Today I wanted to talk about a title deed. With all the deals that are out there at rock bottom prices, advertised bank owned homes that are great deals, and properties changing hands quickly as investors flip or rent, it is important to understand two clear different ways to take on title. Title is the legal evidence to a right in something. In this case we are referring to a house.
Keep in mind that there are many different types of deeds that are given to a buyer when they purchase a home, however the most common two I have worked with are the warranty deed and the quit claim deed.
The most common type of deed in any sale is the Warranty Deed. This means the seller is guaranteeing that the buyer is receiving a clear title. Typically even in bank owned and foreclosure transactions, the bank will pay all liens, judgments, or violations that are on title in order to give the buyer a warranty deed. If this cannot be done they will typically ask the buyer to sign a hold harmless and the buyer should be fully aware of what type of obligation they are accepting and taking on. Be sure to read your contracts and addendums and ask your realtor the question, will I be receiving a free and clear title?
You also may have heard the term "quitclaim" deed. A quitclaim deed means there is guarantee of the title. The buyer in this case is accepting the title with any and all liens, violations, claims, or judgments it may have associated with it. Quitclaim deeds are most often used by people who know and trust each other. It should not be used during traditional sales and here's why.
A quitclaim deed means the seller doesn't guarantee that he/she actually owns the property! There have been cases of people deeding properties that they never owned in order to obtain cash from unsuspecting citizens.
Although this is uncommon it is important that if you are considering purchasing a property on a quit claim deed that you do your research. Please be sure to contact a title agency and do a full title/lien search on the property. Also be sure to contact the city and find out if there are any code violations or tags on the property. Also, you may want to find conduct a tax and water search and find out if the property is behind on either of these things. If this is a condo, an estoppel may want to be ordered for pending actions that have not yet been recorded. There may be other tips and pointers that others know of as well that may help protect yourself as a buyer if you are considering purchasing a deal at an auction, unknown seller, or any other type of venue that uses a quit claim deed to change hands.
If you are looking to buy property in today's housing market, be sure to pay careful attention to your contract. Educate yourself and seek the advice of a realtor and/or attorney.
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