What is a deed?
A deed is a written document that conveys legal and equitable title to real property. The only way a purchaser takes title to real property is through a deed.
What is the difference between a title and a deed? (Deed vs Title)
In the context of real estate, a deed is a document that conveys title. The deed is an actual piece of paper, while title is the ownership right that the deed conveys. When you sell the property, you create a new deed that serves as written proof that you have transferred your ownership rights, or title, to someone else.
Requirements of Texas deeds
To be valid in Texas, a deed must:
- be in writing and signed by the Grantor (the seller)
- include clear language of intent to convey or otherwise transfer the property
- include the name of the Grantee (the buyer)
- include the legal description of the property
- be delivered by the Grantor and be accepted by the Grantee
Notice, it is not a requirement that the purchase price be listed on the deed. In fact, for privacy reasons, most deeds contain the following boilerplate phrase for consideration: “ten dollars and other valuable consideration.” The following items should be in the deed, but the lack thereof won’t affect the validity of it:
- purchase price
- recording the deed in the real property records
Types of Deeds in Texas
General Warranty Deed
A general warranty deed is the most complete deed. It contains both express and implied warranties. general warranty deeds warrant the entire chain of title for the deeded property (from the seller to the sovereign) and obligate the seller to defend the buyer against any title defects, even if those defects existed prior to the seller’s ownership.
Special Warranty Deed
The major difference between a general warranty deed and special warranty deed is that a special warranty deed warrants that the seller has not experienced any title issues during the time that the seller has owned the property. In other words, the seller’s liability is limited only to title defects during his or her period of ownership. Special warranty deeds are a good option for one co-owner to transfer ownership to a co-owner, such as in a divorce. Special warranty deeds are also common in the probate context when executors or administrators are needing to convey land out of an estate.
Deed Without Warranty
A deed without warranty is effective to convey only the seller’s interest in the property, and makes no warranties (express or implied) as to title defects. Therefore, the seller has no liability for any title disputes that could arise in the future. A deed without warranties is slightly better than a quitclaim deed, but most attorneys would advise a buyer not to accept a deed without warranties. The best option for a buyer is always a warranty deed, general or special.
A quitclaim deed is actually not a deed at all. A quitclaim makes no warranties about title defects. Rather than convey the seller’s interest (if any), a quitclaim deed merely signifies that the seller releases (“quits”) any claim to the property. Quitclaim deeds are highly disfavored in Texas, but are sometimes used when a family member gifts property to another family member or in a transfer of property between spouses. However, in Texas a deed without warranty is a better option, and obtaining a warranty deed is always preferable.
Deed of Trust
A deed of trust is not a deed. A deed of trust is a security instrument, similar to a mortgage, that allows a property owner to obtain a loan from either a bank, third-party lender, or individual. The lender is called the grantee in this context and the borrower is called the grantor. The deed of trust creates a lien on the property to secure the grantor’s (buyer’s) promise to repay the loan. Once the loan is satisfied, the lien is released. Generally, the grantor is obligated to pay property taxes, insurance, and maintenance and repairs of the property. The grantee should file the deed of trust with the county clerk to provide notice of a lien on the property.
If the grantor defaults on the loan, the trustee is authorized to foreclose on the property with no lawsuit and no judicial oversight. This is called a non-judicial foreclosure. The property is sold at public auction and the proceeds will be used to pay back the principal of the loan, any attorney’s fees, and foreclosure costs. The trustee must give any excess proceeds from the sale to the grantor.
Sometimes people refer to deeds held in trust as “trust deeds,” but this is not the same thing as a deed of trust. If you are a beneficiary of a deed held in trust and you need to transfer that deed out of trust, you should consult an attorney experienced in real estate law and trust law.
An assumption deed is used when another person assumes the note of a deed of trust already in place. The assumption deed or assumption deed of trust is executed when the owner of real estate burdened by a deed of trust sells, and the buyer agrees to assume the debt and make payments under the deed of trust. It is, however, important to note that the buyer is obligated to the seller, rather than the lender in the deed of trust. The seller (called the grantor in the deed of trust) is still obligated to the lender (called the grantee in the deed of trust), unless the lender expressly releases the seller.
The assumption deed typically includes the same warranties as a general warranty deed or special warranty deed.
Trustee’s Deed or Foreclosure Deed
A buyer obtains a trustee’s deed, also called a foreclosure deed, by successfully bidding on property at a foreclosure sale. When a borrower in deed of trust (grantor) defaults, and the trustee sells the property to satisfy the debt, the trustee will give a trustee’s deed to the successful bidder at auction. The deed typically provides the same warranties of title as a general warranty deed.
Transfer on Death Deed
A transfer on death deed (TODD) is a deed in which the owner (grantor) makes a designation to transfer the property to one or more beneficiaries upon the owner’s death. When the owner dies, the property passes directly to the beneficiary without the need of probate. After executing the TODD, the owner retains all rights to the property and may sell it or use it as collateral for a loan. Upon sale of the property, the TODD is automatically revoked. It may also be revoked by filing a revocation in the county records. If a will and a TODD are inconsistent, the TODD controls.
Deed in Lieu of Foreclosure
A deed in lieu of foreclosure is used to satisfy a debt by transferring the property to the lender in exchange for a release of all liens and claims against the borrower. As the name clearly indicates, a deed in lieu of foreclosure eliminates the need for the lender or the trustee in a deed of trust to sell the property in public auction or foreclosure sale. The deed in lieu of foreclosure should contain specific language within the deed to transfer the property as a satisfaction of debt.
Deeds with Co-Owners
In Texas, co-owners are presumed to be tenants in common, meaning that each co-owner’s heirs/beneficiaries will inherit his/her interest in the property upon the owner’s death. In a joint tenancy with right of survivorship (JTWROS), the other co-owners automatically obtain the deceased co-owner’s interest and it avoids probate. To create a JTWROS, you need specific language in the deed expressing intent to create a right to survivorship and it must be signed and acknowledged (notarized) by all joint tenants.
Deeds with a Life Estate Reserved
Generally, a deed conveys a fee simple estate to the buyer (grantee), meaning that the buyer receives all rights to the property and may enjoy it as he/she pleases. However, a seller (grantor) may include reservations or exceptions in the deed. A reservation operates to convey less than the grantor’s full interest and reserves some interest in the grantor.
When you reserve a life estate, you keep the legal right to continue to use the property during your lifetime. You would continue to live on the property, care for it, and pay property taxes. Once you pass away, the legal ownership would automatically transfer to the grantees upon recording of the death certificate. This deed is often used to avoid Medicaid liens, while qualifying for Medicaid benefits. However, it cannot be revoked or otherwise changed without the written consent of both the life tenant and the remainderman. How would one get around the limitation on revocation? By using a TODD or Lady Bird Deed.
Lady Bird Deed
Simply put, a Lady Bird Deed is a revocable deed that retains a life estate. An enhanced life estate, also known as the “lady bird deed,” grants ownership rights to one person (the “life tenant”) during their lifetime and bestows a future interest in the property to another person (the “remainderman”). Unlike the traditional life estate deed (see above), a Lady Bird Deed can be revoked or otherwise changed without the consent of both the life tenant and the remainderman.
A correction instrument or “correction deed” supplements and corrects an original deed that contained some error or mistake. The instrument relates back to the time of the original deed and leaves the essential terms of the original deed intact.