Deeding a property is the transfer of ownership of a parcel and any structures that may be on it. How the property is deeded can affect many aspects of ownership, such as what the new owner can do with the property or if the original owner still has any rights to the property or its use. Property deeds may be transferred as gifts, sales, to generate income, to cover a tax or private debt or as part of a last will and testament. Knowing the different ways to deed a property will help ensure that the property is transferred as you wish.
Sale or Gift
The most common method for deeding a property is by a contract that transfers rights from one party to another. The new owner then registers the deed along with any relevant paperwork showing transfer with the local authority, usually a county property or tax registrar. Contracts that deed property may include a purchase-sale agreement and/or bill of sale. If the property is a gift, the contract will include that the consideration is not monetary but fulfilled by "love and affection" or "other personal, non-tangible gifts," or similar language. Gifting property still requires that the giftee pay any relevant costs as provided by local law. The gift may be considered federal income. Deeding the property, though, is unaffected by the means of transfer by contract.
A warranty deed is lawful in only certain states. Warranty deeds extend the promises of a traditional sale or gift by saying that if there is any issue with the property being deeded, such as a private lien or municipal encumbrance, the person who is deeding the property to another party will fix whatever is wrong with the deed. Some states will not honor warranty deeds because it may be unreasonable that the grantor will fix the problem. If you intend to receive a warranty deed, consider the ability of the promisor to keep his or her promise.
Quitclaim deeds are usually used in instances where the parties know each other. Quitclaims deeds do not deed property directly. The person who files the quitclaim deed has literally "quit," or given up, his or her claim to a property. In the instance of two people holding property together, such as a divorcing couple, the quitclaim deed transfers the title to the property to the remaining spouse who did not "quit" the property. Quitclaim deeds can avoid extensive or expensive paperwork and legal fees, and is a fairly quick method of deeding property.
Tax deeds are special instruments that let municipal authorities transfer a property even though they didn't own the property. The deeds are used when a municipal authority claims a property as a way to take care of back taxes on the property. Generally, the municipal authority will auction the property and then the funds will go to the authority. The authority files a tax deed with the county to transfer the title to the new owner. Bidding on tax deeds may result in the acquisition of property at well below market rate.
Deed in Lieu of Foreclosure
Deeding a property in lieu of foreclosure is a means of preventing foreclosure when a property owner is behind on his or her mortgage. Instead of foreclosing on a loan and taking the property to auction, the bank or mortgage holder takes the deed to the property. There are a number of private negotiation options when deeding property this way. Sometimes, for example, the property owner can continue to possess the property and regain unencumbered ownership once the mortgage payments are up to date again.