Quitclaim deeds offer one of the easiest and cheapest ways to transfer real property. However, even though the act of transferring the property can be easy, there may be complex issues involved in the transfer. It is important to be aware of certain factors when deciding where to transfer real property with a quitclaim deed.
As is – When transferring property by quitclaim deed, know that the property is transferring “as is.” The owner is not saying the property is free from title defects.
No Title Search – No title search is being reviewed, unless you specifically request that one be ordered.
No Lien Search – No lien search is being reviewed, unless you specifically request that one be ordered.
No estoppel – No estoppel is being reviewed, unless you specifically request that one be ordered.
Condo/HOA Approval – If the property is in a condominium or homeowner’s association, it is possible that the association is required to approve the transfer. You should check with your association to see if approval is required to transfer the property or add someone to your title. If approval is required, but not obtained, then it is possible that the association can object to the transfer and require that you transfer the property back to the original owner.
Transfer Tax – Florida has a transfer tax on transferring real property called a documentary stamp tax. This includes adding or removing someone from your deed. Documentary stamp tax generally applies when the property is being sold and money is changing hands or when there is a mortgage on the property at the time of the transfer.
Real Estate Tax – Real estate taxes are paid in arrears in Florida, and they are payable beginning on November 1. A transfer via deed may lead to a reassessment of property taxes causing the property to be taxed at an increased amount if the value of the property increased. And if property is being transferred to you by quitclaim deed and there are outstanding taxes owed, you will be responsible for those taxes going forward.
Tax – Transferring property by quitclaim deed may result in a taxable event.
Government benefits – Medicaid, social security, or other government benefits may be affected by transfer property via quitclaim deed or adding or removing someone to title.
Title insurance policy – The title insurance policy on the property at the time of the quitclaim deed may not carry over to the new owner.
Mortgage – If there is a mortgage on the property being transferred by quitclaim deed, then the lender will need to be notified and consent to the transfer. The lender should be asked whether the transfer can occur and whether there is a due on sale clause. Many mortgages have a due on sale clause that could result in the entire mortgage balance being due upon the transfer of title.
FIRPTA – If you are selling your property and you are a “foreign person” as defined by the IRS, FIRPTA may apply to your transaction and your Buyer will be responsible for holding back closing proceeds and remitting it to the IRS.
Homestead – If your property is your homestead and you are adding someone to your deed that will not live in the property as their homestead, be aware that the interest of the person you are adding to title will not be homestead. For instance, if you are the only one on title and your property is homestead, then 100% of the property is homestead. If you add your brother to title and he has a 50% interest and the property is not his homestead, then 50% of your property will not be homestead property.
There are many situations where using a quitclaim deed is the easiest and cheapest option for transferring real property, adding someone to title, or removing someone from title. But it is also possible that quitclaiming property can have some unintended consequences. Thus, it is important to be aware of the above factors.