Understanding real estate property deeds may not sound fun, but it’s an important step in the home buying process. Why? Every piece of real estate in the United States is tracked or recorded, and that recording is public record. Having a property deed in your name shows you hold legal ownership, and that comes with protections — though the level of protection can vary based on the type of deed you choose.
Let’s take a look at what property deeds are, what options you have, and how you’re protected as a homeowner.
What is the deed to a house?
A house deed is a written document showing who owns the property. It legally indicates the transfer of the original property owner to you, the new property owner.
What most homeowners do not know — there are many types of deeds, and their levels of protection vary. Before getting into that explanation, though, let’s take a step back and compare a deed with a title.
Defining a deed vs. title
If a deed is the document outlining who the property owner is, then what is the title? Great question. Most people think the title is the legal form when actually the title is more of a concept — it’s the legal way of “saying” who is the property owner. In real estate language, when buying a home, you are getting a deed and taking the title of the new property. This happens through a title search, to ensure there are no liens against the home before you take on ownership.
Title searches are required for refinancing also. Learn more about title search and title insurance.
Five most common types of deeds
Property ownership is transferred from the seller to the buyer with certain guarantees against future claims or problems. These guarantees live in the form of written deeds, and they can include:
General warranty deed
This guarantees the buyer over the property’s entire history, meaning it covers acts taken by all previous owners on the title. It’s the type of deed that offers the most buyer protection. When committing to a general warranty deed, the seller is promising there are no liens against the property, and if there were, the seller would compensate the buyer for those claims. Mainly for this reason, general warranty deeds are the most commonly used type of deed in real estate sales.
Special warranty deed
Though it sounds better than a general warranty — thanks to the use of the word “special” — it really isn’t. Also known as a grant deed, the special warranty deed only covers the period of time for which the seller owned the property. So the seller is only responsible for debts and problems accrued during his time of ownership, meaning you’re receiving less protection against potential title defects. Special warranty deeds are typically used when purchasing commercial property.
Related: Can I takeover an existing mortgage?
Quitclaim deed
Unlike warranty property deeds, a quitclaim deed contains no title covenant. It’s just a simple transfer of names on the title. This means you have no warranty on the status of the property title. If there are any liens on the property, you would be held liable.
The most common use of a quitclaim deed is during a divorce, so one person’s name can be removed from the title. It’s generally a fast process, so it sounds like the best solution during divorce. However, it does not remove you from the mortgage or the responsibility to make payments. If you’re leaning toward using a quitclaim deed, it’s in your best interest to conduct extensive research before signing anything and consider hiring a real estate attorney.
Bargain and sale
If you’re looking to transfer property to a family member or move it into a trust, you’ll likely use a bargain and sale deed. You can also use this type of deed when purchasing a property at a foreclosure sale. The validity of the title is not guaranteed. It is only implied that the grantor (or seller) has the right to transfer the title. It’s also important to know title insurance policy coverage may not be conveyed with a bargain and sale deed, which could leave you exposed to potential claims from third parties.
Fun fact: bargain and sale deeds are most commonly used in Colorado, New York, Vermont, Washington, and Wyoming.
Special Purpose Deed
Special purpose deeds are frequently used in connection with court proceedings or court orders. They’re essentially quitclaim deeds for people acting in some official capacity.
These types of deeds include:
sheriff’s deed - given to the successful bidder at an execution sale
tax deed - when a property is sold for delinquent taxes
executor’s deed - when someone passes away but has a will
Administrator’s deed - when someone passes away but does not have a will
Deed recording fee
When transferring property, you don’t just hand over a signed real estate deed. There are, of course, costs involved. These fees vary at the state, even county, level. They also depend on the type and complexity of the real estate transaction.
Recording fees cover the clerk’s service costs, such as when title searches are conducted. According to Investopedia, the deed recording fee might be $12 in one county and then $15 in another. Some agencies even charge by the size of the document. For example, you could be looking at $84 for the first page and then $1 for each subsequent page. Fees may also change over time as the agency and county deem necessary.
How does the property deed differ from a deed of trust?
Your property deed is not to be confused with your deed of trust, which is a legal document that secures your loan. While the property deed conveys ownership, the deed of trust does not. The holder of the deed of trust is an accredited third party who holds the property until the loan is repaid.
There are no choices involved or different types of deeds of trust. It’s just an instrument that identifies the parties involved, the original loan amount being financed, and mortgage requirements. It also gives your lender the right to foreclose if you default on payments.
Which deed is best for a home buyer?
When buying a home, you’ll need to ensure the property has title insurance coverage. Just don’t get too caught up in the excitement of homeownership that you forget to do your research on types of deeds and warranty options. Make sure to consult with your title company and a real estate attorney to ensure your property is best protected.
