Deed Requirements You Need to Know for the Real Estate License Exam
As you will need to know for the Real Estate License Exam, the requirements for a valid deed have been passed down through history by common practice and law so that no one can have any misunderstandings about
What is happening when the title to a property is conveyed.
Who owns the property now.
To whom the property is being conveyed.
What (exactly) is being conveyed in terms of the property boundaries.
What rights are being transferred.
Because of the importance of establishing and proving property ownership, all states have adopted legislation called the statute of frauds. The statute of frauds requires that all real estate transfers of title be in writing.
Depending on your state, and sometimes even where you happen to be within your state, attorneys are required to prepare deeds, the exact form of which may vary somewhat; however, the essential requirements for a deed, and therefore the conveyance, to be valid are the same. The requirements that follow are listed in the general order in which they appear in most deeds.
Grantor: The grantor is the current owner of the property who is conveying the title to someone else. The grantor must be legally competent and of legal age. Remember the grantor can be selling the property, exchanging it, or giving it away. The grantor could be a corporation or multiple parties if it’s a co-ownership situation.
Grantee: The grantee is the person receiving title to the property. An important factor in naming the grantee in a deed is that the grantee be named in such a way as to avoid any confusion about who he or she is. Addresses for both grantor and grantee are also sometimes required. Grantees can also be corporations or multiple parties.
Consideration clause: The deed must contain words that indicate that the grantor is receiving something of value in exchange for the property. Generally, money is being received, and the consideration clause needs to state the amount. In some places, the phrase ten dollars and other valuable consideration or something similar is used for the consideration.
No, the buyer did not get a super bargain as some people might think. The reference to ten dollars is used to hide the actual amount paid for the property if someone wants to keep that information confidential. When the property is a gift, the words for love and affection, or similar phrasing, are used.
Granting clause: A granting clause states that the grantor is conveying ownership of the property to the grantee. In fact, the granting clause also is known as the words of conveyance. The granting clause includes words that describe exactly what rights the grantee is receiving in the deed and whether the grantee is taking title to the property with another person.
Habendum clause: The habendum clause, which contains the words to have and to hold, further defines the rights being granted to the grantee. This can vary from state to state. The words in the habendum clause must agree with the words in the granting clause.
Legal description: Just think of the legal description as wording that’s designed to leave no doubt about the exact boundaries of the property being conveyed.
Exceptions and reservations: This part of the deed is where those restrictions or limitations are described.
Grantor’s signature: The grantor must sign the deed for it to be valid. Usually, if more than one person owns a property, all the owners must sign. In some states a husband or wife who own property by themselves may have to have the spouse also sign the deed even though the spouse does not have title to the property.
An attorney-in-fact can be permitted to sign the deed in most states. An attorney-in-fact is someone who is appointed by a power of attorney. An attorney-in-fact doesn’t necessarily have to be a lawyer.
If the grantor is a corporation, other rules may apply. A resolution by the corporate board of directors or the majority of the shareholders usually is necessary to convey property owned by a corporation. One or more duly authorized corporate officers must sign the deed.
Acknowledgment: An acknowledgment is a way of proving that the person who signs a deed signed it voluntarily and is, in fact, who he says he is. An acknowledgment normally is witnessed and attested to by a notary public, before whom you produce evidence of your identity and indicate that you’re signing the deed of your own free will.
An acknowledgment technically is not required for a deed to be valid; however, in most states, a deed without an acknowledgment cannot be recorded in the official public records. It is usually not necessary to record a deed for the transfer of title to be valid.
Delivery and acceptance: The conveyance of title to a piece of real estate has not officially taken place until the grantor delivers the deed and the grantee accepts it. The term passing title refers to the acts of giving and receiving the deed. The date of the transfer of ownership is the date the deed was delivered and accepted.
An exception to this timing in some places occurs when closing in escrow. In that case, title passes when the deed is delivered to the escrow agent.