Dirty Deeds Done Dirt Cheap

By
Real Estate Broker/Owner with Providence Group Realty TREC# 0608931

Property deed types can be confusing to consumers and agents alike. As a best practice, we coach all of our agents to do a quick search on the County Tax Records -- as well as with the County Clerk -- to vet and assess possible ownership interests and/or possible threats to securing a clear title during the course of a transaction.

Sellers do not always understand the implications their circumstances might have on the sale of their home, and might not openly share important information unless they are specifically asked about it.

Death, Divorce, Debt, Distressed condition.   Do not assume that these factors aren't present on any listing. It isn't enough to stop at fact-checking name agreement in county appraisal district records. Our clients are not professionals in real estate, and lean on us to advise them about things that could impair transaction success. They simply don't know what they don't know. 

As a Listing Agent: If any of the 3 Ds are disclosed to you, best practice is to open title and get the facts & requirements needed before launching a listing. (Hint: probate, affidavits of heirship, trust summaries, divorce decrees, judgments, liens, chain of title, business entities and deed types can be unexpected alligators. Not only could any of these issues tank a transaction, they could also put selling parties -- including you as the listing agent -- at risk for lawsuit. Salability tends to be a pretty big deal to Buyers.

As a Buyer's Agent: It simply isn't enough to assume the Title Company will be able to work any hiccups out, if they exist. If you have the ability, as a licensed Realtor, to catch a fatal flaw or a scam before your Buyers plop down option fees, earnest money, inspection fees, appraisal fees, & pay for utility connections and movers, then you have a responsibility  to protect them -- either through helping them make an informed choice about when and how to proceed in engagement, or by using the levers and tools afforded through your state's contract terms to provision for reduced risk and lessened liability.

It really doesn't matter which side of a transaction you are on as an agent... A licensed Realtor can be burned by another's ingorance as well as their own when taking a listing or writing an offer. Responsibility lies equally on the shoulders of both professionals to protect the interests of their clients. The ability to do so comes through awareness and education.

 

So how do you know if you might have a risky transaction? 

 

Aside from a name mismatch or clues found via high-level deed history reporting on tax records, much can be learned by researching records (usually online) through the county clerk's office. Name searches will often lead to specific property filings, where a licensee can review details in greater depth.

 

Finding the dots is a good start. 
Connecting the dots is the difference between
being a professional and amateur hour.

 

Deed Primer: This quick reference guide can help decipher research findings. We recommend asking a Title Professional for assistance if you have questions or suspect trouble. Keep in mind that all deeds are not created equal. That 'quick fix' from 20 years ago can leave a lasting mark on a modern-day transaction!

 

Grantor

The grantor is the person or entities selling the property.

Grantee

The grantee is the person or entities buying the property.

Grant Deed

The most commonly used property deed to transfer title in California is the grant deed, although it is not against the law to use other types of deeds. There are two guarantees contained in a grant deed:

      • The grantor states that the property has not been sold to anybody else.
      • The grantor states that the property is not burdened by any encumbrances apart from those the seller has already disclosed to the buyer.

Grant deeds do not need to be recorded to be valid, nor do they need to be notarized to be valid, but most sellers do ask a notary to witness the deed, acknowledging that the seller is the person who signed the deed. And most buyers want the protection of recordation, to give "constructive notice to the world" that the property has been sold.

Laws differ by state, but generally, to be valid, a grant deed needs to contain six essential elements. Those six items are defined as:

    • A written document.
    • A clause that transfers title, called a granting clause.
    • The names of the Grantor and the Grantee.
    • A description of the property being transferred.
    • Execution, delivery and acceptance. It must be signed by a competent grantor, meaning minors and those declared incompetent cannot sign a deed; given to the buyer while the seller is still alive (not after death) and accepted by the buyer.
    • Grantor's signature.

Warranty Deeds

 

Strongest Deed Type

Warranty deeds are used all over the United States but are more common to the Midwest and Eastern states. They are very similar to grant deeds with one main exception: grant deeds contain two guarantees but warranty deeds contain three guarantees:

    • The grantor states that the property has not been sold to anybody else.
    • The grantor states that the property is not burdened by any encumbrances apart from those the seller has already told the buyer about.
    • More important, the grantor will warrant and defend title against the claims of all persons. This means the grantor is guaranteeing the grantee that title is free of any defects that may affect the title, even if the defect was caused by a prior owner.

Quitclaim Deeds

Weakest Deed Type


Common Misspellings: 
"quick claim"
"quit claim"

Quitclaim deeds are used to convey any interest that the grantor might possess in the property. The grantor might be a legal owner or the grantor might never have formally been identified on a deed describing the property.

Quitclaims are most often used during a divorce, to deed the property from one spouse to the other. If a married person holds title to a property as sole and separate or perhaps he or she acquired the property before marriage, the spouse not in title might be asked to sign a quitclaim deed when the property is sold to a third party, just to make sure the spouse who was not on the deed does not later come back and lay claim to the property.

A quitclaim deed will not nullify an edict in a divorce decree.

A quitclaim deed is easily challenged and does not guarantee any ownership rights or clear title.

These deeds are commonly used for estate planning purposes, to transfer ownership from individual(s) into the name of a revocable living trust or other trust instrument.

Tax Deed

When property taxes are unpaid (the numbers of delinquent years vary from state to state), and the property is sold for the payment of back taxes, typically a tax deed is used to convey title to the buyer.

Laws differ by state for protection periods that might allow a seller to buy back (restore) interest if tax liens can be settled within a specific time period after the property has been sold.

 

Gift Deeds

The exchange of money or consideration is generally referred to as "love and affection," meaning the property is transferred without payment of money. Gift deeds are generally used to transfer title among people who are related to each other.

Deed-in-lieu of Foreclosure

Sellers who are behind in payments to the lender will sometimes negotiate with a lender to accept a Deed-in-Lieu of Foreclosure, which means the seller has deeded the property to the lender to avoid foreclosure. But the deed may still show up on a seller's credit report, and bear forward tax implications, similar to a short sale.

Trustee Deed

A trustee deed is only used when real estate has been foreclosed on under the power of sale in the deed of trust. The sale usually takes place on the courthouse steps in a public bidding process. The trustee deed conveys full ownership, but no warranties of title.

Buyers should be wary about assuming reponsibility for tenancies at sufferage or clouds, which may include 2nd liens, vendor liens, or judgemets against the property.

 

Do you have experience with a deed-related topic that wasn't covered in this post? Let us hear about your learning moment and how you resolved the situation or improved your practice to avoid a repeat scenario going forward!

Comments (4)

Winston Heverly
Winston Realty, Inc. - Atlantis, FL
GRI, ABR, SFR, CDPE, CIAS, PA

I was just wondering if you are a fan of a certain Rock Group? Good luck to you.

Jun 16, 2014 03:02 PM
Wayne Johnson
Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX
San Antonio REALTOR, San Antonio Homes For Sale

Amanda-I'm glad you prepared this post. I don't think I've seen the list of deed types since my initial training. Thanks for the summary, Suggested.

Jun 16, 2014 03:49 PM
Anonymous
David Whiteman

That was a great refresher Amanda. More important... having it presented in such a way that we can use it as a reference time and again.

Jun 17, 2014 12:21 AM
#3
Anonymous
RealEstateSuccess.org

You have got to get title insurance on all you deals.

This is a people business just like any other business. So don't hold back and get on the phone and ask ...

http://RealEstateSuccess.org

Oct 25, 2014 09:36 AM
#4

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