To Deed or Not to Deed
You can “do” a good deed or “perform” brave deeds indeed, but when it comes to real property and real estate, there are many types of deeds and each one serves a different purpose.
The world of real estate is often confusing especially since the aftermath of the housing crisis. There are options for owner financing where a warranty deed is essential, transfer of property using a quit claim deed, and even a sheriff’s deed meaning you better watch out because the sheriff is coming and he holds the deed.
In reality, however, deeds and their uses don’t have to be confusing and here, I’ll offer up an explanation of the most common of these in plain English.
Generally, there are four categories deeds fall into, which are explained in the following sections.
In this category falls the general warranty deed and it’s the deed you want! This deed offers the most power and ownership and allows for conveying or assigning it to another party. If you possess a deed such as this for any real property, you can sell, assign or offer as a gift to heirs. As deeds go, this is the Queen Bee of Deeds. This deed can be used in owner financing transactions.
These include a variety of deeds including a covenant of seisin, which means the deed holder can offer warranties to another party and if the property is not in the condition the deed holder conveyed, the other party has court remedies.
A Covenant of quiet enjoyment is another deed covering such elements such as a covenant of warranty forever—guaranteeing the deed will stand forever as is, a covenant of further assurance meaning the holder of the deed, even if conveyed to another party, will repair any liens or encumbrances on the deed if requested.
Also in this category are special warranty, bargain and sale, and quit claim deeds. Don’t be deed stressed here! We’re only half-way through!
The special warranty deed is much as it sounds. The grantor can convey the deed to the grantee but in this sneaky little deed, the grantor ends his responsibility or doesn’t have to step up to the pump if the grantee finds errors or liens on the deed. This type of deed is attractive when properties are sold for delinquent taxes.
The bargain and sale deed is yes, just as you guessed—you’re getting a bargain—sort of like an ice cream sundae without the whipped cream. These deed are commonly used in foreclosures and well, you get what you pay for with no promises or responsibilities from the original owner of the deed.
Finally, in this category we have the popular quit claim deed. I love this deed, especially when one person or party holds single ownership of real property and wants to share and play nice with a new party—think of a single woman who married and wants her hubby on the deed. This transaction is possible but I recommend only using a person you trust.
For example, say the new wife wants to have the groom on the deed. She conveys the deed to a disinterested party who then conveys the deed back to the wife and new spouse.
These deeds are also popular if errors are found such as misspelled names. Further, the third party involved in the quit claim deed has no liability for any defects during the quit claim process. Yikes!
In the trust deed category, falls a general deed of trust, a trustee’s deed and a reconveyance deed. In trust deeds, three parties must be involved. The trustor, or the party creating the trust and the trustee, or the party who is set as the administrator of the deed, and the beneficiary, who is the lucky party who gains all the all the benefits of the trust holding the deed.
A deed of trust is often used when a mortgage isn’t needed and the trustee conveys the deed to the administrator to hold for the beneficiary. A deed of trust is also used to convey the deed from the trustee to the persons identified as beneficiaries.
Finally, a trustee’s deed skips in whole the big guy, the trustor and instead, the trustee can convey title directly to the trust’s beneficiaries and even an organization as a charitable gift. Families often use trust deeds to keep the property in the family.
There’s no doubt about it, no one wants to hear the words “court deeds.” These are deeds created by a court’s decision. For example, in a bankruptcy the court may appoint an administrator of a deed where the party is responsible for maintaining the property and keeping the property in trust until sale or disposal.
Master deed are also often court ordered or issued by zoning boards where the owner of the deed holds many types of deeds within a master plan.
Then we have the dreaded sheriff’s deed where if your home or real property is foreclosed upon, and the court issues this deed allowing the sheriff to engage in a sale to obtain the best price for the real property in a public auction.
I’m sure you are at this point and here, I’d like to warn there are many types of deed and ways to take title such as jointly, tenants in commons, etc. Because of these rules, I suggest to help you determine the type of deed you need to contact a Realtor, a real estate attorney or a tax professional to see how you want to take title and with what type of deed. Finally, not all deeds are allowed in every state so it’s best to consult a professional.
In any event, hopefully, these clear and easy to understand definitions will help you, especially if you find yourself lost in the land of deeds!
References and Resources
Author unknown, “What Are Property Deeds?,” Find Law, https://realestate.findlaw.com/buying-home/buying-home-process/home-buying-deeds-faq.html
Spaulding, William, “Types of Deeds,” This Matter, https://thismatter.com/money/real-estate/deed-types.htm
Bright Hub Helpful Resources:
Image Credits - All images from Sxc.hu under the Royalty Free License
Projectwell - Sxc.hu/loknathswa
Sign a Contract - Sxc.hu/shho
Gavel - Sxc.hu/creationc