BUYING PROPERTY? WHAT KIND OF DEED DO YOU NEED?

             If you are buying or selling real property, you want to use the right kind of deed for the situation.  There are three basic kinds of deeds:  a general warranty deed, a special warranty deed, and a non-warranty or “quitclaim” deed.  If you are a buyer, you want your deed to get you everything you bargained for.  If you are a seller, you do not want to make promises about the property’s title that you cannot keep.

            A general warranty deed is the most common.  Most home sales between strangers involve a general warranty deed.  With it, the seller warrants that he has good title from the people who owned it before him, and he has the right to pass on good title to the buyer.  It promises that the seller will defend that good title on the buyer’s behalf if he has to (or be liable to the buyer for damages if the warranty isn’t true). 

            In a special warranty deed, the seller promises to the buyer that he has done nothing to prevent the buyer having good title (e.g., no judgments outstanding against the seller), but the seller makes no promises about what any other owners may have done.  They are often used in divorce settlements.  If a couple agrees that the jointly-owned home will become the wife’s, the husband usually signs a special warranty deed because he doesn’t know what the wife (his co-owner) may have done to impair the title. 

            A non-warranty deed is also known as a quitclaim deed.  It unfairly gets a bad rap as “the Brooklyn Bridge deed,” from scams in the early 1900s where shysters would try to sell someone an official looking deed (that was a quitclaim deed) to the Brooklyn Bridge.  A quitclaim deed has no warranties of title at all.  A quitclaim deed simply means that the seller is conveying whatever interest he might have in the property, without saying what interest (if any) he actually owns in the property.  However, they are perfectly legal and useful in many legitimate transactions.  You would want to give a quitclaim deed when you are unable to promise anything about the title to the property.  For example, if old deeds and surveys show a boundary line overlap with your neighbor, but the two of you agree to fix the boundary line in a certain place, you will likely exchange quitclaim deeds on either side of that new line.  Quitclaim deeds are appropriate because neither owner can warrant to the other that she has good title where the line has been unclear or in dispute.

            What about a “deed of trust”?  Where does it fit into this system?  It doesn’t.  A deed of trust isn’t really a deed.  Whenever you read the phrase “deed of trust,” think “mortgage” in its place.  In some states that document is called a mortgage (which is clearer), but for historic reasons you probably won’t care about, in North Carolina it is called a deed of trust.  Yes, that confuses first year law students too.

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