Deeds For The Transfer Of Real Estate - What You Need To Know

The transfer of real estate involves particular dangers that are far more pronounced that the dangers involved in buying, say, a car or a hair dryer - and not just because real estate is more expensive either! One of the primary dangers is that the person who's selling you the real estate doesn't actually own it. This is more complex than you might think. Imagine shelling out a couple of hundred dollars for a prime parcel of beachside real estate only to have Paul Plaintiff sue you five years later claiming that Joe Grantor sold that property in 1895 to his great-great grandfather first as a passive investment, and then Mr. Grantor turned around and sold the same property in 1896 to the guy that sold it to the guy who sold it to the guy who sold it you. In that case a court might just award the property to Paul Plaintiff and you'd be sleeping on the beach digging for buried change with your metal detector. Of course you could always go after the guy who sold it to you in the first place, demanding a load of money from him. But this would do you no good if (1) he sold it to you under a quitclaim deed, (2) you couldn't find him, or (3) if he didn't have the money to pay you. In order to guard against this sort of thing, several safeguards have been developed and if you're considering purchasing real estate you need to know how they work.

1. Title Insurance this is by far the most commonly used. A title insurance company will have their lawyer check the chain of title at the local land office to see if they believe there's a possibility that there might be someone out there with a claim to the property that's superior to yours (you can never be absolutely sure). If they're satisfied, they'll insure the title to your property.

2. Warranty Deeds - Warranty deeds will contain up to 6 warranties against title defects, and you can use them to sue.

3. Statutory Deeds - some states allow these types of deeds, and although they provide some protection, they are not as effective as warranty deeds.

Don't buy real estate under a quitclaim deed without (i) carefully checking the chain of title, and (ii) demanding and receiving a deep discount on price to reflect the risk that your yard may be pulled out from under you some day.

DISCLAIMER: The following is intended for reference only and not as legal advice.