Home Buyer Tips: What is a Deed?
If you have a property, then you need to be knowledgeable of residential real estate deeds and that starts with knowing what is a deed and what types there are. Residential real estate deeds are signed and legal documents. They signify the transfer of ownership from the seller to the buyer. In other words, they prove that you own the real estate.
There are four main types of residential real estate documents. They are general warranty, special warranty, quitclaim, and special purpose deeds. If you wish to learn more about these crucial documents, then you have come to the right place. Below, you will learn not only what is a deed but everything else you need to know about residential real estate deeds as well.
Here are several real estate deed FAQs consumers are asking…
What is the Best Description of a Real Estate Deed?
Before we go through residential real estate deeds, let us discuss the term ‘deed’ first. A deed is a signed legal and official document. It transfers ownership of real estate (or any other asset) to the new owner. A deed needs to be written, notarized, and publicly recorded. It is usually short and drawn up by a real estate lawyer.
It should include operative conveyance words and legal language. Likewise, it should name the grantee & grantor and describe the property accurately. In some cases, witnesses must be present during the processing.
For one, the grantor (seller) must possess the legal capacity to transfer the deed. They also need to make sure that the document gets to the grantee (buyer.)
As for the buyer, they should have the capacity to receive the property grant. Likewise, it is also their responsibility to do a title search – with the assistance of a lawyer – beforehand. Doing so will help them spot for liens (or the lack thereof.)
Without the elements mentioned above, the deed is considered ‘imperfect.’ While the document and title are both valid, they are open to delays and legal challenges. The deed It is official if executed legally in court. It is classified as private if the deal is between persons or businesses.
What is the Difference Between a Title and a Deed?
The difference lies in the physical nature. A title refers to the concept of ownership, which is abstract.
On the other hand, a deed is a tangible document that proves that you own the property.
How Long is a Deed Good For?
It depends on the type of deed. Most do not expire, except for the deed of trust. This agreement follows a set time limit, similar to the conventional mortgage.
A deed of trust is a form of real estate transaction. It includes the lender, buyer, and seller. It also covers a trustee or title company. Should the buyer default on the payment, the trustee may seize the house.
Does a Deed Mean You Own the House?
Yes. It’s a document that proves that you hold the title and own the property.
Who Keeps the Deeds to a House?
If you have a mortgage, then the lender will be holding onto your deed. They will give it to you once you have paid your mortgage in full.
That said, you may request copies of your deed (as needed) from your mortgage lender.
How Much is a Deed Recording Fee?
As mentioned, you need to have the deed publicly recorded for it to be perfect. Like other transactions, doing so entails a recording fee. The payment covers several services, including that of a title search. Recording fee costs vary according to location. Some counties levy $12, while some go as high as $15.
Should you assign this process through an agency, you may need to pay fees according to the document size. The cost for the page is often expensive – it may be as high as $85. The subsequent pages are cheaper, though, at about $1 a pop.
What Makes a Deed Invalid?
A deed is invalid if it is:
As mentioned, the grantor must have the legal capacity to do the deed transfer. Without the conscious act of the seller, the deed will be invalid. That is why when it comes to deeds, the lawyer will look into the age, mental, and physical condition of the grantor. If they are sick or at an advanced age, there will be a question of capacity. Although this is the case, the most critical factor remains to be mental capacity. If the grantor is mentally incapable, the deed may be considered invalid.
Borne by Undue Influence
As established, a deed should be awarded voluntarily. Undue influence, which aims to control the grantor’s will, will invalidate the document. One such example is a confidential relationship shared by both parties. The use of narcotics or drugs also shows undue influence.
Any fraud (e.g., forgery) committed by the seller or the buyer will invalidate the deed.
What are the Different Types of Residential Real Estate Deeds?
They vary according to the title warranties given by the grantor/seller:
General Warranty Deed
This deed, often prepared by the mortgage company, provides the most protection. Here, the grantor makes covenants – also known as legally binding promises.
They also give the grantee – and their heirs – warranties that protect them from claims or demands. The covenants included in this deed are:
Covenant of seisin. It means that the grantor owns the property. As such, they have the right to sell it.
Covenant against encumbrances. Unless specified, it shows that the land is free of liens or the underlying obligation to pay a loan. It also proves that the property is free of encumbrances. That means there are no claims against the property, e.g., a mortgage or easement.
Covenant of quiet enjoyment. It means that the grantee is assured a ‘quiet’ possession of the property. In other words, the property does not have a defective title that will ‘disturb’ the buyer’s ownership.
Covenant of further assurance. The grantor promises to provide the necessary documents that keep the title ‘good.’
