Home purchases typically represent the most significant investment people will make in their lifetime. Therefore, it is important to consult a knowledgeable real estate attorney to help protect your interests in the purchase process. It is equally important to consult an attorney if you selling a property. One of the services real estate attorneys provide clients involved in real estate transactions is determining for the client which type of deed should be used to convey title of the real estate. Surprisingly, we often find that our clients have selected the wrong deed form.
WHAT IS A DEED?
Deeds are legal documents that transfer ownership (“title”) of real estate interests from one party to another. Deeds are generally short and non-complex documents, but encompass the entire purpose of the transfer of real property. Therefore, the deed is an essential component of every real estate purchase. In a deed, the party selling or conveying the property is generally referred to as the “grantor.” The party purchasing or acquiring the property is generally referred to as the “grantee.” A deed also provides (or excludes) certain guarantees and promises (“warranties”) from the grantor regarding title to the real estate. The type of deed most desirable will depend on whether the party to the transaction is the grantor or grantee and the nature of the transfer.
TYPES OF DEEDS
This article will focus on the following three types of deeds used to transfer real property:
- General Warranty Deeds
- Special or Limited Warranty Deeds
- Quitclaim Deeds
General Warranty Deed – A general warranty deed offers the buyer the most protection, because a general warranty provides the greatest guarantees and warranties by the grantor to the grantee. While not an exclusive list, the grantor guarantees the following in a general warranty deed:
- Covenant of Seisin: That the grantor owns the real estate and has the right to transfer ownership.
- Covenant to convey free from encumbrances: That the property is free of any liens or encumbrances unless otherwise stated within the deed.
- Covenant to defend title: That the grantor will defend title against claims of any third party, and if title is discovered to be defective, the grantor will remedy the defect, or compensate grantee for the resulting damages.
Special or Limited Warranty Deed – A special or limited warranty deed offers the buyer limited or conditional protection. A special or limited warranty deed ensures the same guarantees as a general warranty deed, but those guarantees are restricted to the time period during which the grantor held title to the real estate. Therefore, a special or limited warranty deed does not protect against potential defects that existed before the grantor’s ownership.
Quitclaim Deed (Non-Warranty Deed) – A quitclaim deed does not offer the buyer any warranties. A quitclaim deed only transfers to the grantee whatever interests, if any, the grantor has in the property. However, the grantor makes zero warranties that the grantor actually owns any interests in the real estate.
CHOOSING THE RIGHT DEED
It is very common for non-lawyers to select the wrong type of deed. For example, a typical mistake is for homeowners to use a quitclaim deed when adding a spouse to the title. Using a quitclaim deed in this situation could have unforeseen consequences and could negatively impact your title insurance coverage. If you are involved in a real estate transaction, the attorneys at Griffith Xidas Law Group recommend you to consult with a knowledgeable real estate attorney. A brief consultation with an experienced real estate attorney is a very practical means to ensure your interests are best protected.
Guest article by Chad Rollins, Esq., Rollins Law Group LLC