There are three basic types of deeds which are commonly used in real state transactions. Deeds are evidence of legal title, and they are used to transfer legal title when buying or selling real property; and title simply means ownership. Deeds are written declarations of intent to transfer title, stating that consideration (payment or something of value) has been transferred in exchange for the title, and contain a description of the property to be transferred as recorded in the county clerk’s office. Most deeds should be recorded with the clerk’s office in order to provide public notice that a new owner of the property exists, which will prevent any parties from placing liens or ‘clouds’ on that property’s title or a fraudulent seller from reselling the same property to others.
A quitclaim deed is the most basic and lowest form of deed, and it does nothing more than transfer all the interest the transferor/seller has in the property, which could be partial or none. Quitclaim deeds are highly risky purchases, and one risks being swindled accepting one. On the other hand, buyers are required to accept quitclaim deeds after some purchases such as at government auctions. Most attorneys will advise against accepting a quitclaim deed in any form of real property transaction, unless the transfer is from a relative such as a spouse or a parent, for example.
A special warranty deed only guarantees good title of the seller, and no farther back in time. As such, it is a better deed than a quitclaim, although it still carries some risk, depending on how long the seller has owned the proeprty. However, with a professional title search and opinion it is possible that the title is perfectly clean and the buyer may receive a significant discount on the property for accepting such a deed. This type of deed is not common, except in commercial transactions, and occasionally some sellers simply want to sell the property without the unqualified promise of a title guarantee to the first owner of the property. A special warranty deed is a perfectly acceptable way to transfer title.
A general warranty deed guarantees good title all the way back in time to the first owner of the property. This is the most common form of deed and one on which many title companies will insist on if the buyer is to obtain title insurance. This type of deed comes with six specific warranties, which will be discussed in a separate article, however, the main point here is that if there is any defect in title, ever in the history of the property, and the purchaser is disturbed in his unqualified possession and ownership of the property, the previous owner is legally bound to commit the time and expense necessary to resolve the matter and quiet title in the new owner or be subject to litigation and potential recission of the sale. A “subject to” clause may be inserted into this deed or a special warranty deed, which will state any known defects, or potential defects in title right on the deed, and limit the seller’s liability for them to the transferee buyer.
Typically, title companies will insist on a general warranty deed to provide title insurance, although sometimes a special warranty deed will be sufficient if the title search discovers a particularly clean history for the subject property. A quitclaim deed will have a very difficult time obtaining title insurance.
A buyer of property should consult an attorney before the contracting stage, so that the contract may be reviewed prior to the title transfer, as the contract may obligate the buyer to accept a certain type of deed, among other potentially dangerous obligations, and once signed it will be too late to demand a more favorable type of deed.
There are numerous other types of deeds used in specific situations. To ensure you are planning on using the correct type you should consult a knowledgeable attorney.