Understanding Deed Types for Real Estate Investors

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As a real estate investor, understanding the different types of deeds is crucial for protecting your investments and navigating property transactions smoothly. Deeds play a vital role in transferring ownership and defining the rights and responsibilities of both buyers and sellers.

Below you'll learn about the various types of deeds, their implications for real estate investors, and how they can impact your property dealings. From general warranty deeds to quitclaim deeds, we'll cover the essentials you need to know to make informed decisions in your real estate ventures.

You'll also discover the importance of title insurance, how to navigate deed restrictions, and ways to protect yourself from deed fraud. By the end of this guide, you'll have a solid foundation in deed types and be better equipped to handle property transactions with confidence.

Table of Contents

Included below:

• Understanding Deed Types for Real Estate Investors

• Why Deeds Are Important

• Two Most Common Deeds

• General Warranty Deed

• Special Warranty Deed

• Title Insurance and Deeds

• Chain of Ownership

• Deed Restrictions

• Deed Fraud

• Mineral Rights

• Additional Deed Types

• Quitclaim Deed

• Bargain and Sale Deed

• Grant Deed

• Sheriff’s Deed

• Deed-in-Lieu of Foreclosure

• Executor’s or Administrator’s Deed

• Ways to Take Title

• LLCs and Taking Title

• Corrective Deeds

Why Deeds Are Important

Deeds play a critical role in real estate investing. When you buy a property, the deed is the legal document that transfers ownership from the seller to you. Without a deed, there’s no formal proof that you own the property.

As an investor, it’s essential to understand the different types of deeds you might encounter. Some deeds provide more protection than others, and the one you choose can impact your risk. Knowing the details can help you avoid costly mistakes down the road.

Deed laws can vary depending on the state you’re investing in. This is why it’s important to consult with a real estate attorney who knows the local regulations. They can help you navigate any specific requirements or nuances.

Having title insurance is also vital. It protects you from issues related to the deed, like undisclosed liens or ownership disputes. Even if the deed appears legitimate, problems can still arise, and title insurance acts as a safety net for your investment.

Two Most Common Deeds

When investing in real estate, you’ll most often encounter two types of deeds: General Warranty Deeds and Special Warranty Deeds.

These deeds differ in the level of protection they offer, and we’ll go into detail about each below.

• General Warranty Deed - Provides the highest level of protection to the buyer, covering the property's entire history. Ideally, you want this when buying a property to ensure you’re protected from any title issues, even those that occurred before the seller owned the property.

• Special Warranty Deed - Offers limited protection, covering only the period when the seller owned the property. This is what you’d likely want to provide when selling to limit your liability to the time you owned the property, protecting yourself from issues that existed before your ownership.

General Warranty Deed

A General Warranty Deed is the most protective type of deed you can receive as a real estate investor.

• Guarantees Provided by the Seller - The seller guarantees that they own the property, have the legal right to sell it, and that there are no undisclosed claims or debts tied to the property.

• Full History Guarantee - The seller is responsible for any title issues not only from their ownership period but also for any problems that occurred before they owned the property. This means if a previous owner had an unresolved lien or dispute, the seller is on the hook to address it.

• Examples of Title Issues - Let’s say a prior owner had a lien that wasn’t paid off or failed to disclose a boundary dispute. With a General Warranty Deed, the seller guarantees to handle these problems, even if they go back years or decades.

• Preferred by Buyers - Because this deed provides the broadest protection, it is typically preferred by buyers, especially in standard residential transactions where buyers want maximum security.

Special Warranty Deed

A Special Warranty Deed offers a more limited form of protection for real estate buyers.

• Limited Guarantees - The seller guarantees that there were no issues with the title during their ownership. However, they are not responsible for any problems that may have existed before they took ownership.

• Key Differences from General Warranty Deed - Unlike a General Warranty Deed, the seller is only liable for claims or disputes that arose during their period of ownership. Any issues that occurred before that are not covered.

• Limiting Seller Liability - Real estate investors might negotiate to provide a Special Warranty Deed when selling a property to limit their future liability. This can protect the investor from being responsible for issues that predate their ownership.

• Common Scenarios - You’ll often see Special Warranty Deeds in transactions involving bank-owned properties, foreclosures, or commercial real estate, where sellers want to limit their exposure to title risks.

