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  • Writer's pictureJames Rogers

The Quit-Claim Deed – How to Avoid Financial Disaster

Updated: Nov 29, 2021


What is a Quit-Claim Deed (QCD) and why are they so popular? A QCD is frequently used to transfer property between family members or by placing a property into a business entity such as an LLC. They have useful purposes such as a divorce settlement requiring one spouse to terminate their interest in a jointly owned home granting full right of ownership to their spouse. Property owners may also use a QCD to transfer title to their children.

The QCD only requires buyer and seller to sign, notarize and file the deed at the Recorder’s office and it’s that simple to transfer property ownership. Since QCD’s are easily executed, unfortunately they can also be used for nefarious purposes. Recently, we worked with property owners trying to sell that were victims of a similar type of action. Here is what happened to our client.

Our client purchased a small, commercial building hoping to start a family-owned business. They got what they thought was an amazing deal, purchasing the building for significantly less than appraised value. As the COVID shutdown struck shortly thereafter they were unable to move forward with their business plans so they decided to just sell the building, needing a quick resolution as taxes were due on the vacant building. They called us at Summit Home Solutions. We looked at the property, discussed their needs and determined a price that would work for us and the sellers. They were thrilled to be getting out of a property so fast and were going to be able to recoup most of their investment and move on.

We drafted and signed a purchase agreement and sent the paperwork off to the title company so they could do the title search and get the paperwork ready for closing. After the title search was complete, the title company had horrible news. Since these current owners had taken title when they purchased the property with a Quit Claim Deed, the title company was not going to be able to issue a General Warranty Deed and a title insurance policy to us when purchasing the building. (General warranty deed and title insurance are standard practice)

The original owner had unscrupulously sold them a property that had hundreds of thousands of dollars in liens against it from years of bad business practices and tax avoidance. Our clients knew none of this. They did not have a title company do a title search because they accepted ownership by Quit-Claim Deed, and now had no legal recourse against the previous property owner. Their entire investment was lost, and the State of Ohio would eventually take the property in an attempt to satisfy those unpaid debts.

The lesson is to be cautious and when taking possession of a property and exchanging your hard-earned cash. Do your due diligence and pay for a title search. A quick talk and a couple hundred dollars for a title search is protection that can save you tens or even hundreds of thousands of dollars!

Call if we can help, we will refer you to a reputable title company who can answer your questions and give more in-depth advice on protecting your investments.

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