Saturday, February 9, 2008

Type of Deeds: General Special Grant Warranty Deeds

General Warranty Deed

For the property buyer, the general warranty deed is the most attractive because it provides the most protection. The general warranty deed extracts several covenants and guarantees from the grantor (seller) that the grantor's title to the property is valid, marketable and can be legally conveyed to the grantee (buyer).

General warranty deeds normally contain at least five covenants, by which the grantor offers guarantees about the title:

1. Covenant against encumbrances. The grantor provides assurances that property's title and real estate have no encumbrances other than those expressly stated in the deed. For more information, see the "Marketable Title" and "All About Easements" article.

2. Covenant of further assurance. If title defects are subsequently found, this covenant activates the grantor's promise or agreement to perform any acts required to correct those defects, within reason.

3. Covenant of quiet enjoyment. This covenant is the grantor's assurance that no other person or party has claims to the property that are superior to the grantee, except as spelled out in the deed. The grantor guarantees that the grantee's title ownership will be good against any other claims of title ownership of the subject property. So, the grantee can rest easy and not have to worry about being evicted or disturbed by a third party having better title or lien.

4. Covenant of seisin. The legal term "seisin" or "seizin" assures that the grantor actually possesses the ownership interest being conveyed and has the right, authority and legal capacity to convey that ownership interest. For example, if the seller is conveying fee simple absolute ownership of a parcel of property, that seller would be violating this guarantee if in fact the seller only had a fee simple defeasible estate.

5. Covenant of warranty forever (warranty of title). If the title conveyed is subsequently challenged by another person or party claiming actual ownership, this covenant requires the grantor to pay for any expenses required to defend the title against that challenge.

The grantee can sue the grantor for damages and/or to force the grantor to correct defects, if it is later discovered that the title is not as marketable and encumbrance -free as promised. Note that receiving a general warranty deed does not necessarily mean that the grantee receives good, clear title. The grantor may be a liar or con artist. The grantee can try to sue the grantor—if the grantor can be located and forced to comply—but the damage is already done. Although the above covenants should be clearly included in the general warranty deed, some states set forth that those covenants are assumed if the deed is identified as a general warranty deed. For example, Illinois, Wisconsin, Michigan and Minnesota recognize all of the usual general warranty covenants if the deed contains the granting clause "convey and warrant." Virginia, West Virginia and Pennsylvania recognize the same with the granting clause "warrant generally."

Special Warranty Deed

Also called a limited warranty deed, the special warranty deed may be used if the grantor (seller) does not want to assume all the risk and liabilities of a general warranty deed. Some states call this a grant deed.

The special warranty deed usually does offer limited covenants of seizin and against encumbrances . So the grantor assures valid possession and ability to convey title, but limits guarantees about encumbrances to the period that the grantor actually owned the property. An "as is" or bankruptcy sale of a property will often use a special warranty deed. For example, Jack buys a house from Jill. Jack later sells the property to Spot with a special warranty deed. If Jack had taken out a mortgage loan shortly before selling it to Spot and did not disclose it—and that mortgage places a lien against Spot's property-—Jack is still liable.

However, if it comes to light that Jill had secretly sold interest to the property before selling it to Jack and that other party now challenges Spot's title, then the special warranty deed relieves Jack of any liability.

Quitclaim Deed The quitclaim deed accomplishes a simple conveyance of the grantor's ownership interests or claims to ownership interest. The quitclaim deed offers no guarantee that the grantor actually possesses any ownership interest, let alone has the ability to convey title. In fact, the quitclaim normally only conveys the grantor's current interest, if any, and not the property itself.

If the grantor's purported interest are false or invalid, no ownership interests or property are conveyed. Also, if the grantor gains ownership interest after the quitclaim deed is conveyed, that ownership interest remains with the grantor and is not covered by the outdated quitclaim deed.

Quitclaims are often used in corrective or simple situations. For example, if the title erroneously lists the ownership as Susan Jones (instead of Suzanna Jones) Suzanna can record a quitclaim deed with the correct spelling. Another example is if Quincy helped his daughter Paula buy a house, and then Quincy wanted to remove his name from the title, he can issue a quitclaim deed that would remove him from the title.

Quitclaims are also recommended if the grantor (seller) is unsure about the quality of the title he or she possesses. For example, if you obtained a property through a foreclosure sale or adverse possession, you may want to consider using a quitclaim deed when you sell it.

Bargain and Sale Deed

Sometimes called a "deed without covenants," the basic bargain and sale deeds offer no warranties, making them similar to quitclaim deeds. However, there is always a clear assumption that the grantor actually possesses and is able to convey title to the property. So unlike the quitclaim deed, the bargain and sale deed actually does convey the land—and not just the grantor's interests.

Grant Deed

Similar to the special warranty deed, the grant deed only covers the actions of the grantor (current owner) and makes no promises about previous owners. This may be acceptable to some buyers, if they conduct a thorough title examination and due diligence, as well as obtain title insurance coverage. However, many buyers try to stay away from grant deeds, instead favoring the general warranty or other stronger forms.

