Everyone knows that when you buy real estate, you receive a deed to the property.The basics of any deed include several items. Deeds have the names and addresses of the seller and the buyer, an identification of the property being transferred, and a statement of the price paid by the buyer to the seller for the property. The seller must sign the deed before a notary. The deed must then be recorded in the county recording office in order to be effective notice to the world that the buyer is the new owner of the property.
A deed may contain other information such as the tax map lot and block numbers, a recital of the details of the deed that the seller received, a metes and bounds description of the property, and references to filed maps.
The best form of deed is a warranty deed. In it, the seller warrants the buyer’s title, and this may extend to later owners of the property. That means that after transfer, if anyone challenges the buyer’s title, the seller must defend that title. Warranty deeds were very common many years ago, but not at all today.
The next strongest deed is a ‘bargain and sale deed’ with covenants against grantors acts.
This means that the seller promises in the deed that the seller has not done anything to encumber the property, i.e. the seller has not allowed anyone else to obtain any legal rights which affect the property, such as by making a mortgage or allowing a judgment to be entered against the seller. This is the most common deed used today in residential real estate transactions.
A variation is a bargain and sale deed without covenants against grantors acts, where the seller is transferring the title to the buyer but without the promises about encumbering the property. This deed is also not too common.
The weakest form of deed is a quitclaim deed. In this form of deed, the seller transfers whatever interest it has in the property, to the buyer. That interest could be nothing. Or that interest may be partial, or disputed. Or the property may be encumbered. This is not a form of deed that any buyer who cares about the quality of its title should accept. The use of a quitclaim deed should be a tipoff to the buyer that there may be something seriously wrong with the seller’s title.
Today, it is very common for buyers to obtain title searches before closing on properties.
The title search will usually inform the buyer about any problems with the title. Buyers may also choose to purchase title insurance which protect them against many risks such as an open judgment or mortgage, or a survey discrepancy.
Insisting on a strong form of deed, coupled with a title search and title insurance, is a good step toward ensuring the integrity of the title to the property which you are purchasing.