Ask a Broker: Can I avoid settlement fees?

Question: I have property in another state and a buyer who wants to pay cash for it. I contacted a title company there and was told about several fees that seemed unreasonable, such as research for liens, property taxes paid, etc. I know for a fact that the title is clear, there are no liens, taxes have been paid to date, and there's no need for inspection or survey. The state allows quitclaim sales, so why do I need a fancy settlement and a bunch of expensive paperwork?

Answer: Everyone wants to save money, that's a quest that is both natural and healthy. However, selling without a full settlement is likely to be unattractive to your buyer and perhaps a false economy for you.
Let's start with a quitclaim deeds. They can be used to transfer title with little fuss or muss — and with few protections for the purchaser. A quitclaim deed says that you transfer such rights as you have to another party. The catch is that the seller may have no rights. For instance, I can give you a quitclaim deed assigning you all of my rights to the Lincoln Memorial. This is a perfectly legitimate quitclaim deed, which gives you exactly what it promises: all of my rights. However, since I have no rights to the famous landmark, the value of the deed is zero.
There may be instances where — with advice from an attorney — the use of a quitclaim deed is appropriate, such as a divorce. In practice most buyers will do much better with "general" or "special" warranty deeds.
As to clear title there are two issues: First, are there any recorded liens? If yes, the buyer will at least want to know about them. Without an assumption all such debts are typically paid off at closing as a condition of the sale.
Second, what about problems that do not show up with a title search? To protect against such claims buyers will want title insurance — and lenders will demand it.
Arms-length real estate buyers want more than just "title" to a given property, what they really want is good, marketable and insurable title, title which assures that the seller is really the owner and that the property is free of all prior liens and claims. Put another way: When it's time for them to sell today's buyers want to be able to pass along strong title assurances to a future purchaser.
The need for title insurance may seem implausible, but if one of those rare claims does arise it could cost a buyer huge sums of money to resolve and perhaps even title to the property. In the end, as much as any seller may believe that a property is owned free and clear, a buyer would be wise to question whether that's really the situation — and have insurance and other protections just in case it isn't.

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