Title Insurance and Deeds

Title insurance is one of the most important protections you can have when investing in real estate. It’s a one-time payment made at the time of purchase, designed to protect you from financial loss due to issues with the property’s title—problems that may surface long after the sale.

For real estate investors, title insurance is essential. It shields you from risks like ownership disputes, undisclosed liens, or fraudulent deeds. While technically optional if you’re buying with cash, it’s required by lenders when you take out a loan. Lenders insist on title insurance to protect their investment for the life of the loan.

It’s important to understand the difference between buying title insurance and providing it. When you purchase a property, you buy title insurance to protect yourself. When you sell a property, you’re typically providing title insurance for the buyer. This reassures the buyer that there are no hidden issues with the title that could affect their ownership.

Title insurance protects against various issues that might arise from the deed, like previously undisclosed liens or ownership disputes. If a title problem is discovered after the sale, the insurance will cover legal costs and compensate for losses. However, the type of deed you provide—General Warranty or Special Warranty—can impact the scope of the risk you take on as a seller.

If you’re selling frequently—whether as a fix-and-flipper or to buy more properties with loans to increase your leverage and return on equity—your exposure is higher if you’re providing General Warranty Deeds. A General Warranty Deed guarantees clear title not just for the period you owned the property but for its entire history. This can put you at significant risk if there are unresolved issues from previous owners. If a claim arises, the title company may cover the buyer’s losses but could come after you for reimbursement. And if you have assets, the title company is more likely to target you, especially if prior owners have no assets to recover from.

By contrast, providing a Special Warranty Deed limits your liability to the time you owned the property. You’re only guaranteeing that no title issues occurred during your ownership, protecting you from past issues. For investors who sell properties frequently or liquidate parts of their portfolio to accelerate financial independence, limiting this liability can be crucial to protecting your assets.

The type of deed you provide affects the extent of title insurance coverage. A General Warranty Deed offers the buyer maximum protection, covering the property’s entire history, while a Special Warranty Deed only covers the period you owned it. Regardless of the deed type, title insurance is your safety net, ensuring any issues that arise are handled without catastrophic financial losses.

As an investor, especially if you’re flipping properties or using leverage to grow your portfolio, you need to pay close attention to title insurance. It’s not just a formality—it’s essential protection that can save you from major financial headaches. Don’t overlook this.

Chain of Ownership

Here’s a story to pull together some key ideas about deeds, title and chain of ownership.

Once upon a time, there was a fabulously eccentric woman named Petunia Glitterbottom. Petunia owned a charming little cottage that was the envy of the town. One fateful evening, during a night of passion fueled by too many glasses of Prosecco, Petunia decided to gift half of her beloved cottage to her dashing lover, Fabio Flirtini. In the heat of the moment, she signed a deed, transferring 50% ownership of the property to Fabio.

However, in her giddy state, Petunia and Fabio never bothered to file the deed with the county. You see, deeds don’t have to be filed to be valid; they just need to be signed and delivered. Filing it with the county is what puts the public on notice, but as we’ll soon see, failing to record a deed can lead to all kinds of drama.

Fast forward a few years, and Petunia sells the cottage. Fabio has long since moved on, and no one knows about that fateful night. The new buyer receives a General Warranty Deed, which guarantees clear title to the property not only from Petunia’s time but from the beginning of time itself. All seems well, and the property changes hands two more times, each buyer receiving a General Warranty Deed and feeling confident that their title is rock solid.

Then, we meet Sarah, the fourth buyer in this story. Sarah has happily lived in the cottage for a few months when she gets an unexpected knock at the door. Enter Lisa Flirtini, Fabio’s great-grandchild, who has recently been going through her great-grandfather’s old boxes. Among Fabio’s forgotten treasures, Lisa stumbles upon the deed from Petunia Glitterbottom, proving that Fabio owned half of the cottage.

Lisa, armed with this information and an eager attorney, sues Sarah for half the value of the property, claiming her rightful inheritance. Sarah, understandably horrified, rushes to the title company that insured her purchase, waving her General Warranty Deed and demanding they fix this mess. After all, her title insurance should cover any ownership disputes, right?