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.

Friday, February 8, 2008

Types of Deeds

Property buyers and investors, as well as their agents and attorneys, must carefully examine the deed presented at closing and being used to convey the property. Even before the closing, the buyer's attorney should negotiate to have the best type of deed, at least from the buyer's point of view.

Different types of deeds offer varying levels of protection and assurances to the grantee. There are five common types of deeds used in most real estate transactions:

1. General warranty deed. This deed offers the grantee or buyer the greatest amount of protection, because the grantor must make several guarantees about the property.

2. Special warranty deed. Also called a limited warranty deed, this deed does not provide all of the guarantees of a general warranty deed.

3. Quitclaim deed. This deed offers the grantee no guarantees about the title and property. All it does is convey any interests that the grantor may have.

4. Bargain and sale deed. This type of deed has slightly more protection than the quitclaim. The bargain and sale deed normally indicates that the grantor actually has the power to convey the title. Other guarantees may be added, but not required.

5. 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.

All of the preceding five common deeds will be discussed in greater detail later in this article. Meanwhile, in addition to the above, many states use special purpose deeds to handle certain transactions:

Administrator's deed. This type of deed is used by the court appointed administrator who is charged with disposing the remaining assets of a person who has died without a will to convey the title of the deceased person's real property to a purchaser, heir or other party.

Deed in lieu of foreclosure. When mortgage loan borrowers have defaulted on their loan and have no practical hope of recovering, they can avoid the further cost and demands of foreclosure proceedings by surrendering their property to the lender. The title to the real property is then conveyed through this deed. For more information, see the "What You Should Know About Foreclosure" article.

Deed in trust. When establishing a land trust, this deed is used to establish the land trust and convey the property ownership to the trustee.

Executor's deed. This type of deed is used by the executor — who is appointed by the will of the deceased person, to administer the terms of the will to convey the title of the deceased person's real property to a purchaser, heir or devisee.

Gift deed. When giving or donating property without expectation of any repayment or consideration, the gift deed may be used in some states. Guardian's deed. This type of deed is used by the court appointed guardian who is charged with administering the assets of someone legally incompetent (because of age, senility or the like) to convey the title of the incompetent person's property to a purchaser or other party.

Referee's deed. In many states and localities, the referee's deed is used to convey title sold during a foreclosure sale.

Release deed. Also called a deed of release, the release deed is used to remove liens and claims currently recorded against the property. This is primarily used to remove a trust deed. The lender will issue the release deed when the outstanding loan has been satisfied.

Sheriff's deed. In many states and localities, the sheriff's deed is used to convey title sold during a sheriff's sale or an auction of a property, ordered by the court, to satisfy a judgment.

Tax deed. When title to the property is sold by the court to satisfy unpaid delinquent taxes (usually real estate), the tax deed is used to convey the property's title to the purchaser.

Trust deed. Also called a deed of trust, this instrument is sometimes used instead of a typical mortgage note to secure a mortgage loan.

Trustee's deed. When removing title from a trust, the trustee will often use the trustee's deed to convey title out of the trust.

In next articles we will look deep to all these deeds listed above. Note from editor. As you see there are provided some basic aknowlegments about mortgage and real estate. May be you know all this things, but it will be interesting even for prefessionals in real estate. All this information provided from real estate finansist point of view, but for individual home buyers or home sellers it is good too.

All About Deeds

Many people unfortunately confuse titles and deeds. They are related, but they are not the same thing. Title refers to the ownership rights to a property, either real property or personal property. So you can have title to a car (personal property) or a condominium (real property).

