Put simply, a property deed is a legal document that transfers ownership of real estate. A common use of a deed is in the sale of a home, when a buyer takes over ownership of a property. In this instance, a property deed is one of the required documents to close the sale.
However, a straightforward sale may not be the only time you need a deed—there are many different types of property deeds for different situations, and it can be difficult to understand which one you need for your particular circumstance. In fact, whenever you are a party in a real estate transaction (such as a buyer or a seller), it’s best to work with a real estate attorney.
But if you’re contemplating buying, selling, or transferring property, this post offers some simple definitions and common scenarios where you might use each type of deed, namely:
- A Warranty Deed
- A Quitclaim Deed
- A Deed of Trust with a Deed of Reconveyance
- A Contract for Deed
- A Survivorship Deed
Is Title the Same as a Deed?
You may hear these terms used interchangeably, but while they refer to similar concepts, they do not mean the same thing. Title refers to your right to use, transfer, or sell the property, while a deed is a legal document that transfers the title from one person (the grantor) to another (the grantee). In other words, your deed to a property is the document that gives you title, or the rights to the property.
What is a Warranty Deed?
A Warranty Deed transfers title from a seller to a buyer while guaranteeing that the title is free and clear, meaning there are no liens or other encumbrances that override the seller’s right to sell or transfer the property. If there are any encumbrances, they must be explicitly outlined in the deed.
Note: An encumbrance is any sort of claim that limits the owner from exercising full control over the property, for example, zoning laws preventing certain uses of the land, or a lien giving a creditor the right to seize the property for an unpaid debt. You cannot sell property under lien until the lien is satisfied (for instance, the debt is repaid).
When Should I Use a Warranty Deed?
A Warranty Deed is used in most residential home sales between unrelated parties because it offers more protection for the buyer than a Quitclaim Deed. With a Warranty Deed, the seller is responsible for any title issues that arise. In addition, title insurance is generally available for purchase, which protects the buyer from having to take action against the seller if any title issues do appear at a later date, such as unpaid taxes.
There are two types of a Warranty Deeds: special and general. A Special Warranty Deed only guarantees no liens or encumbrances occurred during the seller’s period of ownership, so buyers may want to insist on a General Warranty Deed. In this type of deed, the seller guarantees that no encumbrances (such as a lien placed on the home due to a series of unpaid bills) exist at all and agrees to take responsibility should any prior claims or liens be found at a later date.
What is a Quitclaim Deed?
As mentioned above, a Quitclaim Deed (not, as some believe, a quick claim deed) offers less protection than a Warranty Deed.
A Quitclaim Deed is typically used when property is transferred rather than sold, and does not guarantee that the grantor has full ownership rights, meaning there may be liens or other claims to the property that prevent clear and complete title.
Who Should Use a Quitclaim Deed?
Because the grantor is not guaranteeing the title is clear, insurance companies generally won’t accept the risk associated with a Quitclaim Deed, meaning title insurance typically can’t be purchased (in contrast to a Warranty Deed). As a result, a Quitclaim Deed is often used between individuals who already know and trust each other.
Common uses of this deed include:
- Adding a spouse’s name to the title after marriage
- Removing a spouse’s name from the title after a divorce
- Transferring property title to children or other family members
What is a Deed of Trust?
A Deed of Trust, used in some states instead of a Mortgage Agreement, does not transfer full title rights to the buyer (the borrower) right away. Rather, it is used to secure a loan from a beneficiary (or lender) to purchase real estate. A trust deed works by temporarily transferring the property title from the seller to a trustee, who is neutral third party like a title company, until the borrower pays off their loan to the beneficiary.
Should the borrower default on the loan, the trustee is responsible for selling the property to satisfy the debt. But if the debt is repaid, the title is then transferred from the trustee to the borrower using a Deed of Reconveyance.
Pro Tip: A Deed of Reconveyance must be notarized (and in some states witnessed) and filed with the county recorder to satisfy the debt and remove the lien on the property.
Should I Use a Deed of Trust or a Mortgage Agreement?
Unlike a Deed of Trust, there are only two parties in a Mortgage Agreement: the borrower, who is purchasing property, and the lender, who creates a lien on the property to guarantee the loan.
Whether you use a Deed of Trust or a Mortgage Agreement depends on your location, with some states allowing the use of both documents. You can contact an attorney or county recorder to determine which one is required or more commonly used in your state.
Should I Use a Deed of Reconveyance or a Satisfaction of Mortgage?
Like a Deed of Trust and Mortgage Agreement, whether you use a Deed of Reconveyance or a Satisfaction of Mortgage depends on your location. If you know your state uses Deeds of Trust, then it will also use a Deeds of Reconveyance. States that use a Mortgage Agreement use a Satisfaction of Mortgage.
What is a Contract for Deed?
A Contract for Deed is used for private property sales. Like a Deed of Trust, title is not transferred to the buyer right away. But unlike a Deed of Trust, this contract is only made between two parties: the buyer and the seller. The buyer takes possession of the property but makes regular loan payments to the seller, who keeps the official property title until the loan is paid off.
Who Should Use a Contract for Deed?
A Contract for Deed is a common option for seller-financed sales. In situations where a buyer doesn’t qualify for mortgage financing (maybe due to a past bankruptcy or poor credit), the seller may be willing to conduct a private sale. The terms of the contract, such as length and interest rate, can be negotiated between the buyer and seller.
What is a Survivorship Deed?
The last type of property deed we will cover in this post is a Survivorship Deed, which transfers full ownership rights from one owner (the grantor) to another owner (or grantee) when the grantor passes away. For it to work, the owners must first be joint tenants, meaning they have equal rights to the property. This is usually the case with spouses.
When Should I Use a Survivorship Deed?
If you want someone to have full ownership rights to your property immediately after you pass away, avoiding the lengthy process of probate, then you should create a Survivorship Deed. For that reason, the most common use of this deed is between spouses who share a residence. You might also create a Survivorship Deed if you want your property to pass directly to your children after your death, without the need for a Last Will or Living Trust.
All About Deeds
When buying, selling, or transferring a property, it’s important to use the correct type of document, particularly if title transfer is deferred until the buyer pays off their loan. If you’re planning to sell or transfer property it may be worth speaking with an attorney to ensure you create the right document and fulfill all the steps necessary to create a legal property deed.
