Sunday, June 19, 2011

What Kind Of Deed Do I Want To Receive When Buying Or Selling A Property?

What kind of Deed do I want to receive when buying property?

What kind of deed do I want to give when selling property?

A deed is a legal document which conveys ownership to real property. To transfer ownership of the real property to another, the owner/Grantor must execute a new deed identifying the property and the Grantee/buyer of the property. To be valid between the Grantor and the Grantee, the deed is not required to be recorded. To be valid against the world, and to protect the Grantee, a deed must be recorded in the records of the County where the property is located. Hence, you should always record the deed. One condition of a valid transfer often ignored is that the deed must actually be delivered to the Grantee to be a valid conveyance. There are many different types of deeds all of which convey different legal rights. Some of the more common are:

Warranty Deed

A Warranty Deed is a deed that transfers all of the Grantor's rights in the property to a Grantee. In granting a Warranty Deed the Grantor is warranting that they have good title free and clear of all encumbrances. The warranty also requires the Grantor to defend the Grantee against all claims made by third parties claiming an interest in the property. A Warranty Deed is the most common deed used in the purchase and sale of real property between unrelated parties. If you are buying real estate, you should insist on receiving a Warranty Deed.

Limited Warranty Deed

A Limited Warranty deed is deed that only warrants the title for the limited time in which the seller owned the property. In other words, a Limited Warranty Deed is a deed in which the property transferred is warranted to be free of all liens and encumbrances made by or through the Grantor, but not otherwise. In some states, a Limited Warranty Deed is referred to as a Special Warranty Deed. The warranty provided with a Limited Warranty Deed is much more limited in scope than the warranty provided in a Warranty Deed. Therefore, if you are selling property you should try to only provide a Limited Warranty Deed to limit your potential liability.

Quitclaim Deed

A Quitclaim Deed is a deed that transfers to a Grantee whatever claim or interest in the property that may be held by the Grantor. The Grantor of the deed makes no warranties regarding the quality of their interest in the property or even if they have any interest at all. Specifically, in a Quit Claim deed, no warranty is provided regarding liens, encumbrances or other claims against the property. A Quitclaim Deed is most often used in gift transactions, transfers to as spouse, or transfers to an entity owned by the Grantor. But they are also very common as part of a divorce settlement. Often a Quitclaim Deed is referred to by the misnomer "Quickclaim deed".

Types of interests within a deed:

Tenants in Common

To own property as Tenants in Common means that multiple owners have concurrent ownership with no right of survivorship. The individual tenant in common owner can transfer their interest in the property by deed or by Will. Each Tenant in Common is entitled to possession of the whole estate. If the deed conveying property to multiple owners does not state otherwise, the owners are presumed to own the property as Tenants in Common.

Joint Tenants with Rights of Survivorship

To own property as Joint Tenants means that multiple owners have concurrent ownership with the right of survivorship. Right of Survivorship means that when one of the joint tenants die, the decedent's interest in the property is gone. The survivors retain an undivided interest in the property free from the deceased party's former interest. A joint tenant cannot transfer his or her interest in the property by Will.

Example: Alan, Bob, and Carl own an investment property as joint tenants, each owning a 1/3 interest in the property. Subsequently Carl dies. In Carl's Will he purported to give his interest in the investment property to his wife Donna. However, at Carl's death, Alan and Bob each immediately own an undivided ½ interest in the investment property. Even though Carl may have thought he was leaving his interest in the property to his wife, Donna has no interest in the property because the property was held with rights of survivorship.

Tenants in the Entirety

This is an estate in land created in a Husband and Wife. It is similar to joint tenants because it has the right of survivorship. The distinction is that a tenancy by the entirety can only be terminated by death, divorce, mutual agreement, or execution by a joint creditor. Unlike a joint tenancy, a tenancy by the entirety is not destroyed by one party unilaterally conveying his or her interest to a third party. This method of owning property is rarely used anymore.

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