The Best Land Deed Type And Why You Should Care
Transferring ownership of vacant land is surprisingly different from transferring home ownership. Vacant land is not subject to a lot of the same rules and regulations as housing, so transferring ownership is MUCH easier, and can typically be done by an experienced seller.
While this can save on time, cost and complexity, it also means that land sometimes does not go through the same checks and balances. So a little knowledge can go a long way in protecting your land purchase.
What is a Land Deed?
A deed is a document used to transfer ownership from the current owner (the Grantor) to the new owner (the Grantee). So to transfer ownership of a property, a deed simply needs to be notarized by the seller, then submitted to, and recorded by, the county.
There are several different land deed types to accomplish this, but one type is superior to all others.
What is chain of title, and why is it important?
Learning which land deed is the most important first starts with the chain of title. “Chain of title” refers to the entire history of deed transfers for a property.
A clean chain of title ensures that a property has been legally transferred from owner to owner. The danger of having a messy title history is that a previous owner could appear, claiming they legally own the lot.
Having a gap or other inconsistency in a chain of title will also make it difficult, if not impossible, to get title insurance when reselling a property. This is not necessarily a problem with lower-dollar lots, but if you plan to improve or build on that land, selling it down the road could be more difficult.
What can you do to verify chain of title?
You primary option would be to hire a title company. If you’re purchasing a property costing tens of thousands of dollars, the expense can be well worth it. However, if the property you’re planning to purchase is more affordable, you may not want the added expense.
There are also independent title searchers to be found on the internet, but finding a good one can be difficult. So do your research.
Luckily there is an easy way to hedge your bets without going through the trouble of having a title search done: insist on a Warranty Deed.
Types of Land Deeds – Why A Warranty Deed is Best
There are 3 main types of deeds used to convey land: Warranty Deed, Special Warranty Deed, and a General or Quit Claim Deed. Each deed denotes a different level of liability that the seller is offering.
Warranty Deed (Recommended)
This is the gold standard of land deeds.
A warranty deed contain verbiage stating that the current owner is selling the property with completely clear title. It will also state that the land is free from any liens or encumbrances. Most importantly, it denotes that the seller is prepared to defend the clean title should anything arise.
By selling on a warranty deed, the seller is guaranteeing clean title for the entire history of the property.
Special Warranty Deed
In most ways, a special warranty deed is similar to a warranty deed. You are still getting clean title from the current owner, stating it is free from any liens or encumbrances. The big difference is that the seller cannot verify that the title is clean BEFORE they owned the property.
By selling on a special warranty deed, the seller is only guaranteeing clean title history for the length of time that the seller owned the property.
This means that you will want to have a title search done, to verify that no surprising will arise down the road.
General Deed / Quit Claim Deed
This is a general document that transfers ownership from the seller to the buyer. In this case, there is no warranty on the title. This means the seller holds no liability for issues that may arise down the road.
Generally used to convey title for a ‘quick sale’ (between friends, family, etc), or after a tax lien sale, checking for clean title becomes the responsibility of the buyer.
This type of deed offers no real guarantees, and is generally used when there is no easy way to ensure a clean title.
Looking for more in depth information? Click here to learn How to Research Land Like a Professional.