- June 27, 2014
- Posted by: U.S. Title Records
- Category: Real Estate Post
Property deed types, mortgage deeds of trust – Familiarize Yourself With Property Deed Types to Protect Your Legal Rights
During the time of American colonization, many migrated to North America with a dream of owning a piece of land. The property still holds great value in this society and is an indication of power and freedom. If you are about to sell, purchase, or inherit real estate, you should be aware of your legal rights and requirements. Understanding property deed types are not only critical in making the right decision for you and your family but is also necessary for a fair and lawful transaction.
Many new buyers or sellers, who have little experience with the legal system, are confused by the somewhat complicated specialized legal vocabulary. For example, a deed, much like a mortgage, is a legal document that is used to transfer the ownership of a property between two parties. Essentially, this legally binding contract protects the rights of involved individuals and maintains a record of the event. Many different types of deeds exist to accommodate for various situations, depending on the property and legal obligations that should be addressed. The validity of a deed depends on the state of residence; furthermore, you should pay special attention to your local statutes and regulations.
General Warranty Deeds
Real estate purchases are one of the most common property transactions. With the housing market in a recession, there are many properties associated with liens and other debts. Mortgage deeds of trust were designed to protect you, as a buyer, from purchasing a property jointed to additional debt. It acts as an assurance that a grantor is the lawful owner of the estate and has the right to sell the property.
Some people refer to this type of deed as a vesting deed, which may cause some confusion. In fact, vesting deeds are generally part of a warranty deed. During the payment or the vesting term, the seller holds total rights to the property, which includes the title and the ownership. A warranty deed guarantees the grantor has the right to sell the estate, and this property has a clean title, which assures the grantee that he will not encounter any challenges to his ownership.
After all, payments have been made, the title can be transferred to the buyer (deed of reconveyance). If the seller fails to fulfill his part of the contract, you have a legal right to take him to court. You are entitled to your money back as well as the reimbursement of your legal fees. Once you have completed your payments, you will receive a cancellation note in the mail indicating the closure of your loan. It is your responsibility to file the proper paperwork at the county clerk’s office. Recording this information is important because it notifies others about the transfer of property ownership, which further protects your rights.
Special Warranty Deeds
Used for commercial as well as some residential property transactions, a specialty warranty deed doesn’t offer as much protection for the buyer as the general warranty deed. Normally not accepted by a mortgage company, these deeds have a limited guarantee. You are promised that the grantor has the legal title for the property and there were no problems during the time of his ownership. However, a special warranty deed does not protect you from a possibility that your claim on the title will be questioned by another party.
Consequently, more experienced people invest in title insurance, which protects the realty purchaser from possible claims that may surface after payoff. If you are uncertain about your purchase or simply want to eliminate any surprises, title insurance is a great way to go. Prior to issuing the insurance, most companies conduct thorough research through public records and assess their risk of payout based on title defects. If a title insurance company is willing to ensure the property, it is likely you won’t have any problem with your purchase.
When transferring a real estate property within the family, without the involvement of money, a quitclaim deed should be used. This may be the case if the property owner gets married, or has children, and wants to include their names on the property title. Additionally, this type of contract may be used to exclude a potential new owner from filing a claim on a property. For example, a title insurance company may find an additional prospective owner for a property who they will ask to forfeit their rights to the property by signing a quitclaim deed.
It is important to note that a quitclaim deed only affects the ownership of a property and not the mortgage- a fact often neglected by a divorcing couple. A quitclaim may remove the spouse’s name from the home title; however, the responsibility for the property loan is still shared by the couple unless other paperwork is in place. This may affect the removed person’s borrowing capability and his position to purchase a new home.
The general rules for filing a quitclaim deed varies depending on the jurisdiction. Nevertheless, you will include the following information: description of the estate being transferred, names of the participating parties, and date. Although some states do not require a written quitclaim to be filed, it is prudent to draft a legal document nonetheless. You can do this in the presence of a notary, and record the agreement at the county clerk’s office to make it an public record.
Bargain and Sale Deeds
A bargain and sale deeds are types of deeds often used when the seller acquires a property that he knows little about. The grantor takes no responsibility for the estate or any legal problems you may have while obtaining a clean title. They imply but do not offer, a guarantee that the grantor actually holds the title to the property. No buyer protection is available under this deed; therefore, some complications may arise if another individual presents a claim to the same property. Generally, these deeds are used for tax sales and foreclosures on real estate properties.
Following the economic downturn, there was an increase in homes sold at auctions and trustee’s sales due to foreclosure. Consequently, bargain and sale deeds became one of the most commonly used property deed types in the country. Although this was an unfortunate event for many homeowners, it was an advantage for the buyers who paid a fraction of the cost for a relatively new home.
Typically used for real estate, numerous types of grant deeds are available depending on who is transferring the property, and where the transaction is taking place. As with the bargain and sale deed, little protection is offered for the buyer. However, generally, you can expect the following to be guaranteed under this deed: the property of interest has not been sold to another party, and all liens and other debts connected with the property have been disclosed to the buyer.
Components and validity of a grant deed varies state by state so make sure to check your local statutes for what deeds are permitted in your state. Although mostly not required, it is important to notarize the documents and file them with the property’s county courthouse. This notifies others of the legal transfer of ownership and protects your rights as a buyer.
Purchasing or selling real estate can be demanding and stressful. Many people have little knowledge of various property deed types. Property transfer differs from state to state, which adds another layer of complexity to this type of business. It may be beneficial to work with a real estate lawyer so you can be informed of your legal rights and responsibilities regarding the transaction. Many have found it helpful to hire an attorney prior to negotiations, which resulted in an overall straightforward and simple process for both parties.
A fiduciary deed is a type of deed typically used in the transfer of property and land. This is when the grantor is acting in his or her, official capacity as the trustee, conservator, guardian and/or executor for the estate. The fiduciary deed usually will only warrant that the fiduciary (trustee) is acting within her duly appointed capacity and within the scope of his/her authority. This doesn’t guarantee the title of the property. Note that Fiduciary deeds are usually governed by federal and state laws, which can vary by state to state and can provide exemptions from the transfer of taxes for fiduciary deeds.