Thursday, February 7, 2008

Introduction to Real Estate: Land; Real Estate; Real Property

Any understanding of the legal issues involved with real estate and mortgages must begin with the land and the other key elements of real estate, as well as how real estate is owned.
Real estate in the United States follows the allodial system of property ownership. This system recognizes the right of individuals to completely and fully own a parcel of property. This is no small thing, especially when this system is compared to other systems: Feudal system. All the lands are owned by the sovereign ruler, who then gives certain ownership or usage rights to his or her subjects, who then may allow peasants and other workers to lease land for farming or other use. This was the predominant system in Europe for much of the Common Era.
Communist system. Similar to the feudal system, all the lands are owned by the state-or the "people".
Use of land is dictated by the state, and no individual can ever fully own any property.
Allodial system. The system used in the United States and much of the developed and developing democratic world.
In American-English legal theory, it is important to understand the difference between these elements of land, real property, real estate and associated rights, such as air, mineral and water rights. This chapter will discuss these elements in three categories:
1. Land. The ground surface and the natural elements below and above it.
2. Real Estate. Land and any improvements on it.
3. Real Property. Real estate and the different "rights" involved with it.
Most people treat the terms land, real estate and real property as interchangeable. They are not. Anyone who aspires to invest in real estate or work in the real estate industry must understand the key distinctions between these terms. Fortunately, they are not difficult concepts to grasp.
In the real estate industry, the legal concept of land encompasses more than just the ground that we see or that comprises a parcel of property. Land includes everything natural beneath and above the surface. The operative term here is "natural"; but the concept of land need not be completely tangible.
It may be helpful to view land as an inverted pyramid extending from the center of the earth and projecting outwards into the atmosphere. Land includes, but is not necessarily limited to the following elements: Surface ground. This is what most people think of when they hear the term "land," but it's obviously much more.
Subsurface soil and water. Landowners have traditionally owned the water underneath their land surface and can access it at will. However, many local governments and new regulations have begun to exercise control over aquifers and other subsurface water sources.
Minerals, oil and gas. This is an extension of subsurface land rights. These elements are prime commodities and can give the property owner additional income-if that owner still controls the rights to those subsurface elements. For more information, see the "Subsurface Rights" article.
Airspace above the ground. Believe it or not, air space is part of real estate. For example, your neighbor cannot build an overhanging bay window that extends into your property's air space. An increasingly more common discussion of air space involve condominiums, in which the condo owner often only owns the air space within their units—but not the walls, floors or ceilings.
Permanently attached natural elements (trees, boulders and vegetation). The law does differentiate between permanent vegetation and annual crops. Trees, grass and perennials are called "fructus naturales" and are considered part of larger real estate. Planted annuals and crops are called "fructus industrials" and are considered personal property.
The concept of personal property, as opposed to real property, will discussed later in this article. As you can see, however, the land can contain both real property and personal property. Ownership of land can also be further divided into different facets-which allow for separate uses and manners of possession.
Example: Ownership of Land Sally owns a ranch. She learns that there may be precious minerals under her land. She would like to take advantage of this fact, without jeopardizing her ranch operations. So, Sally sells the rights to the mineral under her land without surrendering her land. The mining company that purchases the mineral rights is allowed to mine for it, within strict limits, while Sally is free to continue with her ranch operations.
Real Estate
The concept of real estate begins with land, but typically includes more. Real estate also includes all the artificial improvements to land, such as buildings, sewers, pavements, fences and wells.
When discussing real estate, we are talking about the entire property as a physical entity—soil, minerals, air space and all improvements. The real estate industry sees all of these as commodities that can be quantified, bought, sold and transferred.
In short, the term "real estate" starts with the land, but then includes all improvements made to that land.
Real Property
The term "real property" normally applies to the legal concept of property ownership. In our system of property law, there are different elements to ownership, especially with ownership of real estate.
When using the term real property, you should try to avoid thinking of the tangible, physical elements of real estate. Instead, you should view the term "real property" as a concept or idea. The key issue here is ownership, and the rights involved with ownership.
In this sense, what you own is not as important as how you own it. These elements or facets of property ownership are often grouped into a "bundle of rights" that include the following five: Possession. This facet of ownership pertains to the right to occupy the property. For example, a landlord gives the renter the right to temporarily possess, enjoy and exclude the property, but the landlord keeps the right to control its usage and the right to dispose the property to another person.
Enjoyment. This facet pertains to the right to possess the property without interference.
Control. This facet pertains to the owner's right to determine how the property may be used.
Disposition. This facet pertains to the owner's right to give, sell or transfer the property (either in whole or in separate "rights") to another individual. This right to dispose is one of the cornerstone of the real estate market.
Exclusion. This facet pertains to the owner's right to restrict other individuals from accessing or using the owner's property. Trespassing laws arise from this right.
When many people talk about property rights, it takes on an almost majestic set of rights. This goes hand in hand with American principles (or myths) about self-reliance, privacy rights and individualism. We may find an historical basis for this view of property rights in monarchial Europe, where landowners were essentially royalty and had near-absolute power over their dominions, no matter how small.
Even in America's allodial system, however, ownership is never infinite or unlimited. The government reserves the right to "take" any or all of the ownership elements from any private individual. However, the government must justify any such "taking" as being for the public good and the owner must be compensated the fair market value of the property taken. As long as the government meets these two conditions and follows due process, the property owner cannot prevent such a taking.
For example, when the state, county or city must build a new highway or street, they will need to buy the homes and properties in the path of the proposed road through a taking.
Another, more limited example, would be if the local county wanted to build a river-walk and took an easement through the property of the riverfront owners. The property technically still belongs to the property owner, but the easement gives the government full usage and control of the river's shore.
For more information about the government's ability to limit or take real property from their private owners, see the "Eminent Domain" article.
Real vs. Personal Property Most physical items can normally be classified into either real or personal property. This is an important distinction in the real estate industry and can translate into serious money.
The quick way to understand the difference between the two types of properties is to think of personal property, as everything not permanently attached to the real estate.
As noted above, real estate is land (with its included rights) and anything permanently attached to that land.
Personal property is legally called "chattel," most probably because defining the concept of personal property became a legal need when cattle became big business.
Attachment. The permanency of an item's attachment to the real estate determines whether it is real or personal property. For example, a pile of wooden posts would be considered personal property until they are driven into the ground to create a fence, at which time, they become part of the real property.
Transfer. Real property is transferred with a deed; personal property is transferred with a bill of sale.
With most home purchases, the deed transfers the land and house, while the bill of sale handles the transfer of the washer and dryer.
Per the preceding example, personally property can be converted into real property through the process of attachment. Fixtures are objects that were previously personal property but have been attached to real estate, thus making them real property. Note: try not to confuse regular fixtures with trade fixtures; trade fixtures, sometimes called chattel fixtures, are considered personal property. By the same token, real property can be converted into personal property through the process of severance.

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