If you are transferring or receiving property ownership, understanding what type of deed you need to use is crucial to ensure a smooth and legally sound transfer.
Deeds are legal documents that transfer property ownership from one party to another — or, in legal terms, from the grantor to the grantee. Each type of deed serves a specific legal purpose depending on the known and unknown history of the property, the existence of a lien, or other encumbrance on the property like a mortgage.
In this comprehensive guide, we will explore the most common types of deeds, their definitions, examples, and provide a helpful flowchart quiz to determine which deed may be best for your needs.
Types of Deeds: A Quick Overview
There are several types of deeds used in the US for real estate transactions. Here’s a breakdown of some common ones::
- Quitclaim Deed
- Gift Deed
- Survivorship Deed
- Warranty Deed
- Grant Deed
- Bargain and Sale Deed
- Mortgage Deed
- Deed of Trust
- Contract for Deed
If you are still determining which type of deed you need, below is a flowchart quiz to guide you toward the most suitable deed type based on your specific circumstances.
If you prefer to read about the different types of deeds yourself before making a decision, go ahead and skip the quiz.
1. Quitclaim Deed
Complexity Level: Basic
Grantee Protection: Low
Commonly used in: Property transfers between family members or divorced spouses; Correcting titles
In a quitclaim deed, the grantor “quits” any claim to the property and simply passes it to the grantee. It only transfers whatever interest the grantor has in the property and does not guarantee the grantor’s ownership. In other words, it offers no warranty to the grantee.
Specifically, a quitclaim deed does not protect the grantee from:
- An invalid title: If the grantor’s claim to the title is invalid (i.e., if the grantor does not legally own the property outlined in the deed), the grantee has no recourse. Moreover, while it can correct certain title errors, it does not provide broader title assurances.
- Liens or encumbrances: There are no legal protections against existing liens or other claims against the property. In addition, the grantor is not obligated to assist the grantee in case of such claims.
- Mortgage responsibilities: The quitclaim deed transfers ownership but does not affect mortgage obligations, leaving the grantor liable for any existing mortgage. This means that foreclosure can happen if the grantor defaults on an existing property mortgage.
Because of its risky nature, a quitclaim deed is commonly used to transfer property when there is a high degree of trust between the parties involved. It is sometimes also used to correct a title defect (e.g. misspelling of names).
Most quitclaim deeds involve little or no money exchanged (or, in legal terms, consideration) depending on state laws. California, for example, allows the quitclaim deed’s consideration to be $0 under specific circumstances (e.g., the property is transferred into a trust).
2. Gift Deed
Complexity: Intermediate
Grantee Protection: Low
Commonly used in: Property transfers to loved ones or charities
A Gift Deed, or a Deed of gift, allows the grantor to transfer money or property as a gift without receiving consideration (money) in return. They are commonly seen in estate planning.
Similar to a quitclaim deed, the grantor with a gift deed relinquishes their ownership interest in the property without any warranties or guarantees. Nevertheless, a gift deed has three distinct characteristics that differ from other types of deeds:
- Flexibility: Gift deeds can be either revocable or irrevocable. Revocable gift deeds give the grantor the option to change their mind before the transfer takes place , while irrevocable gift deeds typically cannot be changed.
- Gift Tax: When transferring property through a gift deed, gift tax implications may arise.
- Involvement of a Third Party (Agent): A gift deed can sometimes involve an agent who acts on behalf of the grantor to ensure the gift is successfully transferred to the recipient. This role is common in scenarios where the gift is transferred at a later date or when the recipient is a minor.
Gift deeds can be an effective tool in estate planning, allowing individuals to gift assets and thereby reduce the size of their taxable estate. Additionally, assets passed on via a gift deed bypass the probate process, enabling a quicker and more direct transfer to the recipient without court involvement.
