What is a deed?

If you’re planning on buying a home, it’s important to know what a deed is and how this critical piece of documentation is used. Here’s what you need to know about what a deed is and why you need one to close on your home.

Deeds are legal documents

A deed is the physical, recorded document that declares legal ownership of a property. It’s physically filed with the local courthouse or accessors office. Simply put, it’s proof that you hold the title to a property.

There are several types of deeds:

• General warranty deed: Protects the buyer and ensures that the seller has full legal right to sell the property. It also promises that the seller does not know of any property issues.
• Special warranty deed: Like a general warranty deed, but this is used for commercial properties and only guarantees the title for the time the seller owned the property.
• Quitclaim deed: Used when the property is transferred from one legal entity to the next, without the exchange of money. The most common being a parent to a child.

When you purchase a property, the deed is what transfers the ownership and title to the seller (grantor) to the buyer (grantee). Both parties must sign the document and have it notarized for the deed to become official and binding in a court of law.

Deeds vs. titles

The terms deed and title are sometimes used interchangeably, but they have some very important distinctions.

• A deed is the physical document showing that you hold the title. It must include the legal description and information like where property lines lay, street address and tax identification number.
• A title is the legal term that’s used to refer to the legal ownership of a property. Unlike deeds, they aren’t documents filed on public record—they are a concept.

What to look for

Before you purchase a property it’s always advised that you get the home’s deed and title researched.

• A title search is standard procedure to make sure that it’s free and clear of defects. Defects could include an ex-spouse still having rights to the property, liens, and unpaid taxes.
• Researching a deed can also help you understand how the home’s value has changed over time.

In order to make an informed decision on whether to extend an offer, ask your agent any questions you have about the property. It’s always best to have the background and history for negotiations on sale price or concessions.

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The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.