Deeds are legal documents that, when signed, transfer real property from the owner to the buyer. In almost every deed, the seller is referred to as the grantor and the buyer as the grantee. Deeds work in tandem with the title.
Just a quick refresher, titles allow homeowners to live and use the property as they see fit. Each property gets one title, and the names of owners change as it is bought, sold, or passed through wills from family member to family member.
For a clear title to hold as much weight, it needs a deed. If the title is the documentation required to confirm owners can access, own, and modify the home, the deed is the vehicle initiating the transfer. The deeds are written according to the Statute of Frauds.
The Basic Components of Deeds
Before we break down the different deeds, it’s worth looking at the requirements each one would need to become legally valid.
- For the deed to be valid, it needs to be in writing. There are no regulations on how long the document needs to be just as long as it includes information to make sure the property transfers correctly.
- The seller of the property, or the grantor, needs to be in sound mind when signing the document.
- The deed needs to have an adequate description of the property and structure. Misrepresentation has the potential to be problematic if ever challenged for ownership in the future.
- Ensure it’s written in legal language.
- All parties which are listed must sign the deed for it to be true.
- Finally, the deed must be legally delivered and accepted by the buyer.
The Different Types of Deeds for a Home
The law is designed to protect buyers and sellers and to ensure both parties are getting the most out of their investment. That being said, a few different deeds are available to customize the purchase and offer each party the right amount of protection.
General Warranty Deeds
Maybe one of the most common homebuyers will come across the general warranty deed is popular because it is comprehensive and offers the most security. Why is it so popular? The general warranty deed is a binding promise where the seller is saying that they will protect the buyer if their right of ownership was challenged. This support transcends time. That means if a lien is produced from 20 years back and the current seller wasn’t the legal owner of the property at that time, they would still assume responsibility.
If the general warranty deed is the most protection a buyer can get, the quitclaim is on the opposite side of the spectrum. This deed discusses only the interest of the seller and whatever claims they have on the property at the time. The seller has the right to say in this document that if any issues were to arise later that they aren’t legally responsible. It’s just as effective at confirming legal ownership. However, the buyer could not pursue any legal recourse, and the quitclaim excuses them from liability.
Special Warranty Deeds
So, let’s circle back to the general warranty deed. If deeds offer a spectrum of protection, the special warranty falls in the middle. The general warranty states that the seller will protect the buyer from any issues that happened regardless of when the defect took place. The special warranty falls in the middle because the seller is only assuming responsibility for the time they were entitled to and owned the property in question.
Deeds of Trust
Deed of trust involves three parties: the lender, borrower, and seller. Deed of trust is issued when the buyer uses a mortgage lender to purchase a home. This deed accompanies a promissory note. The promissory note comes from the lender and is a document the buyer signs saying they promise to pay back the loan in the terms outlined. The deed of trust comes into play if/when the borrower fails to meet these guidelines. Deed of trust almost always includes language allowing the lender power of sale or the right to foreclosure.
Bargain and Sale Deeds
Bargain and sale deeds are commonplace when the property being sold is bought in foreclosure. It doesn’t come with warranties for the buyer, which means if the property doesn’t have a good title, it would be the responsibility of the buyer to assume liens and unpaid taxes. In some situations, it could also mean that the buyer doesn’t have the option to obtain a refund for the purchase.
What a Title Company Can Do
A title company, like Hyde Park Title & Escrow, can help you throughout the process, starting with a comprehensive title search. By reviewing documents and additional information attached to the property, it provides buyers an overview of any details that could potentially threaten ownership down the line. Additionally, title companies provide title insurance that protects the investment in the event financial assistance is needed to defend your property against defects that are out of your control.
Hyde Park Title & Escrow offers buyers and sellers in the Middle Tennessee area with a range of title and closing services. Contact us today to learn more.