There are 12 types of deeds in real estate transactions, but seven that are more common and will likely be used when you buy or sell a home. Knowing the ins and outs of each type of deed will let you know how well your ownership of the property is protected, not to mention avoid known obstacles so you can close more quickly and with less headaches.
The seven most common types of deeds are:
- Quitclaim Deed
- Deed of Trust
- Warranty Deed
- Grant Deed
- Mortgage Deed
- Bargain And Sale Deed
- Special Purpose Deed
Each type of deed has a different level of protection and different nuances for the buyer and the seller. Here’s more information on each type of real estate deed so you can go to the closing table or navigate the buying and selling process like a pro!
A quitclaim deed, known as a “release” deed, is a legal document that is used for a simple transfer of property rights and claims to another party (and usually someone you know). Most of the time there is no money involved, and there is no warranty or guarantee.
Quitclaim deeds are used for:
- Transferring a property into a trust or LLC
- Removing a spouse from title when going through a divorce
- Gifting a property
- Transactions where it is unsure if the title has defects
Certain states, like Massachusetts, conduct their regular property sales through quitclaim deeds rather than warranty deeds.
Unlike the other types of deeds like warranty deeds, quitclaim deeds offer a grantee the least amount of protection.
Deed of Trust
There are three variations of a deed of trust outside of the main one. The one you use depends on the grantor and grantee. A trustor creates the trust, the beneficiary benefits from the trust, and the trustee has control over the trust.
Deed In Trust
A deed in trust transfers the title from a trustor to a trustor. In many states, a deed in trust is used in place of a mortgage when the borrower transfers the deed as collateral for a loan. Whether you’ll have a deed in trust depends on your location.
Sixteen states only allow mortgages (like Florida), 26 only allow deeds of trusts (like Alaska), and nine allow either (like South Dakota).
Note: A deed of trust makes it easier for lenders to foreclose on a property when the borrower has defaulted on their mortgage.
A reconveyance deed transfers the title from the trustee to the trustor. This happens when the trustor pays off the loan that was secured by the property.
The trustee’s deed transfers the title to another party who is not the trustor and usually is the beneficiary. The deed needs to state that the deed was executed according to the terms of the trust.
Warranty deeds offer the highest level of protection for buyers and there are two types, general and special. Both warranty deeds offer legal protections to a grantor in case there’s a problem or defect with a title once it’s been transferred. Warranty deeds also require the seller to compensate the buyer if there are any debts or problems not listed in the deed.
Note: Warranty deeds are most common in the midwestern and eastern states, if you’re buying a home in other regions in the USA, check the type of deed being used in your transaction.
Warranty deeds are split into two categories:
General Warranty Deed
General warranty deeds are the most common ones used in real estate transactions as they guarantee that a seller has the right to sell a property, and the property has no debts, liens, or other problems. They offer the most protection for the grantee (buyer) and give the buyer/s legal recourse if an issue with the deed comes up. State laws differ in how a general warranty deed is created, but usually there are specific words that have to be used to make a deed a general warranty deed like “warrant”.
Special Warranty Deed
A special warranty deed doesn’t apply to the entire history of a property and only covers issues or claims during the time that the seller owned the property. The grantor (seller) is also not obligated to do anything else once the title is transferred. This means there is less protection for the buyer.
Special warranty deeds are used in special circumstances like buying foreclosed properties, REO properties, short sales, and trusts.
A grant deed transfers the interest in a property from the seller to the buyer in exchange for a previously agreed upon price. This type of deed guarantees the property is being sold free of debt, but does not guarantee that the title is free of defects like errors in public records, improper signatures, or undisclosed liens.
While this kind of deed is usually used in a residential real estate deal, not all states use them. Grant deeds are typically used during divorce proceedings to avoid a reassessment of property tax values.
A mortgage deed is a document signed between a homeowner and their lender. Mortgage deeds enable the lender to put a lien on the property if the loan isn’t repaid. Mortgage deeds give the title to the property to the financial institution until the loan is fully paid off. Once it is, the borrower gets ownership of the property.
Bargain And Sale Deed
The bargain and sale deed is usually saved for foreclosures or court seized properties. This deed transfers ownership like the quit claim deed, but instead there is money involved. The bargain and sale deed doesn’t come with a guarantee that the land being sold is free of tax liens, easements, or third-party claims to the title.
To minimize your risk if you’re buying a property with problems is to perform a title search, purchase title insurance, and contact a real estate attorney to review everything before you make an offer and sign the dotted line.
Special Purpose Deeds
Special purpose deeds are usually used with court orders or when the deed is from someone in an official capacity or who has died.
Special purpose deeds have multiple names and variations depending on when and why they’re used.
- Administrator deeds are used when a person dies without a will and the court appointed administrator needs to transfer a title of a property to a grantee.
- Executor deeds are used when a person dies with a will and the executor transfers the title to the grantee.
- A Sheriff’s deed is given to the bidder who wins at an execution sale held to satisfy a judgment that has been obtained against the property owner.
- A tax deed is issued when a property is sold for delinquent taxes.
- A Deed in Lieu of Foreclosure is given by a borrower who has defaulted on their mortgage to their lender to prevent foreclosure.
- A gift deed transfers a title to another person without money exchanging hands.
Since there is no one-size-fits-all approach to transferring real estate, there are also different types of deeds. Now you know what each one is, if the property you’re buying has any red flags based on the type of deed, and how to prepare yourself for the closing table.