Q&A: Cash Offers and Quitclaim Deeds

Quitclaim deeds are typically used within families, between spouses or ex-spouses, or from individual owners into businesses. A quitclaim is a useful tool to transfer real estate when no payment’s expected.

What we rarely talk about is a quitclaim combined with a cash transaction. There may be times, though, when a quitclaim and cash come together.

So, let’s do a Q&A here, for a broad-brush consideration of various scenarios.

What Does It Mean to Make a Cash Offer?

If you can buy a home with cash, you don’t need to get a mortgage. The best way of describing this in an agreement? There’s no financing contingency in the purchase contract with the seller. The purchase offer says the buyer’s offer is not contingent on financing.

But that doesn’t rule out getting a mortgage. It just means you can prove to the seller that you’re ready to buy, that you have the cash on hand, whether or not anyone clears you for financing before the closing date.

I’m Selling and Want the Cash in Hand Promptly. Is a Quitclaim Good?

As the deed holder, you are free to use the approved legal form to create a quitclaim deed. Because there’s a cash buyer, you don’t have a lender insisting on a warranty deed. A quitclaim will do it.

But here’s the thing. The quitclaim doesn’t come with a warranty. So, a quitclaim is not recommended in a sale for money. If you want to proceed, we highly recommend having a real estate attorney go over your document.

And be aware that there could be sizable liens, for obligations such as unpaid taxes, that stick to the title through the quitclaim transfer.

Among families, spouses, and co-owners, the title situation is not at such risk as it is when conveying to a third party (“arm’s length”). Use a warranty deed for an arms-length transaction.

What Other Documents Are Necessary for a Cash Purchase?

You’ll need a purchase contract between the seller and yourself. Your attorney can also assist you with that document.

Also important is a home inspection, and having an attorney or title company run a professional title search for the home.

Conveying a deed without hiring an agent? For case-specific guidance, bring your queries to an experienced real estate attorney who works in the jurisdiction where the property exists.

Is a Quitclaim a Full, Final Transfer?

Yes. Create and sign the quitclaim according to the correct procedure, and record it with the county.

Once it’s properly created, signed and notarized and/or witnessed as directed by the home’s state law, and then recorded, a quitclaim deed passes a present interest. That means now. Done. No takebacks.

Please remember! Never create a deed and leave it unrecorded. Even a signed deed, left unrecorded, will create legal questions and problems once the signer passes away.

What Concerns Come Up in the Event of the Death of a Person Who Quitclaims the Deed?

Once a quitclaim is created following the requirements and properly recorded in the home’s county, the recipient owns the property. It will not be an issue for probate, so relatives will not be able to contest the transfer, unless there was some abnormality like fraud or undue pressure to sign.

If the new deed holder is paying off a mortgage that belonged to the past owner, repayments can continue until final payoff is made and lien release requested.

What If There’s a Mortgage on the Home Being Quitclaimed?

The deed can still be transferred, and this still constitutes a full, final property transfer.

The quitclaim recipient gets ownership of the real estate — or, to be exact, whatever interest the quitclaim grantor has. The mortgage is not transferred. The person named on the mortgage agreement, including any co-signers, will be responsible for resolving the debt.

Let the mortgage company know of your plans in advance. Some home loans are assumable, and the company can offer details. In any case, the deed recipient needs lender permission to take over a mortgage. The mortgage lien is attached to the property, so be sure you actually do get greenlighted to assume the loan. Parties can use an escrow agreement to transfer the cash while waiting for the bank’s go-ahead for the mortgage assumption.  

A new owner can avoid refinancing if the mortgage already on the home is assumable. Learn more with Deeds.com about assumable mortgages.

How Quickly Can the Ownership Transfer Happen?

Allow 15 days to a month for the cash purchase process.

Be careful when moving fast in a deed transaction. Resist any urge to rush through a purchase without verifying that the title is clear.

The deed recipient should strongly consider buying an owner’s title insurance policy from the title company.

In This Competitive Market, Can a Parent Buy With Cash, Then Sell the Home to an Adult Child With a Quitclaim?

Yes. But that constitutes two (taxable) deed transfers, and you pay for a title company’s services twice.

Alternatively, you could write a gift letter and support your child’s purchase.

Or you could back up your child’s purchase with cash. Your child can make an offer not contingent on financing based on your gift letter. Your child would still be able to close with financing if approved.

So, assuming the adult child will need financing, the child could still make a “cash offer” if the parents can prove there’s ready cash to ensure the seller gets paid, no matter what. Your child will need proof that the money is ready in your account.

Explore more ways parents are helping their adult children buy homes in today’s challenging housing market.

Does a Cash Buyer Need an Appraisal?

A cash offer might or might not be contingent on an appraisal. A contingency is a wise idea. The clause in an agreement could give the buyer a time limit to obtain an appraisal and it should come in at a minimum price for the deal to go through. The appraiser’s work gives a cash buyer an accurate report on the fair market value of the home.

An appraisal only costs a few hundred dollars. If there’s any surprise (as in, the appraisal comes in lower than expected), it could save a buyer thousands. A seller should be willing to bring the price down if the appraisal report warrants it.

At the End of the Day…

Selling and buying real estate for cash has unique risks. Consider this column an orientation to the process, not legal or financial advice.

If you transfer a deed to help an adult child, have an experienced real estate agent involved for the homeowner-to-be. An agent looks out for the best interests of the client, and warns of pitfalls. Sitting down with a tax specialist to go over federal, state, and local taxation consequences is also vital.

Other key sources of information and guidance are: the mortgage company, if applicable, and the closing attorney or title company. State law governs a real estate transfer, and these professionals make sure the rules get followed. Always seek professional guidance if you have questions or concerns.