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Law Offices of Ronald W. Rutz
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September 27, 2001: Types of Deeds with Real Estate Transactions

Q: I want to buy a condo from an attorney who will only give a quit claim deed. My realtor (who openly bashes and makes jokes about lawyers) says the seller is "up to something" and won't let me go through with the deal. What do you think?

A: I think you are caught in the crossfire of folks playing "head games."

There are basically three kinds of deeds: general warranty, special warranty, and quit claim.

A general warranty deed, in addition to conveying property, carries with it a number of promises, such as the seller has good title, has the right to convey, etc. It also means that the current owner takes responsibility even if a prior owner conveyed the property with a "cloud on the title" (problems that prevented complete ownership from getting transferred) whether known or unknown.

A special warranty deed, in a very general sense, transfers title but with fewer warranties. In a manner of speaking, it also indicates that the promises or warranties obligate only the current seller but may not apply to prior owners, meaning the current seller doesn't take responsibility if a prior owner conveyed the property with a "cloud on the title."

A quit claim deed means that the buyer gets what the seller has. Thus if you buy the Brooklyn Bridge and get a quit claim deed, do not expect to sue and get your money back if you end up owning less than what you expected to buy. You might end up with nothing but still could not get any money back.

In Colorado a Trust deed, Personal Representative's deed, etc. really refer to the type of grantor, but the basic deed still falls into one of the three general categories.

So "what's a buyer gotta do?" In the good old days, a land title company would research the real estate records in the county clerk and recorders office and put together a legal history book of a piece of property called an abstract. Then someone like a lawyer would examine "the chain of title" to spot any problems and write a "title opinion letter" advising the buyer. The buyer would then accept, reject, or ask for adjustments by the seller. If thereafter something popped up that caused the buyer (now the owner) to suffer an unexpected financial loss which the lawyer missed, the lawyer would be sued in order to reimburse for any financial damages.

Nowadays, a title company will look at the "chain of title" and issue a title commitment. If all of the conditions in the commitment are met, then it will give the buyer (new owner) a title policy which is like a real estate title insurance policy. So, if the owner experiences any financial loss because of a defective title and that was not otherwise excepted from the policy coverage, the title company pays the owner for any losses.

So, to answer your question, as long as the title company will issue a policy, then, in a sense, it does not matter what kind of deed you receive. But the seller needs to pay beyond the normal policy fee for any extra costs assessed to be sure that the policy will protect the buyer, such as deleting possible mechanics liens, exceptions, survey issues, etc. Of course some of these are more important to delete if the purchase was something other than a condo.

So let the realtor and the lawyer "play their games." If the lawyer insists on giving a quit claim deed, then he needs to be prepared to pay more for the title policy. If the realtor is upset that the lawyer isn't playing by the commonly accepted rules, he or she should focus on the bottom line - doing the deal so you get what you expect and are protected if you do not.

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