A Look at Real Estate Title Deeds
A property deed is a document that authorizes the transfer of ownership of real estate. There are different types of property deeds to employ in different situations. It can be challenging to know which deed type you require in your particular circumstance. When you are a party in a real estate transaction, either as a buyer or seller, it is best to work with a real estate attorney to protect your interests.
While you may often hear the terms deed and title used interchangeably, they do not mean the same, even though they refer to similar concepts. A title is a document referring to your right to use, sell or transfer property. A deed is a legal document transferring the title from one individual (the grantor) to another (the grantee). In essence, your deed to a property is the document giving you title or rights to the property.
Some of the more common deeds include but are not limited to:
This deed transfers title from the seller to the buyer and guarantees the title to be free and clear, meaning no liens or encumbrances override the seller’s right to transfer or sell the property. If any encumbrance exists, the deed must explicitly outline them. Encumbrances can include zoning laws that prevent specific land use or a lien giving a creditor the right to seize the property if there is an outstanding debt. You cannot legally sell a property under a lien; the lien must be satisfied.
In most residential home sales, you use a warranty deed between unrelated parties as it offers better protection for the buyer than a quitclaim deed. The seller is responsible for whatever title issue may arise, and title insurance is generally available for purchase, protecting the buyer from taking legal action against the seller if title issues arise later, such as unpaid taxes. There are two types of warranty deeds:
- A Special Warranty Deed guarantees no liens or encumbrances during the seller’s ownership.
- A General Warranty Deed means the seller will guarantee no encumbrances exist at all and will assume responsibility if any prior claims or liens appear at a later date.
This deed is similar to a warranty deed but only contains two guarantees. One guarantee is the grantor states the property has not been sold to anyone else, and secondly, the property has no encumbrances other than the ones a seller discloses.
In this situation, the grantor is not guaranteeing the title is clear, and most insurance companies will not accept the risk associated with this deed type. Quitclaim deeds are typically between parties who already know and trust one another. Common uses for this deed type include:
- Adding a spouse’s name to a title after marriage
- Removing a spouse’s name to a title after a divorce
- Transferring property title to a spouse, children, or other family members
Those individuals using a quitclaim in a divorce take heed as this deed only changes title to the property but not the responsibility for its mortgage. A party might find themselves still responsible for a home loan if a payment default on the property occurs. To avoid this, divorcees must precisely remove themselves from any mortgage associated with the property.
There are many other types of deeds such as a deed of trust with a deed of reconveyance, a contract deed, a survivorship deed, a deed of trust, a deed instead of foreclosure, and a tax deed, to name a few. Deeds not in writing, notarized, and entered into the public record may be open to legal challenges and delays. Knowing which deed suits your needs is best handled by your real estate attorney, ensuring a smooth transaction that meets your expectations. Contact our Chicago area office at 630-568-6656 to discuss how we can help you with any legal questions you may have.