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Real estate investors should understand the importance of deeds and how they work. Various types of deeds can be present in real estate transactions, and knowing each type can help you navigate the home-buying process. 

A deed may include a clause that limits what you can do with the property. It may also stipulate an easement or right of way that gives privilege to other property owners to pass over your property to access theirs. Deepen your understanding of real estate deeds in this blog post. 

What is a Deed?

When showing proof of property ownership, a deed will suffice as a legal document. Vital information regarding the current owner, the entity or person that sold the property, the property’s physical description, and other details are found in the deed. 

The deed will specify the grantor (an entity or person) selling the property. Moreover, the entity or person purchasing the property is the grantee. 

Be sure to know the type of deed you are getting when you buy a property because, by this legal document, you will determine how much protection you get from purchasing the property. It will also include legally binding restrictions or guarantees concerning what you can do with the property. 

Kinds of Deeds

You should know about the different kinds of deeds when purchasing a real estate property. Each type of deed has some vital stipulations affecting what you can do with the property. 

General Warranty Deed

One of the most common deeds you may encounter in a real estate transaction is a general warranty deed. This document enables the seller to transfer ownership to the buyer with a guarantee that there are no liens or other claims in the transaction. 

The general warranty deed shows that the ownership of the property is free and clear. The seller must pay to resolve any issue if it is subsequently found that there is a claim to the property. 

Special Warranty Deed

This kind of deed does not guarantee anything about the property that was previously owned. Also called limited warranty deeds, you may encounter special warranty deeds in foreclosures. 

If this type of deed is utilized with a property connected with an HOA, any responsibilities of the previous owner with regard to HOA dues will not be transferred to the new owner. 

Quitclaim Deed

If the transfer of ownership to a person or entity involves no sale, the type of deed to be used is a quitclaim deed. It is common when a family member or relative transfers ownership to another family member or relative. A quitclaim deed expedites the transfer of property in such cases. 

Mortgage Deed

This type of deed is used by the lender when placing a lien on the property with the condition that the lien continues until the total payment of the mortgage. The lender possesses a legal right to foreclose the property if the borrower fails to pay the mortgage. 

Deed of Trust

A deed of trust occurs when ownership is transferred to a third party. Typically, the third party is a bank, and it can hold the property until the complete payment of the mortgage. In most cases, the deed of trust is a requirement when you use financing to purchase a property. 

Bargain and Sale Deed

Purchasing properties at tax lien sales or foreclosures requires a bargain and sale deed. This kind of deed does not guarantee that there are no liens or other claims to the property. If there is subsequent determination of a claim, the new owner will take responsibility for it. 

The Process of Deed Conveyance

Typically, there are three steps in the process of deed conveyance: preparation, signing and notarizing, and recording of the deed. 

Deed Preparation

Preparing the deed involves choosing the type of deed and stating relevant information, including property description and names of the grantor and grantee. It can also include stipulations and other important clauses. 

Signing of the Deed

After the deed preparation, the parties, with the assistance of their lawyers, will review the document to ensure that the information therein is correct. Then, the signing of the deed by the grantor before a notary public will take place. 

Recording of the Deed

The deed will be delivered to the grantee after the signing. The delivery may take place at the closing. Then, for the deed to become a public record, a county registrar or clerk will record the deed in the relevant office. 

Takeaway

A deed is an essential document when transferring property to another person or entity. It may offer guarantees or stipulate restrictions with regard to how you can use the property. Be sure to understand the different kinds of deeds when you are purchasing or selling properties to avoid potential pitfalls along the way.