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3. Warranty Deed
Complexity: Intermediate
Grantee Protection: High
Commonly used in: Real estate transactions
A warranty deed assures that the grantor has clear title to a parcel of real estate and has the full legal right to transfer (sell) it to the grantee. It also guarantees that the property is free and clear of any claims, debts, liens, or other encumbrances. Because of these strong guarantees, a warranty deed is the most commonly used type of deed in the US.
It provides the most substantial protection for the grantee and allows for legal recourse if any unsettled debts or issues with the deed arise.
There are two main types of warranty deeds:
General Warranty Deed
Typically used in residential real estate transactions, a general warranty deed guarantees that the seller has the full legal right to sell the property and that the property is free and clear of any claims, debts, liens, or other encumbrances throughout the property’s history.
It comes with the most significant protection for the grantee and provides them legal recourse if an unsettled debt or issue with the property arises. Because of these reasons, a general warranty deed is the most common type of deed used to transfer title from seller to buyer in the US.
Special Warranty Deed
Similar to a general warranty deed, a special warranty deed (also referred to as a limited warranty deed) assures the grantee that the grantor is the legal owner of the property and that it was not encumbered during their ownership.
The key difference, however, is that the warranty provided only applies to the time when the grantor owned the property. In other words, the grantee may be responsible for liens or other interests in the property that existed before it was purchased by the grantor.
This type of deed is often used to sell commercial property when the current owner does not have complete knowledge of the property’s entire history.
4. Grant Deed
Complexity: Intermediate
Grantee Protection: Medium
Commonly used in: Tax or foreclosure sales
A grant deed guarantees that:
- The grantor hasn’t previously transferred the property to someone else, and
- The property wasn’t burdened with debts or legal claims while under the grantor’s ownership, except for those specifically mentioned in the deed.
A grant deed, used in some states, is similar to a special warranty deed. Generally, a state will use either a grant deed or a special or limited warranty deed, but not both. To determine which type of deed is used in your state, consult your county land or recorder’s office.
Unlike general warranty deeds, grant deeds do not offer the same level of protection as it does not guarantee protection from title problems before the grantor takes ownership.
5. Mortgage Deed
Complexity: High
Grantee Protection: Medium
Commonly used in: Loans with real property as collateral
A mortgage deed is a document signed between a homeowner and a bank or lending institution to secure a loan. More specifically, it secures the property as collateral for a loan — meaning a “mortgage payment” is paid towards a loan debt, with the house serving as security in the event of a default.
Note that a mortgage deed does not transfer ownership of the property. When a mortgage deed is in effect, the borrower retains equitable title to the property, meaning they can legally enjoy or use the property, while the lender holds the legal title as collateral.
If the borrower defaults on the loan, the lender then has the right to foreclose on the property to recover the outstanding debt.
Foreclosing on a property with a mortgage deed requires the lender to go through a judicial process, obtaining a court order for foreclosure, known as judicial foreclosure. This process can take several months to a few years, depending on the court’s schedule, the borrower’s defenses, and various procedural requirements.
If an issue arises with the title in a mortgage deed, such as a claim of ownership post-foreclosure, the responsibility may depend on the mortgage deed’s terms. Typically, lending institutions are expected to conduct due diligence, including a chain of title check, as they hold expertise in this field. However, the extent of responsibility can vary based on the specific language and terms set forth in the mortgage deed.
6. Deed of Trust
Complexity: High
Grantee Protection: Medium
Commonly used in: Mortgage scenarios in real estate transactions
A deed of trust, also known as a trust deed, establishes a legal arrangement involving a borrower, lender, and trustee (typically a title company). In this arrangement, the trustee holds the property title in trust for the lender until the borrower fully repays the loan. Upon complete repayment, the trustee transfers the title to the borrower.
Deeds of trust are used in about half of the states as an alternative to a traditional mortgage.
In a standard home loan, the homebuyer is the borrower, the bank is the lender, and a title company acts as the trustee. The borrower makes monthly payments to the bank. If the borrower defaults, the title company can initiate a foreclosure on behalf of the bank.
