A deed is a legal document that transfers the ownership interest of a property. Here’s what you need to know about these critical documents and how they are used during a real estate transaction. Before we describe how deeds are used during the closing process, let’s go into more detail to explain “What is a deed?”
What Is a Deed?
A deed is a legal document that serves as evidence of ownership or transfer of ownership of a property. The person transferring the ownership interest is known as the “grantor,” and the person receiving the ownership interest is called the “grantee.”
Parts of a Deed
Deeds are written in “legalese,” so you may have difficulty understanding this transfer of ownership document. Here are the basic parts of a deed.
1. Names of parties
The deed identifies the grantor (or the seller) and the grantee (buyer.)
2. Property description
The deed also includes a detailed description of the property being transferred, specifying its location, boundaries, and any relevant details.
3. Consideration
The deed often states the amount of money or value exchanged for the property.
Types of Deeds
There are several types of deeds. Here are the most common.
1. Warranty deed
The most common type of deed is a warranty deed. A warranty deed provides the highest level of protection for the buyer. In a warranty deed, the grantor guarantees that the new owner has clear title or ownership of the property.
2. Quitclaim deed
A quitclaim deed (sometimes called a quick claim deed) transfers the grantor’s interest in the property without making any warranties about the title. They are used to transfer property among family members, move properties into living trusts, and remedy title errors. However, they offer less protection to the grantee.
3. Grant deed (also called special warranty deed or limited warranty deed)
A grant deed is similar to a warranty deed. However, this type of deed only covers the period during which the seller owned the property. The grant deed does not provide extensive warranties regarding the title. With this type of deed, the grantor only guarantees they have not encumbered the property during their ownership.
How a Deed Is Used During a Real Estate Transaction
A deed plays a crucial role in a real estate transaction, as it is a legal document used to transfer property ownership from one party to another. Here’s what that process looks like.
1. Agreement to sell
Before the deed comes into play, the seller and buyer enter into a purchase agreement. This document outlines the terms of the sale, including the purchase price, closing date, and any contingencies.
2. Execution of the deed
Once the buyer and seller sign the sales contract, the seller’s representative prepares the deed. The deed includes the name of the parties, a legal description of the property, the type of deed, and any conditions or covenants. The seller signs the deed.
3. Delivery and acceptance
The deed must be delivered by the seller and accepted by the buyer to be valid. This is a critical step in completing the property transfer.
4. Closing process
The closing is the final step in the real estate transaction. The deed is typically presented during the closing appointment, and the buyer pays the agreed-upon price. The closing agent oversees the exchange of documents and funds.
5. Recording
After the closing, the deed is recorded with the appropriate government office, which is typically the county clerk’s office. Recording creates a public record of the property transfer and helps establish the buyer’s ownership rights.
6. Title transfer
The transfer of the deed and the recording process contribute to the transfer of the property’s title. Title insurance protects the buyer and lender against any defects or issues with the title that may arise later.
What’s the Difference Between a Deed and a Title?
The deed and title are related because they refer to property ownership. Here are the key differences in these documents.
A deed is a legal document that transfers property ownership from one party to another. However, when someone has “title” to a property, they have legal ownership and control over it. This ownership includes the right to sell, lease, or transfer the property.
Both the deed and the title are critical components in real estate transactions, ensuring a clear and lawful transfer of ownership from seller to buyer.
For more information, read Title vs. Deed: How to Explain the Difference to Clients.
In most states, members of the state bar can skip the parts of the licensing process to earn a real estate license. This is because so much of what you learn in pre-licensing education relates to the law.
If you are considering a career in real estate, it’s vital that you work with a real estate school with a solid reputation for explaining complicated legal terms clearly and effectively. Colibri Real Estate is that school for you. We offer pre-licensing education, exam prep, and continuing education for your state. Learn more about becoming a real estate agent with the help of Colibri today.
