undisclosed liens, boundary disputes, or competing ownership claims, the grantee has limited legal recourse against the grantor. In the worst-case scenario, the grantee could discover that the grantor had no legal right to transfer the property at all, leaving them with no valid claim to ownership.

Another risk to consider is that quitclaim deeds may not be accepted by all parties in real estate sales. Mortgage lenders nearly always require warranty deeds as part of their loan approval process, as they provide greater assurance of clear title and protect the lender’s investment. Therefore, securing financing for a property purchased without a warranty deed may be extremely challenging.

How Can Our Firm Assist With Your Quitclaim Deed?

The guidance of a knowledgeable Arizona real estate attorney can be vital when considering a quitclaim deed. Our dedicated legal team at Resolvere Law PLLC can thoroughly review your specific situation and advise whether a quitclaim deed is the most appropriate option for your goals. We can perform due diligence to uncover any problems that might not be immediately apparent, explain the potential risks and benefits in detail, and ensure your transaction complies with all relevant Arizona laws and regulations. Contact our Phoenix office today at 480-568-1327 to book your in-depth case evaluation.