In real estate there are a number of terms that get thrown around regularly without understanding of the correct meaning of the term. The strange thing about it, this is mostly done by so called real estate professionals. In this two part article I want to focus on a fundamental term used in real estate ownership. It is very important for homeowners and real estate professionals to understand the meaning of the term “deed” and how ownership is transferred from the homeowner to another party when they sell a house. The focus of this article is on transferring home ownership; however, deeds can be used to transfer title in all real property.
Title versus Deed
The term title refers to ownership rights in real property. When a person holds title to a house what they really hold are certain rights. These rights include the right to possession, enjoyment, control, and use of the owned property. I guess you could say that title is not a physical tangible thing. A deed on the other hand is tangible. A deed is a written contract used to legally transfer title when you sell a house to another person or entity. Furthermore, when a deed is recorded in the public records it serves as physical proof of the title holder’s ownership rights to the house. As a result of these differences, the terms title and deed should not be used interchangeable. Nevertheless, many people still use the terms incorrectly.
Elements of a Valid Deed
Grantor: The homeowner who voluntarily conveys title to another person when they sell a house
Grantee: The person who accepts title from the homeowner when they buy a house
Consideration: A promise by the grantor and grantee to exchange something of value to show both parties agree to the terms of the deed. This is usually money but can also be in other forms.
Granting Clause: The formal words that state the grantor’s wish to transfer his or her current title to a house.
Habendum Clause: Describes the extent of the ownership that is being transferred by the deed.
Legal Description: A description of the location of the property accepted by a court of law. Street addresses and other informal land descriptions are not sufficient for deeds.
Encumbrances: Any claim or liability attached to the property that may lessen the home owner’s rights or the value of the property. The most common Encumbrance that affects a homeowner’s title is a lien.
Exceptions or Reservations: An Exception excludes from transfer some part of the property that is being transferred by the deed. Reservations create a new right out of the thing granted on behalf of the grantor.
Signature of Grantor: All the grantors listed on a deed must sign the deed to transfer title. There are unique exceptions (i.e. signature by mark, signature by attorney-in-fact) if a grantor is unable to sign.
Acknowledgement: When a grantor signs a deed before a public notary, he or she is making a formal declaration they are acting voluntarily. It also serves at public proof that the involved parties are who they say they are.
Delivery and Acceptance: Title actually passes from the grantor to the grantee when the deed is delivered to and accepted by the grantee. Acceptance means the grantee agrees to be bound by the terms of the deed. This should be in writing; however, acceptance can also be inferred by certain acts.
Summary
Most states share the same criteria for a deed to be considered valid and enforceable. Nevertheless, it is important that you learn about the unique criteria, rules, and regulations in your state when you are ready to sell a house or buy a house. Given the legalities and complexity involved in selling or buying a house, it is recommended to have a highly competent real estate agent, real estate attorney, and title company on your team. In Deeds and Title Part 2 to this article, we will focus on the types of deeds involved in transferring home ownership and title.
Disclosure Notice: The author is a licensed Realtor in the State of Texas under the brokerage of Above and Beyond Realty, LLC.
