10 Jul Understanding Deeds When Signing Over a Home
When buying or selling a home, it’s easy to become discombobulated by some of the legal terms and real estate jargon you might hear thrown around. Considerable confusion commonly surrounds transfer of property, with words such as “deed” and “title” often used interchangeably, for example. They are not the same, however.
A home’s title represents the rights to a given property. It means that you can access, modify and transfer that interest to others. Note that a title isn’t a single document but rather a concept that establishes ownership. Conversely, a deed is a legal, written document used to exchange a property title. In other words, the deed is the record that attests the property transfer. It contains the names of the previous and new owners, a legal description of the property, and is signed by the person transferring the property.
Types of Deeds
A property deed can take on various forms. Among the more common types of deeds in real estate transactions are grant deeds (also known as warranty deeds) and quitclaim deeds. A grant deed transfers ownership and guarantees that the seller has the right to sell the property and the title is free of encumbrances, except as spelled out in the deed. By providing a grant deed, the grantor assures the buyer (or grantee) that his or her title is good and there are no liens or debts associated with the property.
Two types of warranty deeds exist. A general warranty deed is a more comprehensive and preferred instrument to transfer residential real estate titles. This type of deed protects buyers against defects and claims accrued by all previous owners. Another variation, called the special warranty deed, will offer the same protections as a general warranty deed but only for the length of time the grantor owned the property. With this caveat, special warranty deeds are more restrictive since only claims that happened during the grantor’s ownership will be defended. This limited form of a deed is used mostly for commercial real estate transactions.
Lastly, a quitclaim deed transfers any ownership interest a person has in a property, with no extra protections extended to grantees. It makes no guarantees about the legitimacy or extent of the person’s interest. In addition, if any challenges to the property arise, grantors cannot be held liable. Quitclaim deeds are most commonly used to clear a defect on the title and to transfer properties between family members or spouses after a divorce.
Deed of Trust
A deed of trust is a legal document that secures a real estate loan and is sometimes used in lieu of a mortgage. Since most property transfers involve financing, it is usually recorded together with a warranty deed. While a mortgage agreement is between two parties, a deed of trust is comprised of three parties: the borrower, the lender and the trustee. The trustee, generally a title company, holds the power of sale in the event of a default. Because the power of sale provision allows for non-judicial foreclosure, the process is usually faster and more straightforward.