A deed is a legally binding document that transfers property ownership to a new owner. Deeds are typically used to transfer property or vehicle ownership between two parties.
What Is a Deed?

The purpose of a deed is to transfer legal ownership of a property or asset from one individual or organization to another.

For the owner to be able to sell, refinance, or obtain a line of credit on real property, the deed must be properly recorded with the local government. This is typically the responsibility of the buyer's attorney or title insurance company.

• A deed is not a title; it is a signed legal document that grants its holder ownership of an asset but may impose conditions on the transfer of the title. 

• If the deed is not written, notarized, and recorded in the public record, it may be susceptible to legal challenges and delays.

•There are three primary types of deeds: grant deed, warranty deed, and quitclaim deed.

Understanding a Deed

A deed is only enforceable in a court of law after it has been recorded in the public record by a local government official tasked with document maintenance. A deed's execution must be notarized. Some states require witnesses as well.

A deed may be considered imperfect if it is not written, notarized, and recorded in the public record. The document and the transfer of title are valid, but the supporting documentation may need to be filed with the register of deeds to avoid a delay in the event of a legal challenge.

Commissions, academic degrees, licenses to practice, patents, and powers of attorney are additional types of documents that confer comparable privileges to deeds.

The register of deeds is accessible to the public and is typically kept at the municipal, county, or state level.

Types of Deeds

There are numerous types of deeds, each of which serves a unique function. In general, they are classified in the following ways:

Grant deed

A grant deed contains two guarantees that the asset has not been sold to another party and that it is not burdened by any encumbrances that have not been revealed, such as outstanding liens or mortgages. Grant deeds are not required to be recorded or notarized, but it is typically in the grantee's best interest to ensure that they are.

Warranty deed

A warranty deed, also known as a special warranty deed, states that the grantor did not cause any title defects during his or her ownership. It offers the highest level of protection to its possessor. A warranty deed provides the same protections as a grant deed, plus the grantor's assurance that he will defend the title against any claims.

Quitclaim deed

A quitclaim deed releases an individual's interest in an asset without specifying the nature of the individual's interest or rights. The grantor may or may not be the legal owner, and makes no guarantees. Quitclaims are frequently utilized in divorce settlements and property transfers between family members.

In some states, obtaining a mortgage on a home necessitates creating a deed of trust. A trustee holds the trust deed until the property loan is paid in full.

Content Requirements of a Deed

The precise requirements vary from state to state, but are essentially the same. In California, for instance, the transferred property must be adequately described. Both the grantor (the person transferring title) and the grantee (the person accepting title) must be identified.

The deed may be void if the grantor lacks mental capacity, if it was signed by a minor, or if it was forgery.

A deed is not required to be filed with the local government in order to be valid, but doing so can prevent future complications and delays if the deed is involved in a legal dispute or if the property owner wishes to sell the property.

Deed Limitations

Even if a perfected deed has been filed, a transfer of ownership can become confusing. There may be title issues for a variety of reasons. False or erroneous deeds may be filed, necessitating clarification with the record keepers.

There can also be probate concerns. For instance, if the owner of a property dies without leaving a will specifying who should inherit the property, the heirs may contest the property title in court.

Moreover, the conveyance of a title through a deed doesn't really necessarily grant the new owners the freedom to use the property as they see fit. A deed may contain restrictions on the owner's actions, such as the homeowner's association's regulations.

A person who signs a deed for a parcel of land, for example, has the legal right to possess that land, but may not be able to construct a shooting range on it due to the potential dangers. In other instances, the owner of a piece of land may own it but be unable to develop it due to environmental restrictions.

Deed vs. Title

Although not identical, a deed and a title are inextricably linked:

• A deed is a legal document and that transfers property ownership from one owner to another. It details the property being transferred and identifies all parties involved. The document is signed by all parties and entered into the official record. All U.S. states mandate that real estate deeds be recorded with the government, although the specifics vary.

• The title might not exist in any tangible form. The concept of property ownership confers possession and use rights on the owner. The deed serves as evidence of ownership.

Deed FAQs

Here are the answers to several frequently asked questions regarding deeds.

Does a Deed Indicate Homeownership?

A deed is evidence that you are the home's owner (or other property). You own the property in question.

What Is a Trust Deed?

A trust deed is a real estate transaction involving a lender, such as a bank, a buyer, and a seller. It adds a fourth party to the transaction: a trustee, typically a title company, who receives a property interest. If the buyer fails to make payments, the trustee can seize and sell the property.

Many states use the deed of trust process as an alternative to a mortgage agreement. From the perspective of the purchaser, it makes no difference. You must pay your mortgage or lose your home.

What Is a Deed in Lieu?

In its full form, the phrase is "a deed in lieu of foreclosure." A homeowner who is at risk of losing their home due to nonpayment of a mortgage may choose to simply transfer the deed to the lender rather than face the consequences of foreclosure proceedings.

In a deed-in-lieu-of-payments agreement, the lender agrees to accept the property and release the debtor from further obligations.

How Long Does a Deed Remain Valid?

As stated previously, a deed of trust functions similarly to a mortgage and has a time limit for the full repayment of the property loan. At that time, the trustee is responsible for replacing the deed with a new one that transfers the title to the owner.