Special Warranty Deed v Quit Claim Deed
Question: My brother and I inherited a lot in Show Low, Arizona from our mother ten years ago. Since that time I have paid the property taxes, and I have paid for a retaining wall after significant flooding on the lot one summer. Last year my brother said that I can sell the lot and keep the sale proceeds. He then sent me a quit claim deed to the lot which I have recorded. I found a buyer for the lot and we are in escrow, but the title company is refusing to accept my brother’s quit claim deed. The title company is requiring that my brother sign a special warranty deed. If my brother’s quit claim deed states that he has no interest in the lot, why does the title company want a special warranty deed from my brother?
Answer: A quit claim deed is not a conveyance deed of real property, and has none of the warranties of title contained in a special warranty deed. A quit claim deed only states that the signer of the quit claim deed has no interest in the real property.
Title companies want a special warranty deed from any seller of real property for two reasons. First, although the title company may have liability to the buyer, the seller of a home warranting “clear” title is also liable to the buyer for any title defect, e.g., incorrect legal description. Second, if the title company has to pay a claim for a title defect because of the seller’s warranty of title, the title company can demand that the seller reimburse the title company for this payment.
Note: Although in Arizona there are more than 50 escrow companies that do the escrow paperwork for the closing of real estate transactions, there are only a handful of national title insurance companies that actually issue title insurance policies in Arizona. Read a related article on special warranty deeds and general warranty deeds.