Transferring ownership in real estate from one party to another is typically accomplished by signing a deed. However, there are several different types of deeds, each of which serve varying purposes. This article briefly describes the most common deeds and their designed purpose.
Warranty Deed. Perhaps the most common deed is the “warranty deed.” A warranty deed transfers an interest in real property and also provides a “warranty,” or promise, from the seller to the buyer that the seller actually owns the property and that there are no liens on the property other than those specifically disclosed in the warranty deed. However, there are two different types of warranty deeds. A “general warranty deed,” provides the greatest protection for buyers in that the warranty extends back through the entire history of the property, covering even the time prior to the seller’s ownership. Like a general warranty deed, a “special warranty deed” provides a warranty that the seller has legal title to the property and can sell that interest, but the warranty regarding liens or other encumbrances extends only to the seller’s period of ownership.
Grant Deed. In some states an owner can transfer ownership in real property by “grant deed.” Like a warranty deed, a grant deed transfers title with a promise that the seller owns a transferrable interest in the transferring property. However, the grant deed may, or may not, contain promises that there are no liens on the property. Generally, a grant deed is considered to provide less protection for a buyer than that provided by a warranty deed.
Quit Claim Deed. A “quit claim deed,” provides the least amount of protection for a buyer or transferee. A quit claim deed does not guaranty that the transferor/seller has any legal title to the property nor does it warrant that the property has no liens. In essence, the quit claim deed provides only that if the seller/transferor has an interest in the property, with no representation that she does, that interest is transferred to the buyer/transferee. This type of deed is often used to transfer property between closely related parties when little or no money is changing hands.
Trust Deed. A “trust deed” or “deed of trust” is used to protect the interests of a lender by transferring the right to sell the property to a third-party Trustee, which the Trustee can exercise only if the buyer does not repay the loan as promised. All other rights in the property, such as the right to occupy and enjoy the property, are transferred to the buyer. Once the loan is paid in full, the right to sell the property is conveyed to the owner.
Mortgage Deed. A “mortgage deed,” is similar to a trust deed. Like a trust deed, the mortgage deed is designed to protect the interests of a lender. However, rather than transfer the right to sell to a third‑party trustee, the lending institution retains the right to sell in the event payments are not made as promised. Once the loan is repaid in full the right to sell is transferred back to the owner.
While there are other types of deed, the deeds described above are the most common. It is also important to remember that laws regarding the use and interpretation of deeds can vary from state to state. Seek the advice of a qualified attorney in your area with questions specific to your location and circumstances.
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