Do Quit-Claim Deeds Convey Marketable Titles?

Marketable Titles

• Title refers to the ownership of land, or the evidence of ownership. Marketable title refers to clear title, which is reasonably free of claims. When a seller conveys title with a general warranty deed, he is making promises that he has clear title to convey, and a third party has no claims to the property. To back up the promise, the seller typically purchases a title insurance policy. Should a third party later prove she has a legitimate claim to the property the policy pays the buyer damages. Before issuing a title insurance policy, the title company performs a title search on the property to substantiate the seller’s claim.
  
  

Quitclaim Deed

• Unlike some other deed forms, such as the general warranty deed, the quitclaim deed only conveys interest the seller has in the property to the buyer. In the quitclaim deed, the seller makes no promises that he has title to convey. When a seller has clear title to property, a quitclaim deed is as effective as conveying that title to a buyer as another deed type.
  
  

Title Insurance

• When a seller uses a quitclaim deed to convey title, the property is not insurable under a title warranty policy. Eventually, after a period of statute of limitation lapses, according to state law, the property may become insurable. Property with marketable title would be insurable.
  
  

Quitclaim Deed Uses

• The grantor of the quitclaim deed “quits” his claim to the property to the grantee. Common uses for quitclaim deeds include transferring property to a family member or clearing clouds or defects on title. For example, if a man is selling inherited property, which his wife does not own, she might issue a quitclaim deed to her husband, conveying her interest in the property to her husband. While the quitclaim deed doesn’t make a claim she has title in the property, it clarifies the issue, and prevents her from coming forward in the future and making a claim against the property. It is also used to clear equitable title claims. When a seller accepts a buyer’s purchase offer, the buyer has an equitable title claim, which doesn’t mean the buyer owns the property. When a buyer cancels an offer, he sometimes issues a quitclaim deed to release his claim.