A deed is a legal document that grants ownership to a piece of real estate or other property asset. A deed transfers the title of an asset to a new owner, and it is usually recorded in the local county clerk’s office. Recording is a way to protect title and ownership because it puts the public on constructive notice as to the buyer’s ownership. In real estate transactions, a deed is usually delivered at closing. A valid deed for real estate must be in writing. Although different jurisdictions require different elements for a valid deed, the following elements are generally required:
- The names of the grantor and the grantee, and words of conveyance such as “grant, convey, assign, transfer, and give,” any of which demonstrate the grantor’s intent to pass title to the grantee.
- The property’s legal description that adequately describes the property, generally with lots, blocks, metes, and bounds, and any other information describing the property
- An affidavit or statement of consideration. As a matter of contract law, a deed must have consideration to be valid. Consideration is defined as something of value given for the deed. Usually the consideration is money, but it could be for services or anything of value. The amount of consideration does not matter. For example, a sufficient statement of consideration may be “for Twelve Dollars and other good and valuable consideration.”
- A valid deed must be signed by the grantor and delivered to the grantee.
Additionally, different deeds contain different warranties of title. The different types of deeds include a warranty deed, special warranty deed, and quitclaim deed. After the closing, the purchase contract merges with the deed and the buyer can only sue on the warranties contained within the deed.
- A warranty deed is the most favorable type of deed as it provides full warranties from the grantor to the grantee. The warranty deed includes the six traditional Covenants for Title or promises and assurances by the grantor to the grantee.
- Covenant of Seisin: that the grantor has good right of ownership in the property with the right to convey.
- Covenant of Right to Convey: grantor's promise that they have not contracted to sell the property to another.
- Covenant Against Encumbrances: the grantor promises that there are no encumbrances, such as liens on the property, other than those that have been previously disclosed.
- Covenant of Quiet Enjoyment: the assurance that the grantee and their heirs and assigns will enjoy the property without interruption or deprived of its possession.
- Covenant of Warranty: the grantor's promise to defend the buyer against anyone who comes along later and claims title to the property.
- Covenant of Further Assurances: this requires the grantor to take any necessary affirmative steps to further cure any defects and protect the buyer, even from defects in title that date back prior to the grantor’s ownership.
- Unlike the warranty deed, a special warranty deed is a deed where the seller/grantor of the property warrants only against any defects that occurred during their ownership.
- It does not offer any protections or guarantee against any title defects that existed before the seller owned the property.
- Basically, with a special warranty deed, the buyer cannot sue the seller for the title defect.
- Special warranty deeds are very common on commercial real estate transactions because parties typically rely on title insurance for title protection.
- Finally, the quitclaim deed is a deed that makes no warranties that the property has clean title.
- Essentially, it conveys only whatever interest the seller/grantor currently has in the property, if any, and makes no assurances as to good title.
- Properties purchased under a quitclaim deed should have title insurance to protect the buyer since the buyer will not be able to recover anything by suing the seller on the deed if an issue arises.
[Last updated in September of 2022 by the Wex Definitions Team]