Depending on where your actual closing is held, you may or may not need a deed. That isn’t to say that a deed won’t be needed, because it surely will. If the closing is held at a title company’s or attorney’s office, however, those individuals will be responsible for preparing the deed and you, therefore, will not need to. It is nevertheless important to understand the function and purpose of deeds. A warranty deed is the most commonly used type of deed. It is a formal written instrument by which title to real property is transferred from one owner to another and is used specifically to guarantee that the title is free and clear of any and all encumbrances. There are two parties to a deed--the grantor and the grantee. The grantor is the seller and the grantee is the purchaser.
Every deed should contain an accurate description of the property being conveyed. It should be signed and witnessed according to the laws of the state where the property is located and it should be delivered to the purchaser on the day of closing. I emphasize the word delivered because, until the deed is actually given, or delivered, to the buyer, there is no transfer of title. While this may sound like a rather insignificant point, it is in fact a very important one. I mention this because I am currently dealing with tax issues in two different communities I own, both related to this very principle. A few years ago I placed all of the remaining lots in both communities under contract with an option agreement. In both instances, deeds were created and placed in escrow to secure my position. I had what is referred to as an equitable interest in these lots. All of the deeds were dated according to the date of the option agreements. When I finally did exercise my right to purchase the lots under the option agreements, the deeds that had been in escrow for several years were then delivered to me. Unfortunately, the deeds were all dated the same date as the option agreement. When these records were submitted to the county for recording, it appeared as though I had owned the lots for several years. This event then triggered an uncapping of the assessed values of the property extending back to the dates that were on them. This in turn triggered a series of tax increases. The county tax assessor’s office has since notified me that unless I pay these so-called back taxes, they will place a tax lien against the lots. My attorney has since drafted a letter to the county officials that rests upon the notion of delivery, stating that because the deeds had not been delivered, no transfer occurred. We will continue to work together to get these rather taxing issues resolved (no pun intended).
A quit claim deed is used to transfer whatever interest the maker of the deed may have in a particular parcel of land. A quit claim deed is often given to clear the title when the grantor’s interest in a property is questionable. Unlike a warranty deed, which guarantees clear title, a quit claim deed offers no such protection. By accepting a quit claim deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. Quit claim deeds are used for special circumstances in which the deed needs to be transferred from one person to another, or one entity to another. For example, if a loved one’s parent dies and there is a provision in the will stating the son or daughter is to inherit the property, a quit claim deed can be used to transfer title. As an active real estate investor, I own and operate several different limited liability corporations, or LLCs. I recently used a quit claim deed to transfer my interest from one legal entity to another because it was inadvertently placed in the wrong LLC when I purchased it. Although, in most FSBO situations, a warranty deed is used rather than a quit claim deed, it is nevertheless a good idea to be familiar with it and how it can help in certain conditions.To summarize, whether you are buying or selling property, real estate contracts are an essential part of every transaction and are needed to expressly stipulate what both the buyer and the seller are agreeing to. In this section we discussed 10 of the more common forms used when selling property. Although you won’t need all of these forms for any single transaction, it’s a good idea to be familiar with them and to have them available just in case.