Quit Claim Deeds

[Sreenath Vemulapalli]

Fellow BPers,

I have a company which I'd like for it to hold my real estate properties for purposes of limiting liability. I am purchasing properties personally as I cannot finance them with the company yet. I am transferring the asset via a Quit Claim Deed, but repeatedly hearing that this might be an issue for the mortgage holder and they may invoke the Due Upon Sale clause.

Questions:

• What is the most easily accepted method of doing this that works for all parties (as opposed to a Quit Claim Deed)?
• If there is no getting around this, what is the best way to approach the bank? What are the concerns that I should be addressing?
• Please let me know of any other thoughts you might have on the matter...

If it should matter, I'm primarily working in Georgia and South Carolina.

[Andy B.]

Originally posted by Rick Harmon:

The reason that a Quit Claim deed may be sufficient to transfer your interest into your entity (as opposed to using a Warranty or Grant Deed) is that you don't need to assure yourself marketable title; you already have that.

I always recommend to steer clear of using Quit Claim deeds - they have the potential to create problems down the road. Also, there should be no noticeable cost difference between a Quit Claim and a Warranty Deed (or whatever term is used in your area). They are both pieces of paper with generic words on them that need to be recorded and a real estate attorney can take their form deed (Quit Claim or other) and insert the property information in just about the same time (no real time difference, so no real cost difference) and both types of deeds are approximately the same length, so the recording costs will be just about the same.

The difference comes down to the language in the deed. In the most simplistic terms, a Quit Claim Deed says "I'm giving you whatever it is that I own, but I'm not saying that I own anything" whereas a Warranty Deed says "I warrant that I own this and I am giving you my ownership rights". There is really no difference to you when transferring from personal to corporate ownership since you know exactly what is owned; however, in a few years when you go to sell the property, the Title Company doing a review to grant title insurance to the purchaser will see a line item that says property transferred from Bob Jones to Property Holding, LLC and if it is a Quit Claim that did the transfer, they put up a red flag and then have to dig to determine what ownership Bob Jones had and how he got it and from what I have heard, many title companies do not like doing this sort of research and do not feel comfortable (even with the research) in insuring title.

Will this prevent a future sale? Probably not, but for no extra time and no extra money, go ahead and do the Warranty Deed and avoid the potential issue.