Knowing Your Deeds
So, it’s finally time, you are about to buy your first piece of property, you’ve scoped out the house you want, made an offer that was accepted, and now you’re getting into the legal documents for the property transaction. One of the most important things you need to consider and be aware of during this real estate transaction is how you will be taking ownership of your property and how it will be deeded to you. The assurances, or lack of assurances, that you receive from your Deed massively affect your legal standing and your ability to seek reimbursement from the previous owners for defects that were or were not disclosed to you at the purchase or sale of the property. The three main types of Deeds are General Warranty Deeds, Special Warranty Deeds, and Quit Claim Deeds.
General Warranty Deeds are what most lawyers would suggest that buyers obtain if possible. These deeds provide covenants of a right to sell, of quiet enjoyment, and of freedom from encumbrances. The main point of a General Warranty Deed is that it encompasses the entire history of the Property. This Deed promises that there are no encumbrances on this property whatsoever and that the owner has the absolute right to sell the property. In a General Warranty Deed there is also a promise to defend new owners if their ownership of the Property is challenged by a third party or a previously undiscovered encumbrance comes to light.
A Special Warranty Deed is similar to a General Warranty Deed but the key difference is that the Owner is only ensuring that no defects or issues have arisen during THEIR ownership of the property, not anyone else before them. If there were previous encumbrances that the previous owners were unaware of and did not occur during their ownership, they are not liable to the buyers for the discovery of this issue and have no obligation to help defend against it.
Finally, the least encompassing deed, the Quit Claim Deed. This is a deed that should rarely be used and only in situations where both parties require no assurances from each other. The Quit Claim Deed simply conveys the property, it does not warrant against any encumbrances and makes no promises as to the Seller’s actual ownership of the Property. A Quit Claim Deed is often used between families and close friends where there is immense trust or no need to establish liability if encumbrances are discovered at a later date.
Knowing the kind of deed that you have is very important when determining your legal rights in regards to a property you take ownership of or give ownership away. Whether you are buying or selling you want to be positive you are aware of what promises you are making or are being made to you about such an important transaction.
For assistance with drafting or reviewing the deed to your next property sale or purchase, please consider contacting the Law Office of Andrew Szocka P.C. online or by phone at (815) 455-8430.