Is a Quitclaim Deed Valid Without Consideration?

Deeds document property transfers between buyers and sellers. When a property is actually sold, a warranty deed is generally used to convey ownership. This type of deed lists the sales price paid to the seller and also provides a warranty of a clean title. Quitclaim deeds do not offer a warranty on the title and are more commonly used when ownership is transferred between related parties or when a property is conveyed as a gift. Because of this, quitclaim deeds can be valid without an actual monetary consideration listed.

Function

The consideration is used to show what the buyer paid the seller for the property. However, quitclaim deeds are not generally used when a property is purchased. The majority of quitclaim deeds are prepared to include specific verbiage to disclose the consideration value to prove that the seller, or grantor, received something for the conveyance. Depending on state laws and guidelines, the considerations listed on quitclaim deeds do not always have to be dollar amounts. For example, Colorado views a consideration listed “for love and affection” as valid for a quitclaim deed consideration.

Gifts

A number of property transactions can be considered gifts. Transfers to add or remove a spouse or child to the title of the home fall into this category. For example, Bob owns a home in his name alone. Bob then marries Sue, and wishes to add her to the deed. He is essentially giving her ownership rights as a gift. A quitclaim deed can be drawn up to state that Bob grants ownership to Bob and Sue as joint tenants. Removing someone from the deed works in a similar fashion. Generally, a small dollar amount such as $1 or $10 is listed as the consideration. Some quitclaim deeds may read “for valuable consideration of . . . ."

Taxes

Most states impose a transfer tax on property conveyances. The tax is based on the consideration listed on the deed. However, most states consider a number of circumstances as exempt from transfer taxes. Sometimes, if the consideration listed is a very low amount, the tax authority will question the terms of the sale. This is when an exemption will need to be claimed. If an exemption cannot be validated, the state or county may base the tax on the fair market value -- assessed value -- of the property.

Validity

Although an actual dollar amount does not always need to be listed as the consideration, some type of consideration should be listed on the deed. Failure to state a consideration may not render a deed invalid for recording or conveyance purposes, but it may cause problems in the future if an issue with the property title occurs. It is advisable to consult the help of an attorney to prepare a quitclaim deed to use in any situation.

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