Transfer of Title Flashcards
Deeds
The purpose of a deed is to transfer title between the owner/grantor and the receiver/grantee; deeds DO NOT guarantee or provide ownership; deeds DO NOT have to be recorded for title to transfer, title passes upon acceptance of the grantee
Warranty Deed/General Warranty Deed
Five covenants and a guarantee of title (BEST for grantee)
Covenants in a Warranty Deed
- Covenant of Seisin - grantor has the right to convey;
- Covenant of Quiet Enjoyment - grantee will not be disturbed by others;
- Covenant Against Encumbrances - there are no unspecified encumbrances;
- Covenant of Further Assurance - cooperation in signing additional documents;
- Warranty Forever - guarantee of defense
Limited (Special) Warranty Deed
Warrants only those defects and encumbrances that occur during the grantor’s period of ownership
Quitclaim Deed
Used as a problem solver and to terminate deed restrictions; NO promises, NO guarantees
Best for granor
Bargain & Sale Deed
Contains only implied warranties that the grantor holds the tile and possessions of the property
Public Grant
Government transfers ownership by land parent to private property
Essential Elements of a Valid Deed
- Competent grantor (18+ & sound mind);
- Executed by grantor(s);
- Identifiable grantee;
- Delivered and accepted by grantee(s) – title & possession of property (unless otherwise agreed) pass at this point;
- Legal description;
- Consideration (money or something or value);
- Words of conveyance (granting clause)
Probate
The process of distributing all of a deceased’s assets; a will MUST go through probate for real & personal property to be distributed; joint tenants DO NOT go through probate to claim title to the property
Devise
The act of transferring the deceased’s interest in real estate to another by will (hook to DEED)
Bequest
The act of transferring a deceased’s interest in personal property to another (hook to BILL OF SALE)
Adverse Possession
Ownership granted by the courts due to Open, Continuous, Exclusive, Actual, and Notorious (Hostile) possession (OCEAN) of another’s land for a minimum statutory period
Prescriptive Easement
An easement prescribed by the courts due to Open, Continuous, Actual, and Notorious (Hostile) use of another’s land for a minimum statutory period (NOT exclusive)
Recording
NOT required for validity, gives constructive notice to protect interests, and determines priority (first in time, first in right)
A deed that is not recorded creates the risk that a later interest could take priority and does NOT have constructive notice of ownership
General Recording Requirements
- Recorded deeds/mortgages must be acknowledged by grantors/mortgagors;
- Documents must be dated;
- Signatures should be notarized (required in most states)
Abstract with a Title Opinion
Abstract of title is a historical summary of all conveyances and encumbrances against the property
Title Commitment/Report
Unlike the abstract, which lists historical information, the title commitment/report lists current title status and title defects (mortgages, easements, etc.) but no history of documents
It is the promise to ensure the title; it WILL NOT cover items listed as exceptions and defects
Title Insurance Policy
Protects against defects discovered in the title AFTER closing (not BEFORE closing)
Owner’s Title Insurance Policy
Protects owner (buyer) and heirs while they have an interest
Mortgagee’s Title Insurance Policy
Protects the lender giving title coverage
Quiet Title Action
Used to clear title problems found in the abstract or title report
Credit to Seller
Anything that increases the amount of money the seller takes from the closing (e.g., sales price)
Debit to Seller
Anything that decreases amount of money the seller takes from the closing (e.g., brokerage fee, mortgage payoff, or contract for deed)
Credit to Buyer
Anything that decreases the amount of money the buyer must bring to closing (e.g., earnest money, new loan, or contract for deed); ALL loans are ALWAYS buyer credit
Debit to Buyer
Anything that increases the amount of money the buyer must bring to the closing (e.g., sales price, recording the warranty deed, loan origination, or discount points if paid by buyer)
Capital Gains Taxes For the Principal Residence
- There is no tax on the first $250,000 of gain (single) or $500,000 of gain (married) from the sale of a principal residence;
- Owner must have lived in the residence two out of the last five years (does not have to be consecutive)
Capital Gains Taxes For the Investment Property
- Used by investment property owners to defer payment of capital gains taxes;
- Allows an investor to sell one property and buy another without paying capital gains taxes
Investor does not pay until selling the second property
Deductible Items
Points, origination, interest, and taxes (POIT)
NOT Deductible Items
Principal, homeowner’s insurance premiums, HOA fees
Depreciation Tax Reduction for Investment Property
Residential income property must be depreciated over a 27.5 year period using straight-line depreciation
Commercial income property must be depreciated over 30 years using straight-line depreciation
Straight Line Depreciation
Requires that an asset must be depreciated by equal amounts each year over it’s useful life
