What is a property deed? When you buy or sell a house, there is a mountain of paperwork involved. One important piece of the puzzle is the property deed, which is an important document that has to do with transferring ownership. Further, there are multiple types of property deeds to choose from, each of which serve different purposes for unique scenarios. This guide will go over what you need to know about property deeds, how they differ from property titles, and the different types of property deeds to choose from.
What is a property deed?
A property deed is a signed legal document that is used to transfer the ownership of real property. By using the property deed instrument, the current owner of a property can legally grant ownership of the property to a new owner.
This transaction is usually associated with the closing process during the sale of a property, but a deed can also be used when the house is being gifted to a new owner. Thus, property deeds are often an important aspect of estate planning when a Testator or Grantor decides to bequeath their home or other real property to a loved one.
When using a property deed, the person selling or gifting the property is called “the grantor.” The person receiving the property ownership through a purchase or gift is “the grantee.” Property deeds are also often called house deeds since they are often used when transferring ownership of homes. However, they can be used to transfer ownership of any type of real property, such as land.
What do property deeds include?
There is no uniform template or format required of property deeds, so any documents that you come across may have some variations. Further, the requirements vary from state to state. We’re going to share some examples of what property deeds generally must include, but be sure to double-check the requirements of the specific state you live in. Making sure the property deed you have is valid where you live is the most important piece.
Here are some common types of information that property deeds generally include:
Identifying and Contact Information: Both the seller (grantor) and the buyer (grantee) list their full legal names and addresses of residence to enable further contact.
Property Description: The deed should include a legal description of the property. This usually entails the exact property boundaries that use common landmarks such as roads or sewer lines for reference.
Grantee Signature: The grantee must leave no doubt as to their identity by signing their full legal name. The signature must match the legal name listed in the rest of the documentation used throughout the deed.
Granting Clause: The deed should include a granting clause or words of conveyance. The clause transfers the ownership from the grantor to the grantee. It also lays out the grantee’s rights in case other parties have claim to the property.
Consideration Clause: A deed typically contains a consideration clause, which states that the grantor has received something in exchange for the property. If this is money, which is customary, then the amount paid would be listed. If instead the property was gifted, the deed could include a phrase such as “for love and affection.”
Note that other information to be included in the deed depends on state requirements and the type of property in question. For instance, one deed might include a list of special conditions. Another deed might include a more detailed property description if the property is a part of a subdivision.
Property deed vs. title: what’s the difference?
When it comes to establishing real estate ownership, you’ll often hear two words used interchangeably: property deed and property title.
These are both legal concepts that relate to your ownership of a property. When you own a property, you own both the property deed and title to that particular property. The property deed is the physical legal document that transfers ownership and proves who the legal owner of the property is. It holds critical information about the property, such as who the house was bought from, and who it was sold to.
In contrast, property title is a concept. There is no such thing as a physical title document. “Holding title” is a real estate jargon that means that you own a property and have the right to use and sell it.
Who holds the deeds to a property?
Property deeds can be found in several places. First and foremost, a great place to check is with your local county clerk or records office (where the property is located.) Property owner and property tax information is public, so you’ll be able to request this information from your local government.
If the property has an active mortgage on it, then the mortgage lender usually holds the property deed until the loan is paid off. Once the house is owned free-and-clear, the property deed is held by the owner. Last but not least, a real estate attorney or title company records the deed and issues it to the buyer if they are purchasing a home without a mortgage.
Types of property deeds
There are several different types of property deeds that offer different degrees of protection. Some deeds benefit the grantee more than the grantor, and vice versa, so be careful to select the best type of deed based on your role in the transaction. Below we explore several common types of property deeds.
Warranty deed: special & general
One type of property deed is a warranty deed, and there are general ones and special ones.
If you’re a grantee (the person purchasing property), a general warranty deed will give you the highest level of protection. Using this type of deed, the grantor makes covenants, which is a set of legally-binding promises. These warranties are agreeing to protect you, the grantee, from any claims or demands of any parties in regards to the property. These claims can stem from any time, even before the grantor held title to the property. The grantor promises to defend the title against any such claims if they come up.
A special warranty deed offers slightly less protection to the grantee. It works very similarly to a general warranty deed. However, this time, the grantor is only warranting against defects that could arise from their timeline of ownership. It does not protect the grantee from claims made against defects that could have occurred any time outside of the grantor’s ownership of the property.
Thus, most homebuyers should aim to demand a general warranty deed whenever possible. Read our guide on warranty deeds for more information.
A quitclaim deed, sometimes called a non-warranty deed, offers the least amount of protection to the grantee. Quitclaim deeds convey whatever interest a grantor has in the property, which could be zero in some cases. Warranties or promises regarding the integrity of the title are not made.
In a best case scenario, the grantor has a good title and the quitclaim deed is just as effective as a general warranty deed. However, the grantee has no legal protection if it turns out that there’s a problem with the title.
This type of deed is often used when the grantor isn’t sure if the title holds any defects, or they don’t want to have any liability. We often see quitclaim deeds used when there are multiple owners to a property, or when a grantor is gifting their property interest to another party. Our quitclaim deed guide explains the advantages and disadvantages as well as possible uses.
Special purpose deed
Special purpose deeds are often used as a part of court proceedings when judgment is involved, or the property deed is coming from a party acting in an official capacity. Typically, we see that special purpose deeds provide minimal protections for the grantee, not dissimilar to quitclaim deeds.
Here are some examples of special purpose deeds:
Administrator deed: When a person dies without a will (intestate), the administrator appointed by the court will use an administrator’s deed to dispose of the deceased person’s assets.
Executor deed: When a person dies with a Will, their appointed Executor is often authorized to dispose of the deceased person’s assets using an executor’s deed.
Sheriff deed: An execution sale will sometimes be held to satisfy a judgment against a property owner. The grantee, a successful bidder from the sale, receives the property title through a sheriff’s deed.
Tax deed: Tax deeds are issued when a property is sold due to tax delinquency.
Deed in lieu of foreclosure: This special type of deed can be used by a borrower who is underwater on their mortgage. If the lender accepts this deed, they will terminate the mortgage loan instead of foreclosing upon the home. This is rare, as most lenders prefer to foreclose on a property and clean up the title.
Gift deed: Last but not least, you can use a gift deed if you don’t need any consideration on a property and are purely gifting it. This is commonly used when a parent wants to gift a property to a child, etc.
Make sure property deeds are a part of your estate plan
A property deed is an essential legal instrument that is used to transfer property ownership from one party to another. It is also used as proof of ownership. It is not to be confused with property title, which is a conceptual word that describes property ownership but is not an actual document.
There are several different types of deeds that homeowners can use to transfer property ownership. Different deeds offer varying levels of protection to either the grantor or grantee, and are thus selected based on the circumstances.
Property deeds are also an essential aspect of a property owner’s estate plan. When planning for your eventual passing, you must plan ahead on how you plan to transfer ownership. Even if you state that you want to bequeath your house to your child in your Will, for instance, that doesn’t necessarily address how. It is a good idea to pre-select the type of deed that will be used to transfer that property and make the necessary arrangements. Be sure to create or update your estate plan to include your property transfer plan. Trust & Will can help; we offer many estate plan options fit for any homeowner! Take our free quiz to see where you should get started, or compare our different estate planning options today!
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