In most states that use deeds of trust, legal title is transferred to the trustee, who holds the property in trust for the borrower’s benefit. In others, the trustee only holds a lien.
Deeds of trust usually contain a power-of-sale clause, enabling the trustee to sell the property without a court order in case of foreclosure. This kind of foreclosure is referred to as non-judicial foreclosure, which is different from judicial foreclosure with a mortgage deed.
Deed of Reconveyance
In the context of a loan secured by a deed of trust, a deed of reconveyance is used to release the property from the lien once the loan has been fully repaid. It acknowledges the satisfaction of the debt and transfers the legal title to the trustor (borrower).
A deed of reconveyance is typically prepared by the trustee and recorded in the public records to provide clear evidence of the release of the lien.
7. Survivorship Deed
Complexity: Intermediate
Grantee Protection: Low
Commonly used in: Leaving property to surviving spouse or family member
A survivorship deed allows co-owners of real estate to automatically transfer a deceased owner’s share to the surviving owner(s). It can help avoid the probate process after the death of a joint property owner, as the property automatically passes to the surviving owner(s) without the need for the involvement of a will or trust.
This kind of deed is particularly useful in establishing co-ownership of property and securing the right of survivorship. For instance, someone may use a survivorship deed if they want to add their spouse or another individual as a co-owner to ensure automatic inheritance of each other’s share upon death.
A survivorship deed is primarily used by co-owners or joint tenants to ensure automatic property transfer upon the death of one owner. This is distinct from a gift deed, which is used to transfer property while the grantor is still alive.
Based on your state laws, a survivorship deed may be able to establish different types of ownership. Check your state and county laws; consult with an attorney when necessary to understand the legal implications.
8. Bargain and Sale Deed
Complexity: Basic
Grantee Protection: Low
Commonly used in: Foreclosure, tax sales, or estate settlements
A bargain and sale deed includes a warranty that the grantor owns the property but doesn’t guarantee against claims or liens. It does not protect the grantee against title-related problems that may arise after the transfer. The grantee assumes the risk of any encumbrances or defects in the title.
Bargain and sale deeds are commonly used in situations such as foreclosure, tax sales, or settlements of a deceased person’s estate. In such situations, the seller or grantor usually has limited or no knowledge of the property’s history or status.
If you are entering into a bargain and sale deed as a grantee, it is advisable to conduct a thorough title search and consider obtaining title insurance to mitigate potential risks.
9. Contract for Deed
Complexity: High
Grantee Protection: Medium
Commonly used in: Seller financing scenarios where the buyer pays in installments
A contract for deed (also known as an installment land contract, a land contract, or a land sales contract) is a type of unique real estate agreement where the seller essentially finances the buyer’s purchase of the property.
In this arrangement, the buyer obtains equitable title (usually with a down payment) and starts making installments to the seller, including the agreed purchase price and any interest. The legal title remains with the seller until the purchase price is fully paid.
Once the buyer has paid everything, the seller is required to sign a deed that officially transfers the legal ownership of the property to the buyer.
How Do I Know What Type of Deed I Have?
If you have a deed but are not sure which type of deed it is exactly, here are some key elements to look for when identifying it:
- The presence of warranties or guarantees;
- The level of protection offered to the grantee; and
- The specific purpose or situation for which the deed is commonly used.
If you are unsure about the type of deed you have, it is advisable to consult with your county’s recorder’s office for guidance and clarification.
Conclusion
Different types of property deeds offer varying levels of protection and are suited for different situations. Whether you are entering into a residential real estate transaction, transferring property as a gift, or securing a loan with real property as collateral, knowing the specific characteristics and considerations of each deed type will help you make an informed decision.
Remember to consult with an attorney or title company to ensure a smooth and legally sound transfer. Conducting a title search and considering title insurance can provide additional protection and peace of mind.