If you are the seller, it’s essential to study the local laws and the risks you need to disclose. Generally, you are mandated to indicate the following in the general warranty deed:
- History of crime in the property
- Neighborhood nuisances such as frequently-occurring foul odors
- Damage risks such as flooding
- Major structural repairs made
Special Warranty Deed
This deed, given to the grantor, proves that they have received the title. Add to that, it means that they haven’t done anything to make the title defective. Special warranty deeds are often used in foreclosed homes. This deed helps the bank or lender sell the property to a new buyer.
Compared to a general warranty deed, it offers a lesser degree of protection. That’s because it only covers problems that took place during the grantor’s ownership. In other words, the grantee is not immune from the problems that occurred before the last owner.
Also known as a non-warranty deed, this document comes with the least amount of protection. That’s because it details any interest that the grantor has on the property. It lacks warranties or promises over the title’s quality.
In most cases, a quitclaim deed comes in handy if the seller is unsure about the title’s status. It also frees the grantor of any liabilities under the covenants. There is no money involved here, as you would expect when:
- Parents transfer ownership to the children
- Spouse transfers ownership to another
- Individual transfers ownership to an LLC or trust
Despite its limitations, a quitclaim deed may work like a general warranty deed. Such is the case if the grantor has a good title. But if the title is defective, the grantee may not take legal action against the grantor.
Special Purpose Deeds
This document comes into play when the deed comes from a person acting in an official capacity. Like a quitclaim deed, it offers little to no protection to the buyer. Here are six types of residential real estate special deeds:
Administrator’s deed. This document surfaces when the property owner dies intestate or without a will. It conveys the title to the grantee. As the name suggests, it is issued to the court-appointed administrator. They are in charge of disposing of the intestate grantor’s assets.
Executor’s deed. Opposite to the administrator’s deed, this is for the testate grantor (with a will.) Used by the estate’s executor, it helps convey the real property to the buyer.
Sheriff’s deed. Given to the successful bidder, it’s a document that satisfies the judgment against the owner. As a result, the buyer gets the title that the in-debt grantor has.
Tax deed. This document is for selling properties with delinquent taxes.
Deed in lieu of foreclosure. The borrower, who is in mortgage default, provides this document to the lender. Should the lender accept the document, the lender will have to terminate the loan. Sadly, most lenders prefer to push through with the foreclosure as it helps clean the title.
Gift deed. Also known as the deed of gift, it’s a document that presents the title as a gift of consideration. Depending on the state, the grantee must have it recorded within two years of the gifting. If not, it will be considered void.
Even if your residential real estate deed is ‘perfect,’ you are not impervious to problems. One such cause is the deed restriction, which may result from any of the following:
Cloud on Title
One of the more common reasons is a ‘cloud on title.’ It refers to an encumbrance, lien, or claim that impairs the title. In other words, it makes the document ‘doubtful.’ This ‘cloud’ usually shows itself during the title search. The good thing is a quitclaim deed may resolve it. As mentioned, it releases the person’s interest without the need to state its nature.
For this restriction, you will need to clear the document with the recording officer.
A probate – or a review of a will – helps validate a deed. This restriction happens when the owner dies without relinquishing control of the property. The heirs may challenge each other for the deed.
Even if you hold a deed, it does not mean that you can use the property whichever way you want. You will need to follow restrictions, such as those given by the homeowner’s association. These restrictions often limit:
- Property use
- Design, building size, or fence height
- Maintenance works
- Activities that may affect the environment
Can a Restriction be Removed?
Yes, although it is pretty tricky. First, anyone who is affected by the restriction must agree to remove it. If the restriction is no longer relevant, the person who put the restriction may remove it. In rare events, a court order may order to remove such a restriction. This ruling is possible if the court views it as discriminatory, unfair, or illegal.
How to Make Deed Changes
There are many reasons why you may want to change the deed. For one, there may be clerical errors.
A change of ownership is another valid reason. For example, the person you have bought the house together with has died.
Sadly, changing your deed can be a painstaking process. For one, you will need to present your desired alterations to the court. If the judge deems it valid, they will issue a court order to authorize your deed reform.
As always, it is crucial to record the judgment in the title chain. You can do so by taking it to the Register of Deeds.
This step will help inform the public about the changes. Without this, you can not proceed with the deed revisions.
Final Real Estate Deed Thoughts
A deed is a written, notarized, and publicly recorded legal document. It proves that you own the property. It is different from a title, which is the concept of ownership. It is abstract, compared to a deed that you can physically see and touch.
There are four main types of residential real estate deeds. A general warranty deed is most protective because of its covenants and warranties.
Deeds, although perfect, may come with restrictions. These often result from a ‘cloud on title,’ falsification or errors, and probate issues. These restrictions may limit your actions as an owner as well.
Hopefully you now fully understand what is a deed and how important they are. Just remember, a deed is the document used to transfer property ownership from the seller (grantor) to the buyer (grantee). A signature by the seller validates the deed and is their declaration they have authority to sell and are giving up their rights to the property.