Requirements for a Valid Deed

There are several requirements that must be met to make a deed completely valid. The most basic and overarching of these requirements is that the deed must meet all of the legal requirements of the state in which the subject property is located.

If the deed is being used to convey title to property in Alaska, the deed must meet all of Alaska's legal requirements—even if the transaction is being closed in an office in Miami.

Although each state varies, all states have most of the following requirements:

1. Written. The statute of frauds of most states typically requires written deeds, making oral deeds unacceptable.

2. Identified parties. The full names of both the grantor and grantee must be included, often with their current official address. The name indicated as grantor should be the same name currently recorded as titleholder to the property. However, if the indicated name is different from the grantor's true name, the deed is still valid. Thus, misspellings and different names will not invalidate a deed-in fact, the grantor's name often does not have to appear in the deed-as long as the grantor adequately signs it. A common way to confirm this fact is with the use of the term "the undersigned" at the start of the deed.

3. Grantor capacity. The grantor must be of legal age and legal competence to convey the title. Most states will void a deed if the court has declared the grantor to be insane or mentally incompetent to understand in a reasonable matter the nature and consequences of the transaction, especially at the time the deed is signed.

4. Consideration. The deed should clearly describe the consideration, such as the purchase price, being given to the grantor for conveying the property. But this has become a formality with most deed forms, so the actual presence of consideration is unnecessary. Consideration may not be even necessary, especially if the grantor is "giving" the property to the grantee. Note, however, that creditors may invalidate such gift transfers as fraudulent attempts to circumvent the creditors' rights.

5. Granting clause. Also called words of conveyance, the deed must clearly state the grantor's intention to convey the title to the grantee. Warranty deeds typically use the phrase "convey and warrant" or "grant, bargain, and sell." Quitclaim deeds typically use the phrase "convey and quitclaim" or "remise, release, and forever quitclaim."

6. Habendum clause. The deed's habendum clause describes the estate being conveyed. This clause will indicate whether the title being conveyed is fee simple, life estate or leasehold. This clause should be read carefully. For example, whenever a time limit or condition is indicated, the fee simple could be turned into a leasehold or life estate. Also, if the habendum clause indicates some sort of usage, the conveyances may just be of an easement, rather than fee simple or leasehold. For more information about types of estates, please see the "Title and Estates in Land" article.

7. Legal description. A complete and precise legal description of the subject property must be included in the deed. For more information, see the "Survey and Legal Description" article.

8. Grantor signature. The grantor must sign the completed deed. Note, however, that the grantee's signature is not required. If the signed name does not match the name indicated in the body of the deed or the grantor's true legal name, the deed may still be considered valid. [For example, Jonathan Xavier Jones signs his name John X. Jns, the deed may still be considered valid.] Persons unable to write may affix their mark with an X or sometimes a thumbprint, but a witness is usually required for such signatures.

9. Delivery. The deed must be legally delivered by the grantor during the lifetime of the grantor; and some states require that it be accepted by the grantee to complete the transaction. If the grantor fails to deliver the deed while he or she is still alive, the deed (even if signed) will not be valid if the grantor has died before delivering the deed. However, the grantee does not have to receive the deed in order for delivery to occur. Delivery occurs whenever the grantor has executed the deed and signifies his or her intention to finalize the deed. Although words and action are normal, deeds can be delivered without one or the other. Note that silence by the grantee or the official recording of the deed is typically considered acceptance by the grantee.

10. Recording. To make the conveyance official, the deed must be publicly recorded, usually with the local county records office. This recording also prevents title challenges from third parties. Optionally, the deed may also contain the following items:

Warranties of title. Indicate any covenants or guarantees that the grantor provides with the deed.

Recitals. Indicate mortgage liens and other encumbrances against the property.

Exceptions and reservations. The grantor may set aside certain portions of the property or the estate being conveyed. These exceptions and reservations must be clearly spelled out in the deed.

Official date. This is customary, but lack of it will not necessarily invalidate the deed. Seal. Most states no longer require seals, but a few still do. However, most states require official corporate seals on deeds executed by a corporation.

Witnesses. Many states require witness signatures, often two separate persons, to make the deed official. They are definitely required when the deed is signed and executed with a mark.

Documentary stamps. Often called transfer stamps, these are forms of taxes charged by states, counties and municipalities to convey property or to record certain legal documents. For example, a 1999 home purchase in Chicago will incur a $1 per $1,000 (of the sales price) transfer stamp charge from the state of Illinois, as well 50? per $1,000 charge from Cook County and a shocking $7.50 per $1,000 from the city of Chicago.

It should go without saying that a deed obtained by fraud, forgery, misrepresentation, or coercion can and will be voided and set aside by the courts. The courts may also set aside mutual mistakes, when both the grantor and grantee have serious, mistaken assumptions about the transactions.

We hope that you've found our Mortgage and Real Estate helpful and informative. We welcome all comments, critiques and suggestions.


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