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Deeds pass on property; title insurance backs your claim
By John Adams
Published on: 07/22/07 www.ajchomefinder.com
While there are many legal instruments used to convey property, the three most commonly seen deeds are often the
subject of controversy. Lawyers and agents sometimes argue over which type is best, while the hapless buyers look
on in confusion.
Let's take a look at these deeds, and try to determine which works best in the most commonly seen real estate
situations.
First, the most common form of deed is the "general" warranty deed used to convey property from one party to
another. It is the highest and best form of transfer, and, in laymen's terms, says this: I own this property by myself,
and no one else has any claim on it whatsoever. I am transferring it to you. And if anyone ever makes a claim on this
property in the future, I will come back and defend it against the claimant at my expense.
Most real estate contracts call for the seller to deliver a general warranty deed to the buyer at the closing, but you
should remember that the warranty of ownership is only as strong as the person making the warranty. If Mr. Seller
should pass away or disappear, you might have no one to fall back on if there were a claim against your ownership.
This is why smart home buyers always purchase title insurance, regardless of the strength of the seller's title
guarantee. Once title insurance is in place, the quality of the title is assured indefinitely.
A second type of deed we often see is a "limited" warranty deed. Sometimes called a "special" warranty deed, this
document makes a claim of exclusive ownership of the property, but limits the warranty to claims arising from the
period of time during which the seller owned the property.
This type of deed is often used by banks or governmental institutions. Their position is that they can only be
responsible for actions taken by them, and they have no knowledge of what may have happened years ago. If it
strikes you that such a position is particularly convenient for the institution, you are right. It gets the seller off the hook
for any title irregularities that may have happened years ago, but have yet to be uncovered.
If you ever intend to buy any real estate from a seller who only offers a "limited" warranty deed, it is imperative that
you purchase title insurance. Otherwise, you would be fully exposed to any past defects in title, such as a long-lost
relative of a previous owner who might have had a claim to some or all of the property in years past, but who could
not be found at the time the property was passed on.
The third type of deed most often seen in residential real estate is perhaps the most confusing, because its name
leads people to believe it can be used in place of other deeds. But that is not so.
A quit claim deed serves the purpose of permanently transferring whatever interest the seller (or grantor) might have
in a piece of property to the buyer (or grantee), regardless of what that interest is. So the value of the quit claim deed
is exactly equal to the value of the grantors interest in the property, whatever that interest might be. But the grantor is
not saying he will defend your ownership of the property. The one promise made in a quit claim deed is an important
one. And that is the promise that the signer will never try to reclaim ownership in the future.
So this type of deed is often used by attorneys to take one person's name off title or to permanently solve the
questions of whether or not a relative or a partner might have some undisclosed interest in a piece of real estate.
Some people have mislabeled this instrument as a "quick" claim deed, believing that it can be used in place of a
warranty deed. However, it carries absolutely no warranty of title and would likely arouse suspicion during future title
exams.
As always, my advice is to follow the directions of your attorney, and to purchase title insurance with every real estate
acquisition.