Owning real estate can be an empowering and exciting thing. Whether the property is used as a primary residence or a real estate investment, it is likely to increase in value over time. If you are ready to part with real estate you own, transfer it into someone else’s name. Of course, the same process also applies if you need to transfer real estate from someone else’s name into your own. The process of transferring the legal title to real estate property from one person to another is referred to as conveyancing.
The transfer of home ownership can be as easy as adding or removing a name from the deed. No matter what kind of deed you choose, the process of transferring the property is similar.
Consider a Quitclaim Deed
The cost to transfer a deed to another person can be minimal. In fact, except for attorney fees for the transfer of property that may include a deed preparation fee, you can transfer real estate property to someone else with no money changing hands. That can be lovely for parents who want to give the property to an adult child, and it also works in a variety of other situations where the property is being gifted to someone.
A quitclaim deed may be the way to go when you want to transfer property without exchanging money. It’s easy to complete a transfer that way and not as risky when all parties trust one another. With a quitclaim deed, it’s possible to transfer the property fully from one party to another, and someone can remove themselves from ownership entirely. It’s also possible to simply add an additional name to the title while keeping other names on the title, thus subdividing the property.
It’s rarely wise to accept a quitclaim deed from a stranger. A title search isn’t required, so outstanding liens on a property may be missed. That can lead to trouble if you accept a quitclaim deed from someone who is not trustworthy. The grantee is entitled to only whatever interest the owner has when the property is sold. Past court cases around the country reveal that many aspiring homebuyers unknowingly used quitclaim deeds to attain property that had liens against it or otherwise had unpaid tax bills attached to it. Before accepting a quitclaim deed, do your due diligence to ensure that it hasn’t been used as collateral on unpaid debt and that all taxes on the property are currently paid in full.
Once the quitclaim deed is signed, notarized and filed, it cannot be canceled. If you want the property back after transferring it to someone in this way, the grantee would have to file another quitclaim deed to transfer the real estate back to you. There is no way to make them do this, so be sure that you want to fully and completely transfer your rights in the property to the person before doing so.
Tax Considerations for Quitclaim Deeds
Keep in mind that the IRS will view a real estate transfer for no profit as a gift, so the person who is transferring the property will be responsible for taxes on it. The giver will need to fill out Tax Form 709, but the giver can apply the property’s value to the millions that he’s allowed to give away under the rules of the estate tax. So, unless the giver plans to transfer millions of dollars’ worth of real estate, they probably won’t need to worry about being immediately penalized on their taxes when they transfer ownership of a house to someone.
However, consult an attorney to make sure that you are making the right choice for your long-term financial future. A capital gains tax can be costly and may be applied when the property is later sold depending on how it was attained. If the property is given through a quitclaim deed and has increased greatly in value, the capital gains tax could be very costly.
Consider a Warranty Deed
A warranty deed is sometimes referred to as a full warranty deed or a grant deed. It is used to transfer real estate property to another person in exchange for a specified payment. For a buyer who doesn’t know the seller, a warranty deed is typically the safest way to transfer ownership of a house. It protects the buyer from a seller who may have hidden existing problems with a title. With a general warranty deed, the seller is held liable for legitimate claims against the title while they have the title to the property and possibly even after their interest has been transferred.
A warranty deed isn’t only for grantors who want to receive a profit on the property. You can also use the warranty deed to transfer property as a gift, but you typically will place a small amount like $10 as the consideration for the transfer.
Tax Considerations for Warranty Deeds
All taxes must be cleared on a property before a warranty deed is filed. Once the ownership has been transferred from the grantor to the grantee, the grantee then becomes responsible for paying the property taxes. Also, taxes are imposed on deed transfers in many states, and the documentary transfer taxes must be paid.
Complete the Transfer of Home Ownership
Every state has its own specific deed forms, so be sure you are choosing the right one in your state of residence that will meet all your transfer needs. No matter what kind of deed you choose, the process of transferring the property is similar. Before you intend to transfer the real estate to someone else, confirm its specific address and parcel number. Also, the legal description of the property is needed. In addition to your own name and address, you will need the grantee’s full name and address. Know the county where you both live and decide on the county and state where you will sign the deed to transfer the real estate property.
Specify the name of the party who will receive the recorded deed. Also, if money is being exchanged, state the exact amount. Otherwise, be clear that no money is being exchanged for the transfer of real estate. Be specific about whether you’ll reserve any interest in the mineral rights of the property. That includes gas and oil rights.
The grantor is the current owner of the property and the grantee is the new recipient. It’s possible for a person to be both the grantor and the grantee on a quitclaim deed or a warranty deed. For example, if someone wants to transfer a part of their interest in a family home to a sibling, they will be grantor but also remain the grantee because they are keeping a part of their interest in the property.
To finalize the real estate transfer, make sure any kind of deed is legally binding by signing it before a notary public who will be a witness and notarize it by placing their signature and stamp on the document. Be prepared to give the notary a print of your thumb for their records. Then, after notarization, the completed and signed deed needs to be filed with your city or county. You may pay fees to have the deed registered. Other taxes that may be due on the property should be paid before the filing. From there, most counties work quickly and will likely have established the new owner of the property before the end of the day when the deed is filed.