What is a deed and how does it work?

Real estate buyers and sellers have many documents to contend with before and during closing, but one of the most important is the deed. Without it, ownership can’t pass from the seller to the buyer. 

What is a deed? 

A deed is a legal document for property transfers from one party to another. While the exact language a deed uses varies from one state to another, all property deeds identify the property as well as the names of the individuals granting and receiving ownership.

Real estate deeds also serve as public records of property transfers, and they inform the public about who owns the properties.

How does a deed work? 

Real estate transactions culminate in the transfer of ownership from the seller (grantor of the deed), to the buyer (grantee of the deed) on closing day. The house deed is the document that proves that the transfer occurred.

Before closing, the closing agent or attorney prepares the deed. The seller can sign the deed in advance or at closing, with a notary public as a witness.

After closing, the closing agent must record the deed by sending it to the county office responsible for maintaining real estate records. 

Recording the deed completes the transfer and makes it a public record. From that point on,  any interested citizen who wants to examine it may.

The deed also establishes the chain of ownership, also called the chain of title, which is the complete record of each and every ownership transfer and lien associated with the property.

Types of deeds 

Buyers and sellers entering a real estate transaction might encounter three different deed types.

Warranty deed

In a typical real estate transaction, ownership passes from seller to buyer with a type of deed called a warranty deed. A warranty deed warrants that the seller has full ownership rights and is passing those full ownership rights onto the buyer.

A warranty deed contains six covenants that describe the rights afforded to its holder. As the Cornell Law School Legal Information Institute notes, those covenants promise:

• Ownership rights with the right to sell the property
• The seller hasn’t sold the property to another party
• The property is unencumbered by undisclosed liens
• The buyer will receive undisrupted, uninterrupted “quiet enjoyment” of the property
• The seller will defend title to the property in the event of claim on the title
• The seller will take whatever steps are necessary to resolve title defects, regardless of when they occur(ed).

Other types of deeds make fewer warranties, or no warranties at all.

Special warranty deed

A special warranty deed limits the seller’s liability for title defects to only those that occurred while they owned it. The seller isn’t liable for defects that occurred before they acquired title to the property.

This type of deed is uncommon in residential real estate sales, but you might encounter it if you purchase a foreclosure. The lender or loan guarantor likely has no knowledge of how or if the borrower might’ve encumbered the property, so it won’t guarantee clear title — it’ll simply guarantee that it didn’t encumber the title.

Quitclaim deed

A quitclaim deed is unique in that it doesn’t necessarily transfer full ownership from grantor to grantee. It simply transfers the grantor’s ownership interest, whatever it might be, and it does so with no warranty as to the condition of the title. 

A buyer purchasing property in exchange for a quitclaim deed accepts a high degree of risk. If the seller has full, unencumbered ownership rights, that’s what the buyer receives. But if it turns out that the seller has no legal ownership rights, that’s also what the buyer receives, and they might not become aware of it until they try to sell or gift the property years later. 

Here’s a quick look at the three major types of deeds, what they convey, and the warranties they make:

Title vs. deed: What’s the difference? 

You’re probably familiar with a car title, which is both the word used to indicate ownership and the legal document used to transfer ownership and serve as proof of ownership. The word has a different meaning in real estate.

In real estate, title is strictly notional — it’s the word that means ownership. A deed is the legal document used to transfer title and serve as proof of title, but it is not itself a title.

Common uses of deeds in real estate 

Warranty and special warranty deeds transfer full ownership rights from a grantor, usually a seller, to a grantee, usually a buyer.

Quitclaim deeds, on the other hand, transfer ownership interest, which doesn’t necessarily have to be full ownership.

For example, if you buy a house while you’re single, and later want to add your spouse to the deed, you can grant your spouse ownership rights using a quitclaim deed. If you later divorce and decide that you’ll keep the home, your spouse can use a quitclaim deed to transfer their ownership rights to you.

You might also use a quitclaim deed to gift property to a family member or friend, or add a beneficiary to your deed so that the property automatically passes to them without having to go through probate if you and the co-owner, if there is one, die.

Requirements for a valid deed 

All deeds need to have certain elements to be valid — that is, defensible in court. Those elements are:

• Grantor: the individual granting ownership
• Grantee: the individual receiving ownership
• Legal description: a detailed description of the property’s location (not its address)
• Affidavit of consideration: a statement indicating that something of value changed hands, whether money (even if just $1), or a service or other benefit

What is a deed FAQ 

What information must a deed contain?

A valid deed needs a grantee, grantor, legal description of the property, and a statement of consideration.

How is a deed different from a contract?

Whereas a deed is a document that transfers ownership of real estate, a contract is an agreement that obligates the parties to take certain actions. 

In a real estate transaction, the contract is between the buyer and seller. It obligates the seller to provide clear title in exchange for receiving a specific sale price. It also obligates the buyer to pay that sale price in exchange for receiving the title. The contract is complete when money and the deed change hands and the deed is recorded with the county.

Deeds and contracts both need consideration to be valid, but the requirements otherwise differ. 

A deed also requires a grantee, grantor, and a legal description of the property.

A contract, on the other hand, also requires:

• Offer and acceptance, which establishes a meeting of the minds
• Capacity, meaning the parties have the ability to fulfill their contractual obligations
• Legality, which means the contractual obligations are legal

Can a deed be challenged in court?

It’s possible for a deed to be challenged. But you have two ways to protect yourself before it happens. 

The first is to make sure your deed is recorded. If it’s not, the individual who transferred ownership to you still holds legal title to it.

The second protection is to purchase owner’s title insurance, especially if you have a special warranty deed or quitclaim deed instead of a general warranty deed. A general warranty deed obligates the grantor to defend the title on your behalf. 

If you use a mortgage for your home purchase, you’ll likely be required to purchase title insurance for your lender. But that policy only protects the lender if there are claims on the title — you’d need owner’s title insurance to protect your interests.

What happens if a deed is lost?

As long as the deed was recorded, you can contact the county office in charge of deeds to ask for a copy. If it hasn’t been recorded, legal publisher Nolo suggests contacting your attorney or title agent.