Grand Prairie, TX · Member since 2013 · 70 posts · 7 votes
I have the opportunity to acquire a property from three heirs, one at a time, via quitclaim deed. This may be the only way to make the deal happen. If I did this, what would be the possible issues down the line considering that title insurance is a no-go on a quitclaim transfer?
A sale with a QCD should never be done, it is more to the transaction than having a QCD in the chain of title, QCDs are properly used in divorce, family transfers to trusts and as deeds in lieu of foreclosure.
A title company may insure over a QCD, the issue is more to why it was used.
Title goes to the very basic aspects of value, transferability of land is a function of its value and taking a QCD can cloud title, the ability to transfer. You can certainly transfer a property with a clouded title, the value however may be severely effected and it will be a distressed value not meeting requirements as to market value.
You may also effect financing in the future, an owner is then limited as to the security interests they may convey, this may or may not be overcome with the lender's title policy. You can have instances where a title company will insure a lender as to some matter, but not the buyer/owner, such will be listed on Schedule BII, Exceptions, of the Standard Title Policy.
The grantee (buyer) may be responsible for title issues during their ownership, not having title insurance means you'll have to defend title, if a matter arises prior to your ownership, you will need to subrogate against other insurers, a David and Goliath position, getting past coverage to save yourself from any loss, the buck can stop with you if you warrant title.
The heirs should be using a Special Warranty Deed excepting out their responsibilities to title allowing warranty from past ownership. :)
Ask a Local title attorney, here it's no issue assuming you actually get clear title. I have an issue on one now here I need proof that a spouse died, continuous marriage, etc.
1. Why would they only offer a quit-claim? Why not a special warranty deed?
2. How do you know those are the only heirs? Without title insurance, if another potential heir pops up, you have a very expensive problem on your hands.
3. What will your exit strategy be? Without the ability to insure title (not possible in Texas under a quit-claim) you'll have little chance of transferring the property at a later time.
@Guy Gimenez I've been getting conflicting information on Quitclaim deeds. I'm considering accepting a deal offering one but I don't want any trouble later. I planned on having a title company do a title search before we did the deal to ensure a clear title. Even with the pre-transfer title search do you think accepting the QCD is still a bad idea?
I have the opportunity to acquire a property from three heirs, one at a time, via quitclaim deed. This may be the only way to make the deal happen. If I did this, what would be the possible issues down the line considering that title insurance is a no-go on a quitclaim transfer?
When you refer to heirs, are these individuals who not received record title to date? Meaning, are they on title now or not?
If not, probate may be required in order to formally determine and confirm heirship as well as confirmation that all other debts or creditirs of the decedent have been satisfied.
As for fixing deficient deeds after the fact, title companies do this all the time. Part of the issue could be that title requires other affirmations from a transferor confirming that they understood what they were signing, had no personal claims (tax or judgments against them) or anything else that will satisfy a title officer when a previously uninsured deed was recorded.
Title companies often act as if they are entitle to receive a fee for ever deed that gets recorded. When not insured, they want to eliminate even the most remote cgance of risk.
You may be relying on information from other states that do recognize quitclaims. There should be no conflicting information in Texas. Texas title companies do not recognize them as a form of ownership transfer and as such, they won't insure on quitclaims. If YOU accept one, you had better plan on holding onto the property as you won't be able to get the title insured for subsequent buyers either.
Don't trust what I'm telling you. Contact two or three title companies and ask them. The answer will be the same.
@Guy Gimenez thank you for the info. I think I will contact a couple more. I contacted one title co & they said it wouldn't be a problem but everywhere else (online) says it would be. Maybe she didn't understand what I was asking.
I would definitely double check. Ask them if they will insure title based on a transfer by quitclaim. I have not found a title company in Texas willing to do so in the last 10 years or so.
A sale with a QCD should never be done, it is more to the transaction than having a QCD in the chain of title, QCDs are properly used in divorce, family transfers to trusts and as deeds in lieu of foreclosure.
A title company may insure over a QCD, the issue is more to why it was used.
Title goes to the very basic aspects of value, transferability of land is a function of its value and taking a QCD can cloud title, the ability to transfer. You can certainly transfer a property with a clouded title, the value however may be severely effected and it will be a distressed value not meeting requirements as to market value.
You may also effect financing in the future, an owner is then limited as to the security interests they may convey, this may or may not be overcome with the lender's title policy. You can have instances where a title company will insure a lender as to some matter, but not the buyer/owner, such will be listed on Schedule BII, Exceptions, of the Standard Title Policy.
The grantee (buyer) may be responsible for title issues during their ownership, not having title insurance means you'll have to defend title, if a matter arises prior to your ownership, you will need to subrogate against other insurers, a David and Goliath position, getting past coverage to save yourself from any loss, the buck can stop with you if you warrant title.
The heirs should be using a Special Warranty Deed excepting out their responsibilities to title allowing warranty from past ownership. :)