The formulation of a sales contract is the most important part of a real estate negotiation and the manner in which it is written governs the fundamental aspect of trading between two parties. However, the actual deeds to a property are critical factors of each transaction and cannot be ignored. The deed signifies true ownership and it is important to understand it in all its aspects.

Let us examine what constitutes a deed. Simply put, a deed is a legal document showing ownership of a property, it also specifies the type of ownership, it unambiguously describes the property, and lists out and references the restrictions and covenants applicable to the property specified in the deed - particularly if any such restrictions or covenants with respect to that type of property are specified in the legal records.

Deeds have a long history, and in the old days they were not the bland legal documents we know them for today. In Europe, during the Middle Ages, they were made from precious pieces of parchment, were well crafted and expertly styled and often bore unique seals and marks to show their authenticity. There were other styles of deeds as well. Some were made from single sheets of parchment that recorded the title information two times, once the deed had traded hands or was made, the parchment would be torn in half in a very deliberate manner, so that two complete copies of the deed would result and these would than be stored in different places. The reason for tearing such deeds was simple. Whenever someone questioned the authenticity of a deed or in cases of transferring of the title between two parties, the two halves would be pieced together and matched. If the two pieces matched, it proved the authenticity of the parchment and therefore, the practice was a guard against falsified deeds and illegal claims on property.

The concept of a deed in the contemporary world is a documentary device that more or less conveys the ownership to a specific property; essentially displays who does the conveying - the grantor or the seller of the property. It also clearly documents the person or party receiving the property - the grantee, or buyer of the property. A deed must contain five basic requirements to be considered a valid deed or a proper legal document.

Most of the legal requirements for validity with regard to a deed are comparable to those applicable for a contract. These can be summarized.

  • Similar to contracts in general, the parties involved in the transfer of a deed must be legally "competent," to do so. Here the concept of the expression "competent" means that the persons involved in the transfer or enactment of the deed are of legal age and possessing of a sound mind. The definition of legal age means the "age of majority" in the state where the transaction occurs, this was traditionally when a person reached twenty one years of age but it is now set at eighteen in most jurisdictions.
    In this instance, the concept of a "sound mind" means that the individual who is signing the deed possesses an awareness of what he or she is doing with respect to the deed. Questions of competency can arise if the person singing the deed suffers from addiction problems such as alcohol dependency and drug abuse or is known to have a history of mental instability.
  • A deed must include a clear statement of consideration. In the majority of cases, a deed will specify the exact dollar value or amount to be paid for the property specified in the deed.
  • A deed must contain a good description of the property. A good description of the property may show things such as for example, the lot on which the property resides, the specific block, and the subdivision of a house located in a certain urban area or town. A good description of the land on which a property stands is an essential feature of a deed. The information contained in the deed must be carefully verified and recorded as it is often disputed. There are uncounted numbers of lawsuits that come about solely due to faulty land descriptions, and due to insufficient or simply unclear descriptions. The accuracy and reliability of a description is an essential aspect of the validity of a deed, even where a description of the property makes very dry and uninteresting reading. The prime factor is accuracy of description.
  • Though a simple step, it is necessary for the deed to be signed by the actual seller. This is one of the first things that need to be verified in real estate deals.
  • The transfer of the deed must include a process of delivery and acceptance, between the two parties involved in the deal.

In this instance, the term "delivery" suggests the giving of a statement or indication of intention by the seller to transfer the property to the buyer and signifies his or her relinquishment of rights and claims over the property. The process involved can require more than a mere signature on the deed being transferred. The signature on transferring a property need not show actual trade in the property, as an example, a seller may sign the deed initially and place it in a safe place while evaluating if he or she will go through with the deal or the transaction of the property. In a hypothetical situation, the intended purchaser may make off with the deed; however, such a transfer will not be valid as the existence of a signed document is not proof enough of assent. Sale or transfer would not have been considered to have occurred as there was no process of delivery - in this case, the seller has not stated his or her intention to transfer the property to the buyer and did not "deliver" the deed. Hence, delivery of the deed is necessary for transfer of deeds.

At the same time, a statement by the seller is not necessary for delivery to be complete. Delivery would be considered to be complete by the seller's presence at a settlement and his or her signing the deed in the presence of the buyer is a case in point, this act together with any failure on the part of the seller to place an objection to the buyer taking title, indicates his or her intention to transfer the property to the buyer. In such cases, a delivery would be complete and the deed can be transferred to the buyer.

The process of delivery may also depend on being contingent on the occurrence of some specified event, in such cases once the event occurs, the delivery would be regarded as complete and the deed would then be transferred.

The concept of "acceptance" also accompanies the process of deed transfer in addition to delivery. In this instance, acceptance is the presence of some indication or statement made by the buyer that the transaction occurred to their satisfaction and that they accept the deed. The concept of acceptance in this case is not to suggest that the buyer is waiving his or her rights or that no problems with the deed exists or that they have no issues with the warranties in the deed, or even that they agree that there are no other complications with the transaction as such. The concept of acceptance fundamentally means consent to a transaction by the buyer and that the property is now under his or her ownership.

To be valid, all deeds need to meet the five basic requirements given above; however, all deeds are not similar. Certain deeds may include a lot of "warranties," or promises of good title made by the seller for the convenience of the buyer. However, other types of deeds will offer almost no guarantees to the purchaser of the property. Thus, a lot of different deeds exist even though they have many things in common.

Generally speaking, there are three types of warranty deeds. A general warranty gives the strongest level of assurance with respect to any deed; there is also the less meaningful special warranty deed. The third type of deed is the quitclaim deed, which essentially offers no assurance of ownership to the buyer.

The most extensive guarantee is given by a "general" warranty. The terms of a general warranty will state that the title to the property is good and valid. In addition, such a warranty states that the property is free and clear of all encumbrances and liens - with exceptions as noted in the deed. The most important aspect is that the seller guarantees the return of the title back to the first time an ownership interest in the property was created. This may even go back to pre-revolutionary times in the case of some properties.

The cover given by the general warranty contrast greatly with those under a "special" warranty deed, this type of warranty states that the seller's title is good and valid; however, it is not subject to any liens or encumbrances that might be outstanding at the time of settlement of the deed. However, warranties are not made about a title prior to the time that the seller came into the property in question. In this case, the seller's responsibility for giving a good title is therefore limited in scope. Therefore this type of warranty needs to be carefully checked with respect to the land records in order to determine the existence of any difficulties with the title or the presence of any encumbrances that were unknown or not disclosed by the seller at the time of the settlement between the two parties.

The third type of warranty is actually very little or the absence of any warranty. In the "quitclaim" deed, a seller is actually giving a deed to the property that is without any guarantees, the seller in this instance does not even guarantee that he has good title on the deed. In a quitclaim deed, the seller only states a willingness to transfer any interest that he or she has in the land being traded without the interest being specified. In such cases, a possibility exists that the seller possesses no valid or legal title to the property being traded through the deed. However, such transactions are not considered to be illegal, as long as the buyer understands the limitations of the quitclaim deed and they recognize that they are taking a considerable risk in buying the property.

Usually, the parties involved in the transfer of a deed. The buyers and the sellers will want to exert every effort through their respective attorneys or the party conducting settlement to ensure that the correct drafting of the deed. Costly and protracted or complex problems and challenges in the future can be precluded by great accuracy at the time writing the deed. Accuracy in the early stages saves time and money for both parties involved.

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