Warranty deed--need to use an attorney?
Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
The consensus seems to be that a WD is better than using a quitclaim. Is this something I need to pay an attorney to do or is it fairly straightforward and something I could do on my own to save money?
This post will be long, but there are a number of issues I want to clarify....
§1 DEED TYPES (there are more than 2 types of deed, but I am only discussing 2....)
A)
Warranty Deed - The grantor of a warranty deed warrants (guarantees) the title to the property is good: nobody else has rights in the property. If a 3rd party claims the 3rd party has a right to the property, which right has an impact on the new buyer's ownership of the property, the grantor agrees to defend the new owner against the claim of the 3rd party.
While all that is technically required is that the grantor makes a guarantee, in practice, that guarantee is in the form of an insurance policy that is purchased. The insurance company agrees to hire an attorney to defend against any 3rd party claims. The insurance company protects its butt (technical legal phrase there) by only issuing a policy if a licensed insurance agent certifies a proper title search was done and the agent determines there are no legally valid claims that can be made against the title. This is more commonly known as a "title search" or "title exam"; and, it is performed by a "title agency".
Warranty Deeds are required by lenders that are given a mortgage to secure repayment of the loan that was used to purchase the property. Many people don't realize that there are 2 types of title insurance policies: 1 only protects the lender - so as soon as the loan is paid off and the mortgage is realesed the owner cannot make a claim on the insurance policy; 1 protects the owner's title so the owner can make a claim on the insurance policy anytime anyone tries to assert interest in the property
Please Note - just like any insurance policy, there are "exclusions" or things the policy will not protect against. When the policy is issued, the exclusions will typically specify that the policy only protects up to a certain dollar value, the policy will not protect against tax liens, any existing right of way, easement, special assessments, etc.... Also, the policy will never protect against any change in the title that takes place after the policy is issued (e.g., the new owner has work done and a contractor places a mechanic's lien on the property, the new owner grants a utility easement, etc....)
B)
Quitclaim Deed - The grantor gives up any and all rights the grantor has to the property and transfers those rights, WHATEVER THOSE RIGHTS ARE, to the new owner. The grantor makes NO GUARANTEE WHATSOEVER about any rights in the property. Quitclaim deeds are most commonly used in a divorce (1 spouse transfers all rights in the property to the spouse who will keep the house), when transfering property to a living trust, transfering property between companies owned by the same person(s), or transfering property from an individual to a company owned by the individual. In these situations, the "old" owner had a warranty deed and the "new" owner has a close enough relationship with the "old" owner that the "new" owner is not worried about anyone asserting a claim since the title insurance was issued on the warranty deed (and in some instances like the living trust, the "new" owner still has the same rights to the guarantee of the warranty deed.)
§ DEED RECORDATION
Each state has its own laws about the requirements of a deed to real property. For example, in Ohio (see R.C. 5301.01):
To be valid, a DEED must be:
i) signed by the grantor;
ii) the grantor must acknowledge the signature before an official (a judge, a clerk of court, a county auditor, a county engineer, a mayor, or a notary public)
iii) the official shall certify the acknowledgement and sign a certificate of acknowledgement
Note - a properly signed (but not recorded) deed is a valid transfer of real property - HOWEVER, without recording, there is little protection against 3rd party claims against the property - (I've seen cases where people sold the same piece of land to different buyers!)
In Ohio at least, it is not required that an attorney create a deed. It is not required that an attorney file a deed. Whether a warranty deed or a quitclaim deed is used does not matter for purposes of legally transferring property. However, do something wrong and you may have unintended and/or negative consequences so I always recommend you consult a local professional to give you guidance....
In random order I see 3 main options:
1)
How comfortable are you the title to this property is good? If you have no doubts title is good, you could decide to forgoe the title insurance policy - BUT you would have to be willing to accept the consequences of paying to defend title should anyone make a claim against the title.
2)
Transfer the property to your LLC and purchase a title insurance policy. You won't have to pay all the typical closing costs because you don't need all the typical title agency services. All you need is title insurance - however, to issue a policy the title agency will at a minimum have to do a title search. They will probably require that you also have them draft and file the warranty deed - so you will have to pay the fees for those things as well.
3)
Leave everything status quo.
I bought the house as a foreclosure, so I assume there's a small chance the former owner could challenge the way the way the bank took back the property if there was robosigning or some other shifty behavior involved.
^ Actually, since the original policy will still cover the time period up until the date the bank sold the property to me (just not after), maybe it doesn't matter that much? (obviously I haven't done anything personally to cloud the title since I've owned the house.)
I see that this thread is from last year, but hopefully we can still discuss this issue. My family and i own a condominium building and we want to reallocate certain units within the building. In Florida there are no "endorse" options within a title insurance policy. The only thing they will do is provide a "reissue" credit, which is minimal. If I transfer a unit to my brother in the form of a general warranty deed I will void out the TI policy; but I would be able to sue him which would allow the policy to be active. I would prefer to just get title insurance again and have the reissue fee applied, but the title companies want to do the entire process all over again which is going to mean approx $900 per unit, x4 units=$3,600. For that kind of money I'm debating if I should just bite the bullet and not have the policy, and sue in the future if required. Mind you, all of the units were involved in short sales, foreclosures, and one bankruptcy so I am not confident in that history. But on a positive note Fidelity, Chicago and Stewart all issued owners policies; so there would have to be three of the largest companies all making mistakes! Florida is horrible by not allowing endorsements within the family, WHAT TO DO?! Any OPINIONS would be much appreciated.
@Christopher Russell I was told the same thing by my title insurer--they would have to do a reissue.
I was referred to an attorney from a member of this forum. I contacted the South Florida attorney and she said if you are transferring within the family or to your own LLC it is not necessary to obtain new title insurance because you will still be covered through your families policy from the date of the transfer backwards. If anything happens after the policy became null and void with the transfer, than you would be on your own; but frankly that would be your problem anyway. She actually told me to use a quit claim deed if done within the family, that a GW deed is not necessary. She said why would you need to warrant anything if you are doing it directly from your name to an LLC or from your name to your brother etc etc. As long as you all know that there are no problems from the date of the title insurance forwards to
time of new transfer. This seems to be a topic of debate with no real clear answer, but in Florida I have been advised by legal counsel that title insurance will stay in effect backwards, but not forwards. Any future encumbrances claimed by prior owners will be insured through the old policy you had before the new transfer. Best of luck to all; and get it while its hot!