So, you want to own real estate. It might be a home (the American Dream), or a vacant tract of land. The question is, how do you know, once you buy it, inherit it, or win it, that you legally own it, or, more importantly, how does the rest of the world know you legally own it? You need evidence that you are the master of this little part of the planet. In our civilized world that “evidence” comes in the form of a deed. Here’s the internet’s definition:
A deed, referred to in ancient history as an “evidence,”is the legal term used to describe a legal written document that passes interest in, or ownership of, property (typically real estate, but it could be something else i.e. intellectual property). The deed then serves to confirm, or affirm, the owner’s right and interest in the property. A deed is generally executed by the party transferring ownership of the property (the Grantor) to another party (the Grantee).
Okay, time for a little history compliments of the website PocketSense. “The concept of deeds goes back to medieval England. Originally, land was transferred through a process known as the “livery of seisin.” To transfer land that way, the seller would actually give a symbol of the land — such as a rock, key or twig — to the buyer and have people witness it. That act was referred to as a deed as in good deeds and bad deeds. By the 16th century, English law changed to allow property title to be transferred by a written document. In a throwback to the actual deed that was conducted as a part of the livery of seisin, that document became known as a deed.”
Again, our British roots are showing.
Fast forward to the 21stCentury and the Louisville real estate market. You have come into ownership of real estate and are wise enough (or your attorney and/or mortgage company is) to know that you need a deed to protect your rights (and the mortgage company’s). Your education continues when you discover that there are 3 types of deeds common to Louisville (and really the rest of the United States as well) and they are:
General Warranty Deed
A General Warranty Deed guarantees the buyer (the Grantee) that the seller (the Grantor) has the right to sell the property, and that the property is free of debt or other liens. The seller agrees to defend the title against any and all other claims, unsettled debts or problems that may have arisen during the time he/she owned the property AS WELL AS during the ownership period of ALL previous owners of the property. A Grantor/Seller, by giving a General Warranty deed, is saying to the Grantee/Buyer, “Don’t worry, I’ll be responsible for any title problems that may crop up, even those that originated hundreds of years before I owned this property.” This is the usual type of deed given during a property purchase in our market and this is the one you want if possible but, sometimes it’s not possible. Then you may get this:
Special Warranty Deed
Differing from a General Warranty Deed, the seller’s guarantee does not cover the property’s entire history. Generally, the seller only guarantees against problems or claims created during the seller’s ownership of the property. A Special Warranty Deed is typically used by Grantors who have owned real estate for a short period of time (generally less than a year and maybe only a few minutes!) due to their business model. An example would be trust companies/banks that have taken title to properties in an estate and have then resold them. Another would be what are called 3rdparty companies that assist transferred corporate types by buying their homes and then reselling them to the public. Quite a few real estate transactions occur in this manner leaving the Grantee/Buyer without a deep reaching title guarantee from the Grantor/Seller. What to do if you are the buyer and want more protection? The answer is title insurance from a reputable title insurance company that basically takes the place of the missing long-term title guarantee afforded by the General Warranty deed. Who pays for this insurance?
The buyer does and that’s a topic for another time.
Most often used by family members, divorcing spouses, and people well-acquainted with each other, a Quitclaim Deed allows one party to transfer property rights and claims to another party. Usually there is no monetary exchange. The extent and authority of the grantor’s interest or claim to the property is unspecified, and the grantee is not provided with any guarantee. Since the grantor/seller’s interest in the property is unspecified this can be a dicey way to buy anything. A seller, by giving someone a quit claim deed, is saying, “Hey, if I have any ownership interest in this property, I’m giving it to you.” The seller may charge you for this deed and this becomes the source of all the stories you have heard about selling the Brooklyn Bridge to some unsuspecting and gullible buyer. A quit claim deed can, however, be just as valid in transferring the property as a General Warranty or Special Warranty deed if the seller does truly own the property in question. Remember, there are no guarantees of any kind with this type of deed but there’s always title insurance………..if the insurance company’s underwriters approve it!
Two topics to come pertinent to the issue of deeds:
1. Another, obscure type of deed, is a Commissioner’s deed from a courthouse or Commissioner’s sale of real estate during foreclosure auctions.
2. State Recording Acts which determine whether we live in a Notice Jurisdiction, a Race Jurisdiction, or a Race-Notice Jurisdiction: You’ve been given a valid General Warranty deed that may turn out to be worthless unless you get it to the courthouse in time.