Real estate in the United States has a long history of being extremely valuable. Owning land was only for the wealthiest individuals in the early years of U.S. history. Unlike property that can move (possession is nine-tenths of the law after all!), it is often difficult to see who owns real estate just by looking at it. The value of the property and the need to have some tangible way to determine who owns a property make property ownership much more paperwork-heavy than other types of goods.
Every piece of real estate in the United States is tracked or recorded. Usually, these files are kept with the County Recorder’s office. They are public record, which means that anyone who wants the information can take certain steps to obtain it. It also means that when you transfer property from one owner to the next, you need to change the official documents to reflect the transfer. In fact, a failure to record the required documents accurately can undermine and even invalidate the transfer altogether.
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Read on to learn more about the different forms of deeds.
The transfer process happens by way of deed. A property deed is a formal, legal document that transfers one person or entity’s rights of ownership to another individual or entity. The deed is the official “proof of transfer” for real estate, which can include land on its own or land that has a house or other building on it.
Every deed should contain the following information:
As deeds do not require much information, the document itself is often very short. However, the document may also contain additional information such as the conditions or assurances that go along with the transfer. Each deed must also be validly delivered to the individual taking ownership of the property. In most situations, it should also be filed with the appropriate authority as well.
Every real property transfer will require the use of some type of deed. It is important to use the legal description of the property for the deed so that it can be recorded accurately.
The person transferring ownership is often referred to as the “grantor.” The person receiving property is the “grantee.”
There are several types of deeds. Each type varies based on the warranties provided to the grantee. Different varieties of deeds provide varying levels of title.
Deeds help show ownership of the property. However, the deed itself is really only used for transfer of the property. The real “test” of whether you have ownership of a property is based on whether your name is on the title. When you have a title to a property, you also have various other rights that go along with property ownership, including the right to:
Often, titles will be in more than one person’s name. For example, if a married couple owns their home together, both of their names will often be on the title for the property. When this occurs, each spouse generally holds a one-half interest in the property. That also means that the property cannot be transferred without both spouses’ permission.
As property is held in such high regard in the United States, having a good title is critical when you transfer property. Every time a property is transferred, it is recorded in a public way, usually with the County Recorder’s office in your area.
When a property is not recorded properly, there may be “holes” or “gaps” in the title. These deficiencies make your ownership questionable because it is unclear whether the person who received the transfer after a gap did so validly. That is, the person transferring the property may not have had the necessary ownership rights to assign it.
These concerns about titles lead to products such as title insurance, which will indemnify losses related to defects in the title to real property. Problems associated with the title become particularly relevant if there are encumbrances or debts that you are unaware of or did not agree to.
The kind of deed you can use to transfer property will depend on your title. If you know you have a valid title, for example, the deed used to transfer that property may be different than the deed you should use if you are unsure of the title’s integrity. The following is a brief list of some of the various types of deeds available to transfer property.
The deed right for your situation will obviously vary based on your title and how the property is being sold. Some deeds are more common than others, with the most common variations being the general warranty deed and the quit claim deed.
A general warranty deed is often considered the most common way to transfer real property. It is used when you are aware and confident that the title to your property is good and marketable. It is most commonly used for residential real estate transactions. A general warranty deed is a buyer’s best protection against title challenges. The guarantee not only applies to the seller, but it applies to all of the individuals or entities involved in the chain of title for that particular property.
By providing a general warranty deed, you are also positively asserting that there are no debts or liens on the property. This concept may be confusing for some homeowners because they have a mortgage on their home. However, when you sell your property, your mortgage is often paid off with the proceeds of the sale, and may even transfer to a new property that you purchase. This is part of the covenant to convey free of encumbrances.
A general warranty deed also includes several other covenants that are built into the guarantee.
Obviously, there are many advantages to transferring property with a general warranty deed. If possible, buyers often strive to obtain this type of deed in their real estate transactions.
In some situations, the seller may need to create a “special warranty deed,” which provides some of the covenants, but not others. Particular circumstances dictate the use of a special warranty deed, and it is sometimes used as a compromise between the buyer and seller so that the seller still receives some warranties.
Unfortunately, not every property can be transferred with a general warranty deed. There are often many unknowns for property transfer that could create problems for a title. In those situations, using a quit claim deed may be appropriate.
While a quit claim deed still conveys the owner’s total interest in the property, it contains no warranties regarding the title. That is, there is no assurance that the title the owner holds is valid and marketable. That means that the deal only transfers whatever rights of ownership that the seller has at the time of transfer. In most situations, the owner does have a valid ownership interest in the property, but still does not want to provide the warranties afforded in a general warranty deed.
Quit claim deeds can be concerning, but they are often the fastest means to transfer property. They essentially deal with potential title defects by avoiding addressing them altogether. Many title insurance companies will be reluctant to provide title insurance related to real property that is conveyed by quit claim deed.
Quit claim deeds are used most commonly in situations where:
If you are considering purchasing a property through a quit claim deed, it may be helpful to ask the seller why he or she is using a quit claim deed as opposed to a general warranty deed or special warranty deed. The rationale may be something simple, or it could trigger red flags that may require you to rethink the purchase. Of course, it may be a good idea to simply avoid these types of deeds unless you have significant trust in the seller or his or her title. Special considerations for title insurance may be necessary as well.
Part of the buying process includes an investigation into the title of the property. When you do not know the seller, this inquiry is often conducted by a real estate attorney. The attorney will determine the legal status of the seller, which is particularly relevant when the seller is a business or trust.
The attorney will put together what is commonly referred to as a “property abstract.” An abstract details the ownership record of a particular piece of real estate and provides information about whether the title may have any potential issues from a legal perspective. The abstract will go back as far as possible, using public and government records.
In states that use title insurance, property abstracts are less common. They may not be used at all in other states. Regardless, it is useful information to have if it is available to you; if nothing else, it provides peace of mind knowing you have a good and marketable title in your real estate.
You may not need to involve an attorney to create a particular deed if you already have all the information. This is especially true if you are transferring property between family members or into or out of a trust.
We provide several real estate forms that can help you transfer property validly in your state. Our deeds, including general warranty or quit claim deeds, are drafted by our team of lawyers to meet legal requirements in your state.
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