Having a property deed to your own home is crucial. It’s the single most important document that shows that you hold legal ownership of your house. This also means that you are entitled to sell, gift, or transfer your home to another party.
However, what many people don’t know is that there are actually several types of deeds used in the U.S.; most say that there are up to 6 different types. If you haven’t reviewed your deed in a while, or are in the process of obtaining a deed, then now is the perfect time to know your options. Here, we reveal the different types of deeds that you should know about.
What Are Property Deeds?
Property deeds are useful legal tools that transfer the ownership of real property from one party to another. For example, when a homeowner sells their home to a buyer, they would use a deed to do so.
To be clear, the deed does not represent ownership in itself. Ownership interest in a house is called ‘title,’ and a deed is the legal vehicle used to transfer that title, or ownership, between parties. Regardless, the deed is the legal document used to prove title. The parties named on a deed can be individuals, groups of individuals, companies, and even estate planning instruments such as a Trust.
For the purpose of this article, and for the sake of simplicity, we will assume that the two parties are individuals. One party is the grantor, or the person who currently owns the property. The second party is the grantee, or the person who is set to acquire or receive the property. Finally, let’s assume that the real property in question is a traditional home sitting on a lot of land.
In order for a deed to be legal, it has to include the full legal name of both the grantor and the grantee, the property lot number, a legal description of the property, and the signature of the grantor.
Further, a deed can be further broken down into classifications, which we’ll explain next.
Types of Property Deeds
There are several different types of property deeds that can be used in the transfer of real estate. Each type of deed offers different levels of protection, and are often used in different scenarios. The three most common types of deeds are:
Grant Deeds
Quitclaim Deed
Warranty Deed
Grant Deeds
A grant deed is one of several types of deeds that are used to transfer ownership of property. A grant deed is used as written proof that the property title is owned free and clear. That means that it does not have any claims or liens on it, such as the new owner of the property will also have the full legal right to sell or transfer that property. The grantor is also promising that the property hasn’t already been sold to anyone else.
Not all states use grant deeds. Typically, a state will commonly use a grant deed instead of a warranty deed, or vice versa. If you’re not sure which type of deed is often used in your state, check with your county recorder’s office.
When submitting a grant deed, you must provide your signature and you also often have to have the document notarized. When filing your grant deed, you may also be required to submit additional documents, such as a Preliminary Change of Ownership Report.
Quitclaim Deeds
Quitclaim deeds are deeds that are typically used only when the transfer of real estate doesn’t involve any money. This is because a quitclaim deed offers the lowest level of protection.
When writing a quitclaim deed, the grantor isn’t offering any protection or warranty to the grantee. They are not guaranteeing that the property title is free and clear, and they are not guaranteeing that they have full interest in the property. For instance, if they only own half of the property, then they are only signing over half of the property’s interest. They are merely “quitting their claim” on the property.
Quitclaim deeds are often used in scenarios such as transferring a property into a Trust or an LLC, removing oneself from title when going through a divorce, or gifting a property to a loved one. Because there is no monetary transaction involved, the warranties are not necessary.
If you are involved in an arms'-length real estate transaction, such as buying a house from a seller who you don't know, do not use a quitclaim deed. You would absolutely want to opt for an option that offers protection. To learn more about quitclaim deeds, click here.
Warranty Deeds
Warranty deeds offer the highest-possible level of protection for buyers. If you are buying a home, then you will certainly want to push for a warranty deed when possible. However, they are not widely-used in some states, which is why some buyers end up with a grant deed instead.
A warranty deed offers the same promises as a grant deed, and then some. The owner of a property is guaranteeing that they have the full right to sell and transfer the property, and that the property is clear of any present or future claims, such as liens and taxes. On top of that, they are agreeing to be held personally liable for any third-party claims, even after the real estate transaction has been finalized.
This means that if anything goes awry, the grantor can be sued. If the grantor is found responsible, the court will typically award the grantee the monetary difference between the property if it had been owned free and clear versus the value of the property with claims on it.
Other Deeds
So far, we discussed the three most common types of deeds: grant deeds, quitclaim deeds, and warranty deeds. These are the deeds that you’re most likely to encounter when buying or selling a house, or incorporating your house in your estate plan.
However, there are some other types of deeds out there. Here are these other types of deeds:
Deed of Trust
Bargain and sale deed
Mortgage deed
A deed of Trust is specifically used to transfer title of a house out of a Trust and to the beneficiary of the Trust. Deeds of Trust are often used instead of a mortgage. The trustee will typically hold the property until the trustor has paid off the debt. Once the debt has been paid off, the trustee will keep title to the property, but the trustor will retain equity and can legally use the property as their own. The trustee can sell the property if the trustor defaults on their loan.
A bargain and sale deed is similar to a quitclaim deed in that it offers as little protection as possible. It does not offer any guarantee regarding debts or liens. Instead, it merely states that the grantor is the title holder.
Last but not least is the mortgage deed. It’s a legal document signed between a homeowner and the lender. The deed states that if the mortgage isn’t paid, then that lender has the right to put a lien on the property. This type of deed uses property as collateral for a loan.
Create Your Property Ownership Deed Today
Now that you know the different types of deeds. The three most common deeds used for real estate transactions are: warranty deeds, quitclaim deeds, and grant deeds. Don’t forget that we provided links to additional resources in each respective section if you’d like to learn more about these deeds and the differences between them.
You also learned that there are mortgage deeds, bargain and sale deeds, and deeds of Trust.
The key takeaway between all of these deeds is that they are legal documents in which someone is held liable. It’s in your power to mind your due diligence and research which each of these documents could mean for you, and opt for the choice that provides you with the highest level of protection.
Now that you have an understanding of different types of deeds, you can move forward and make sure you continue to hold proper title to your properties. Deeds are a critical aspect of managing assets for your estate plan, and can even be used to transfer property ownership into your Trust. To learn more and get the help you need, click here. Trust & Will offers many solutions to meet your unique needs.
Here at Trust & Will, we’re here to help you keep things simple. You can create a fully customizable, state-specific Estate Plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning options today!
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