If you're new to real estate you'll want to know the different main types of Florida deeds that exist and what each one means. Whether you're buying or selling, it's important to know what type of deed you currently have and what type of deed you will be transferring the property with.
Below are the most common types of deeds I've come across in Florida...
- Quitclaim Deeds
- Special Warranty Deeds
- Life Estate Deeds
- Warranty Deeds
I am not an attorney, title agent, or realtor so this is just based on my own research and experiences. Do not take this information in the place of solid legal advice. You should always consult your attorney before making any real estate decisions.
1) Quitclaim Deed
This type of deed is one of the most common in Florida but I'm not sure why. It's is less reliable than other deeds. Often, it's mistakenly referred to as a quick claim deed, however the actual wording is quitclaim. This common mistake could be because it sounds so similar or also because people think of it as a quick deed since it's a simple one to do.
A quitclaim deed simply deeds over whatever ownership interest a person has in a property to another person or entity. Unfortunately though, it doesn't guarantee the person has any legal ownership to convey. The example is always given about the Brooklyn Bridge but I'll use a more realistic and up to date one.
Let's say for example you find somebody on craigslist who is selling a property for 80% below market value. The only caveat is they've got a crisis in their life and they need to move fast, close fast, and get their cash fast in order to deal with this unfortunate event in their life. They offer a quitclaim deed to you and you accept.
For this particular example, let's assume everything seems legit on the surface. They can prove who they are, you can see they own the property by looking online at the county records and seeing that it's listed in their name.
You purchase the property and send it off to be filed (recorded). Now, you find out they don't own the property because the day they issued a quitclaim to you, they also issued seven more quitclaims to seven other buyers at various prices. You happened to be the last person they issued one to.
The whole thing gets interesting real quick and the title is now clouded by problems with the conveyance of ownership. The problem is, they gave you a quitclaim, handing over whatever interest they had in the property- which happened to be nothing since you were last in line.
At this point you would need to decide if the legal battle and price tag is worth the effort to unravel this mess (if it can be unraveled). I'm not saying this is a common thing that would happen, but it could, among other things. I always suggest using an escrow or title company who will hold everything in escrow until everything goes through.
The only time I would suggest considering a quitclaim deed in Florida is when you are transferring a property from one person to the other and both parties know AND trust each other. But keep in mind, just because you trust someone doesn't make them trustworthy.
So, for example, if your brother, mother, sister, cousin (etc.) were to sell you a property or you were adding the name of a partial owner to a property you could use a quitclaim deed. A quitclaim deed protects the seller because it leaves little recourse for the buyer if there is a cloud on the title or something isn't accurate. I've had problems in the past with this type of deed and because of that, I issue (and expect) a warranty deed when I buy or sell a property.
In my experience, using a quitclaim is simply not worth the risk.
4) A Special Warranty Deed
A special warranty deed is... well... special. The term special is a little misleading because it kind of implies that it is better than a warranty deed but in fact, a special warranty deed offers less protection against problems with clear title than a regular warranty deed. It's better than a quitclaim deed. If you were to rate them in order of protection it would be...
1) Quitclaim deed (lowest protections - offers no guarantees)
2) Special Warranty Deed (offers some guarantees)
3) General Warranty Deed (offers the most protection)
A special warranty deed, unlike a quitclaim deed, does offer a little protection. While a quitclaim deeds offers no guarantees, a special warranty deed offers guarantees against title defects, liens, and judgments during the time the seller owned the property.
So you might issue a special warranty deed guaranteeing that during the time you owned the property there was clean title and no liens were placed against the property. But with a special warranty deed, the seller makes no guarantees about what happened before they owned it.
My understanding is that typically these are used in commercial real estate deals, but not always. Residential deals usually convey property through a warranty deed, which brings us to our next common Florida deed.
