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Real Estate Deeds

Let’s get into the nuts and bolts of real estate deeds. First, we need to define what a deed is used for during a common residential real estate transaction. A deed is an instrument that conveys (transfers) title to real estate property from the seller (Grantor) to the buyer (Grantee).  An instrument is a legal document which can transfer title, create a lien (like a mortgage), or establish a right to a payment (Promissory Note, or a Real Estate contract).

While doing my homework for this article I found 24 definitions of real estate deeds listed in one real estate reference book. In this article, we will be reviewing the two most common deeds used in the average residential real estate transaction.

A Deed of Trust is the most commonly used deed in a residential real estate transaction. It is an instrument that creates a voluntary lien on real property (real estate) to secure the repayment of a debt. The main parties to this deed are the borrower, the lender and a neutral third party.

This deed usually includes a power of sale clause which permits nonjudicial foreclosure. Meaning the lender can cause the sale of the property against the owner’s wishes so that the unpaid lien can be satisfied from the sale proceeds.

A Quitclaim Deed conveys any interest in a property that the grantor (seller) has at the time the deed is executed, without warranties. If the grantor has no interest at the time, then no interest is conveyed.

One reason to use a quitclaim deed is to cure a “cloud” on the title and may be called a “ reformation deed” as well. Another reason is when the grantor (seller) is unsure of the validity of his/her title and wishes to avoid giving any warranties (and avoid any liability).

A quitclaim deed can be a useful method to transfer interest or cure a cloud, yet it may not be the best method to protect the buyer (grantee). A title search should always be requested through a reputable title insurance company so that the buyer knows what interests are being conveyed.

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