This is a review of the common types of deeds used to convey property and what are the advantages or disadvantages of each. Different states may require specific types of deeds if they are a judicial or non-judicial state in terms of their foreclosure proceedings.

Written guarantee – Sometimes called a General Warranty Deed, this type of deed essentially guarantees that the seller (grantor) is transferring clear, negotiable title to the buyer (dealer). Clear, negotiable title means no liens or title defects. This guarantee is not limited to the time the grantor owned the property, but extends to the origin of the property in the public registry. The seller can make this claim because prior title policies have secured his interest when he purchased the property.

Limited Warranty Deed – This type of deed is also called a Special Warranty Deed and differs from a Warranty Deed in that the seller (grantor) essentially guarantees only that the grantor has the right to transfer the deed. Limits type of title transfer to “insurable title” rather than clear, negotiable title.

The difference is that an insurable title may contain a title defect or a break in the chain of title usually caused by a foreclosure action or sale of tax deed as examples. The buyer may obtain title insurance, but the title may not be clear or marketable. The result is that a bank cannot lend to a buyer of this property in the future. There are cures for this break in the chain of title, usually through a quiet title action in the court system.

deed of resignation – This type of deed specifically transfers title to the property with the grantor “relinquishing” any liability that was attached to the property at the time of transfer. These liabilities can be mechanical and code liens or code violations and lawsuits against the grantor. Mortgages will remain on the property and remain the responsibility of the grantor after transfer to the dealer.

Often children of elderly parents will have their parents sign a quitclaim deed and file it after their parents die. Although the clerk of court will record the deed and the children’s names will appear in the public record, the parents’ estate will need to be probated in order to transfer title to a buyer later.

The problem occurs when a closing agent does a title search on the property and finds the quitclaim deed without a judge’s adjudication in the public record showing the closing of the probate by probate. If a trust owns the property, the transfer of property bypasses probate but not liability for income or estate taxes, if applicable. In a county that is close to where I live, 80% of the quitclaim deeds on the public record are fraudulent. Most are identity thefts from attempts to refinance or resell properties. Now, when any quitclaim deed is filed, the court clerk contacts the former title owner to confirm the transfer.

writing certificate – This type of deed is not signed by the previous owner of the property since the property is transferred to the new owner by legal action. It is issued by the court clerk after a foreclosure sale or tax deed sale. It is essentially a “temporary” deed that will have to go through a quiet title action to be transferred to another buyer at a later date. This brief action is necessary if the new buyer wants an insurable or negotiable title if he plans to sell the property in the future.

Deed of Trustee – This type of deed is essentially a deed of guarantee from a seller to a trustee of a land trust or other financial planning trust, such as a revocable living trust. The trustee is empowered to do what is in the best interest of the trust beneficiaries with respect to the property itself, including maintaining, repairing, and selling the property. When the property is sold, the trustee will sign as grantor, but the proceeds of the sale will be given to the beneficiaries or held in the trust for their benefit.

In summary, you may see these basic types of deed transfers in your investing career. It is important that you read the deed carefully to determine what the grantor is transferring to you: responsibility or a clear and negotiable title or something in between. If you’re a buyer getting a quitclaim deed, pay to have a closing agent issue you a title policy to make sure you don’t run into a lot of problems you never expected.