Types of Deeds You Need to Know for the Real Estate License Exam
You must deal with several different kinds of deeds for the Real Estate License Exam. Different deeds serve different purposes, and although all convey ownership, they differ in the kinds of warranties or guarantees they provide for the grantee.
You should check out the most common types of deeds used in your state and find out whether they have names that are different than the ones listed here.
General warranty deed
General warranty deeds, which sometimes are called the full covenant and warranty deeds, provide the greatest protection and warranties by the grantor to the grantee.
Covenant of seisin: Seisin is the guarantee that the grantor is the owner of the property and has the right to transfer ownership.
Covenant of quiet enjoyment: Quiet enjoyment means that the grantor guarantees that no one else can come along and claim ownership of the property. It also means that if a later party’s title claim is found to be better than the owner’s title, the grantor is liable for any losses.
Covenant against encumbrances: The grantor guarantees that the title to the property has no encumbrances like an easement or lien. Easements are rights that enable someone else to use some of the property, and liens are financial claims against the property. The only exceptions to this warranty are encumbrances that are specifically stated in the deed.
Covenant of further assurance: In this covenant, the grantor promises to obtain and provide documents necessary to clear up any problem that comes up with the title.
Covenant of warranty forever: The grantor guarantees to pay all costs to clear up any title problems at any time in the future.
A particular feature of a general warranty deed is that warranties cover any title problems that may have occurred during the ownerships of all past owners.
Special warranty deed
Special warranty deeds contain only two warranties. The first is that the grantor has title to the property. The second is a guarantee that nothing was done to affect the title during the grantor’s ownership, and if a problem did exist, the grantor will correct it.
Because of the limited warranties, people acting as third parties sometimes use special warranty deeds. The executor of an estate uses a special warranty deed to convey property belonging to an estate or trust.
Grant deeds are used in a few states and provide limited warranties. The grantor guarantees that the property hasn’t been conveyed to anyone else, that no encumbrances limit the use of the property except the ones specifically listed in the deed, and that if the grantor later obtains any other title to the property, it will be conveyed to the grantee.
These guarantees are limited to the period of time the grantor owned the property. The grant deed is used in only a few states, but if yours is one, you need to remember this information.
Bargain and sale deed
The distinguishing feature of this type of deed is that it has no warranties. That the grantor has full title to the property is implied. Essentially it gives no protection to the grantee. This type of deed sometimes is used in foreclosure and tax sales.
Warranties can be put into the deed to make it similar to the special warranty deed, and in that case, it’s referred to as a bargain and sale deed with covenant against grantors acts.
The quitclaim deed provides no warranties to the grantee and gives no implication of how much or how good the grantor’s title to the property is. It conveys to the grantee only that much ownership interest that the grantor may have. Quitclaim deeds often are used to clear up a cloud on the title.
A cloud on the title is something that makes the title less than complete, like someone appearing to occupy the property without the owner’s permission or indicates that some other ownership interest may exist, like two properties abutting a private road with both claiming ownership of the road. Quitclaim deeds sometimes are used for uncomplicated transfers of property ownership within a family.
Trust and reconveyance deeds
A trust deed is used to convey ownership by a trustor to a trustee for the benefit of a beneficiary as security for a debt. Here’s an example: Party A, the trustor, borrows money from Party B, the lender, and then signs a trust deed conveying ownership of the property for which he borrowed money to Party C, the trustee, a third party.
The lender is the beneficiary. If Party A pays all the borrowed money back to the lender, Party C then reconveys the property back to Party A. If Party A fails to repay the debt, Party C sells the property and gives the money to the lender to pay off the debt.
On a related note, a reconveyance deed is used to reconvey title to property from a trustee back to a trustor after a debt for which the property is security has been paid off.
A trustee’s deed is given by a trustee when ownership of property held by a trust is conveyed. Say, for example, that a young child owns property held in trust until he reaches legal age. The trustee of the trust can use a trustee’s deed to convey that property to someone if the trust decides to sell the property.
Deeds often are issued as a result of legal proceedings. An executor’s deed in the case of a deceased person’s estate and a sheriff’s deed in the case of a sale of property seized by a local unit of government town or the bank are two examples of such court-ordered deeds. State law establishes these deeds, and state law governs their form.