Warranty Deed or Quitclaim Deed? Not Even Close

How do Texans effectively transfer real estate ownership from one to another? While mid-century Hollywood would lead you to believe that signatures on the back of a cocktail napkin, or better yet, the good ole handshake, serve as acceptable and perfectly enforceable forms of agreement, today’s consumers must be much more careful, especially with the myriads of legal forms swamping the internet.
When conveying property title in Texas, the content and structure of a proper written, signed and notarized agreement is of utmost importance. But what form of agreement is needed? If the goal is to simply transfer property title, either in whole or in part, from one or more parties to another, without the necessity of contracts, closing statements, mortgage payoffs, title insurance, etc., then that goal may be accomplished with a warranty deed. Examples may be a transfer between former spouses during/after divorce, a gift of property from one to another, or a transaction where the parties are familiar with each other, do not require a closing, mortgage payoff, title insurance, etc., and just need the legal documentation to evidence the transfer, choosing to handle any financial considerations between themselves. If the seller plans to “seller-finance” the transaction and receive future payments, additional loan documents would be necessary.

But what kind of deed? A quick search of the internet will uncover a plethora of forms, most often the quite popular but oh-so-troublesome Quitclaim Deed (often mistakenly referred to as a “quick-claim” deed”). In Texas, quitclaim deeds should be avoided in all situations. Why? Because, contrary to long-held beliefs that they serve to transfer title, in actuality they fall short of that goal. Rather than “conveying” title from one owner to another, they merely “release any claim” to a property in favor of another. That “stepping-aside” and releasing any claim is not NEAR strong enough to convince a title company, for example, to insure the grantee’s ownership. Title attorneys and title companies typically require that all transfers in a chain of title be accomplished by actual conveyances, not releases.

Which leads to the need for the most commonly accepted form of deed, the warranty deed. A warranty deed serves to convey title, while at the same time warrants to the grantee that they will hold title free and clear of any superior lien or claim of others. Especially combined with title insurance, a warranty deed provides a grantee the security they need to acquire such a major asset.
Warranty deeds typically come in two different flavors: general warranty deeds, and special warranty deeds. Despite its perhaps attractive name, a special warranty deed isn’t so special after all. It is a limited deed, whereby a grantor warrants that title is free and clear of claims only during the time of the grantor’s ownership, but not prior in time. Conversely, a general warranty deed contains warranties of title from the beginning of time, providing a grantee much greater security.

If a grantor simply insists on signing only a special warranty deed, a prudent grantee should accept only if they obtain title insurance from a reputable title insurance company, providing third party protection from prior claims of others.

Jeffrey A. Rattikin is an AV Pre-eminent rated attorney, Board -Certified in Residential Real Estate Law by the Texas Board of Legal Specialization. Mr. Rattikin has provided transactional legal services to clients across the State of Texas for over 28 years, emphasizing real estate, business and title law. Mr. Rattikin continues to define new legal frontiers through his incorporation of technology to enhance the attorney-client experience, as evidenced by his firm’s innovative websites www.rattikinlaw.com and www.texaslegaldocs.com.