3) General Warranty Deed
A general warranty deed, commonly just called a warranty deed, offers the highest level of protection. It guarantees that there are no defects in title, liens, encumbrances, etc. against the property going back many years. I think title companies usually go back 30-40 years when they run through all their research.
Because of the level of protection it offers, most residential home purchases use general warranty deeds. This happens in part because most people don't buy their homes for all cash and the people handing out loans for home purchases (banks and credit unions) are versed enough in real estate to know they want to be protected before they give anyone $100,000+ to purchase real estate.
So if you're buying properties with cash as investments, you should require a warranty deed. Unless you are buying a property with money you are willing to risk losing, you should always get title insurance as well. It can save you time and money in the long run.
No matter how well you research and do your due diligence, you can always miss something if you're doing everything yourself. Title insurance means the title company will be looking at everything, the company issuing the title insurance policy will be looking over everything, and of course you will be looking at it.
That's at least three sets of eyes looking to make sure every "i" is dotted and every "t" is crossed. If somebody does miss something (even a little detail on spelling or wording) it can cloud the title making it almost impossible to sell. Unless of course you find somebody gullible enough to accept a quitclaim deed from you. But knowing what you know now, that shouldn't be an option.
If you get title insurance (which you should), it insures that the title was correct and if any issues arise, the title insurance covers the cost of resolving those issues.
I have had to use title insurance to clear up the title work and conveyance of a property before and I was extremely glad I had it. That title insurance policy was worth every penny I paid for it.
4) Life Estate Deed
A life estate deed is an interesting one but I've come across it a few times. It isn't nearly as common as the others but if you run across it you'll want to know how it works. Usually, life estate deeds get set up by a person who knows what they are doing (usually with the help of an attorney) and they want the property used in a specific way.
When I've come across situations like this, the person trying to sell the property didn't know how it worked or that they didn't really own the property.
In layman's terms, a life estate deed give a person limited ownership (the right to occupy, use, or rent) of a property until they pass away, at which time the property would automatically go to whomever it is supposed to go to. It sounds complicated, but the example below will make it easier to understand (hopefully).
Just recently I was talking with an lady who wanted to sell her property and move back out west to live with her family. On the surface, it looked as though she owned the property free and clear. It was in her name (100% ownership) and she even had the will of her deceased husband stating that he was leaving it to her.
We came to an agreement and I decided to purchase it. Leading up to this though, I knew it was a unique type of ownership because there were a few red flags that made me think something wasn't right. After multiple discussions with the title company, a consultation with a real estate attorney, and a close examination of the deed we found out it was a life estate deed.
The way this particular deed was worded, the former owner gave his wife limited ownership (the right to occupy, rent, or live in) the property until she died. At her death, ownership would be conveyed to her four children (in equal shares) without the need for probate.
So obviously in this situation, the husband decided before he passed away that he wanted his children to have the house, but he also wanted his wife to be able to live in her "home" for the rest of her life. He also wanted to save them the trouble of Florida probate, which is another topic altogether.
It was a wise set up because it took care of his children and his wife. By using a life estate deed, neither party could do something other than what were the wishes of the original owner. This is the type of situation where you would see a life estate deed used and as I said before, sometimes the person living in the property doesn't realize it's even set up like that.
Another similar deed that is relatively new and even less common (hence not listed as one of the common Florida deeds) is the ladybird deed. A ladybird deed is like a traditional life estate deed except the owner still has the right to do whatever they want with the property while they're alive (even sell it).
A ladybird deed would be used if you wanted to keep your children from needing to go through probate but still wanted them to have your house when you died. Using a ladybird deed (which can be quitclaim, warranty, or special warranty deed, etc.) is an effective way to ensure this happens while still keeping your ownership rights in tact.
It protects your ownership because if you choose to, you could always sell the property without the permission of whomever you're leaving it to. You still have full rights exclusive of how they feel about it. Since you wouldn't be transferring the property during your lifetime, you would also be exempt from the federal gift tax usually imposed if you transfer ownership before you die.