Buying a home seems simple: you find a property you like, make an offer, and move in. While that may cover the broad strokes, owning a property involves a lot more legwork and legal paperwork, including a deed.
What is a deed?
A deed is one of the most important pieces of the homeownership puzzle. “Every transfer of real property is done through the recording of a deed,” says Stephen L. Pryor, an attorney with the Ohio-based firm, Katz, Pryor & DiCuccio, LLP. A deed is a physical, legal document between a seller and buyer, illustrating the transfer of ownership from one party to another.
The particulars of property deeds vary by state law, but according to J.R. Skrabanek, Senior Counsel with Jones Law Firm in New York City, there are a few common components you can expect to find in a valid document:
- Identification. The document must identify itself as a deed.
- A grantor (seller) and grantee (buyer). The deed must identify the buyers and sellers by name and address, and a notary or other qualified party must witness their signatures.
- A legal description. The deed must accurately describe the property being transferred.
Deed vs. title
The difference between a deed and title isn’t always obvious, and many people use the terms interchangeably. That said, understanding their nuances is crucial. “A deed is the physical document that identifies ownership, whereas ‘title’ is merely the concept of ownership,” Skrabanek said. In simpler terms, a deed is the legal document that transfers property ownership from a seller to a buyer, and is recorded in a courthouse or assessor’s office. A property title, rather than being a single document, is the chronological history of ownership. So, if your title represents ownership, your deed is the legal proof that supports it.
Types of deeds
Just as there are different types of property (and ownership), there are different kinds of deeds, including:
General warranty deed
“The most common type of deed is a general warranty deed,” Pryor said. This type of deed offers the greatest level of security for buyers because it guarantees property warranties from the seller. These warranties include confirmation that the seller owns the property and has a right to transfer ownership to a buyer. It also verifies that the home has no outstanding debts or liens attached to it that could affect the buyers’ finances once they take ownership. Standard insurance also provides an added level of security with general warranty deeds.
“Title insurance is generally purchased to ensure the enforcement of protections afforded within a general warranty deed,” Pryor said. “All purchasers are generally recommended to obtain a title insurance policy when purchasing real estate.”
Special warranty deed
“A special warranty deed conveys some, but not all available interests in real property,” Pryor said. Like a general warranty deed, a special warranty deed guarantees that the seller currently owns the property and there have been no liens or debts attached during their stewardship. However, the warranty does not guarantee that debts and liens didn’t exist before the seller owned the property. “Foreclosure actions are a common use of special warranty deeds,” Pryor said.
For example, suppose you’re interested in buying a bank-owned home. The bank issuing a special warranty deed is responsible for any title-related issues, fees and debts during their ownership, but they aren’t liable for debts and other issues attached to the property by the previous owners. As a new owner, a long-lost utility bill or other unpaid debt could land on your doorstep with a special warranty deed.
A quitclaim deed deals in hypotheticals and offers even less protection than a special warranty deed. “A quitclaim deed is a transfer of all of a seller’s ownership interests in a property, but with no guarantees or warranties as to what the seller is actually conveying,” Pryor said. In other words, a quitclaim deed doesn’t guarantee that a seller owns the property or that it doesn’t have attached debts or liens.
This deed is most commonly used by existing owners who know the status of the property and wish to surrender it, i.e., “quit” their “claim.” An example of this might be a spouse who has agreed to give up their interest in a home during divorce proceedings, thereby removing themselves from the deed and the mortgage.
An agreement is as good as the paper it’s written on, and there’s no substitute for professional expertise to help you during the process. “Serious buyers and sellers should consult with a trusted attorney or real estate professional to assist them with the various intricacies of deeds,” Skrabanek said. It’s important to know what you’re buying.