What is a deed and why is it important in the conveyance of real estate? While I am not giving legal advice, understanding deeds and their pertinence on the property as well as who has the rights to sell the property is important. Doing your homework early could save you time and money.
A deed is a legal document that transfers property ownership from a seller/grantor to a buyer/grantee. It contains a legal description of the property including property lines and identifies the sellers/grantor and the buyer/grantee. Normally it is prepared by an attorney with the assistance of a title company and is signed by both parties to make it official. The deed is filed in the county courthouse where the property is located and becomes public record.
When you are looking at a property typically you consider the address assigned, however it is the legal description that identifies the property. If the legal description is entered incorrectly on the deed, you may have purchased something different than you expected. In addition, if there is no deed filed or if there is a dispute of ownership you may meet challenges.
Ownership is identified on the deeds filed at the courthouse. Tax bills might show the same name however, it is not always a reliable way to determine ownership. Deeds show who can be party to the sale. All owners listed on the deed must be party to any purchase agreement. For example, if the deed lists three siblings it will require all siblings to sign on the purchase contract as well as the deed to convey. Finding this out during the title search period could delay the purchase of your investment.
Start first by pulling the tax bill at the assessor’s office and proceed to the recorder’s office. Many offices today store their deeds on microfiche which makes it easier to pull and print copies. When searching the database be sure to look for subsequent transfers for this property such as quit claim deeds and mortgage deeds. Quit claim deed normally happen after the originally deeding and may happen when a property is transferred between family members. They are used when a property is transferred without a sale. Quit claims do not go through a title search process and are not protected by title insurance. Mortgage deeds imply that there is a mortgage on the property which means it has a lien. If the property has been paid off there should show a release of the mortgage.
Taking time to grow in your understanding of the process will help you ask the right questions of your sellers and your title companies. By having a working knowledge, you will ask right questions and avoid the pitfalls of blindly assuming.
