Month: April 2014

Selling Property Acquired by Quitclaim Deed

There’s a world of difference between a quitclaim deed and a warranty or grant deed.

A quitclaim deed can be useful when you’re transferring property to family members as a gift or in a divorce, but in other circumstances it can be problematic. The grantor gives up his or her claim to the property, but this doesn’t mean you now have title; you may have received a pig in a poke.

It’s all about title

With a quitclaim deed, there is no warranty (guarantee) that the giver is conveying title; there could be other claims on it. Whereas with a warranty or grant deed, the buyer has legal ownership of the property. A title insurance company has cleared the title and sold the buyer a title insurance policy, which will pay costs if there is a subsequent problem with the title.

So why accept a quitclaim deed? It’s an inexpensive way to transfer property, and, while an owner of a property acquired by quitclaim deed can’t sell it without a clear title, the property can be sold later after a warranty deed is obtained.

To sell via a warranty deed, you’ll need to pay a title insurance company for a title search; this involves looking for potential legal issues such as liens or previous disputes.

You can then buy title insurance and, with legal title, transfer the property through a warranty deed. To be legal, this must be filed at a recorder’s office in the area in which the property is located.

Don’t Confuse ‘Pre-qualified’ With ‘Pre-approved’

You should always be in a state of readiness when you’re house-hunting. And this means ensuring you have a letter from a lender signifying that you’re ready to buy a home.

In the past, your real estate agent or broker chose a lender whose job it was to arrange a mortgage loan after the seller had accepted your offer.

Now, you need documentation showing that you’re in a position to buy. Many buyers confuse pre-qualified with pre-approved, believing that if their lender pre-qualifies them for a mortgage, it means that they have been pre-approved for a home loan. Not so. The terms “pre-qualified” and “pre-approved” are different, and a misunderstanding may prove disastrous.

Pre-qualified

To get a pre-qualified letter, you need to supply the lender with your overall financial picture, including your debt, income, and assets. This can be simply done with a phone call, and you likely won’t be charged a fee. With this information, the lender will have an idea of the amount of mortgage you will qualify for. However, this process does not look closely at your credit report, and it also won’t tell your lender whether you’re actually able to purchase a home.

Pre-approved

Obtaining pre-approval is more complicated. You’ll be required to pay an application fee and supply the necessary documentation to complete the lender’s picture of your financial background and current credit rating. From this, the lender can figure out the specific mortgage amount you’re approved for. You’ll also have a better idea of the interest rate you’ll be charged on the loan and, in some cases, you might be able to lock-in a specific rate.

When you find the right home, you fill in the appropriate details, and the pre-approval becomes a completed mortgage application. Finally, a “loan commitment” is issued by the bank when your application is approved. Then, finally, you buy your home.