Types of Deeds Flashcards
There are four main types of deeds that are commonly used to convey real estate. In order of the most protection for the grantee to the least, they are:
General warranty deed
Special warranty deed
Bargain and sale deed
Quitclaim deed
Note: Other instruments affect title, but do not convey title, such as mortgages. These documents are not intended to convey title but are financing instruments that establish real estate as security for the payment of a debt.
Arizona Only Has Three
In Arizona, a quitclaim deed isn’t considered a conveyance deed. The only deeds that can be used to convey title are general warranty deeds, special warranty deeds, and bargain and sale deeds. Quitclaim deeds are still used to clear up title disputes in Arizona, just not to transfer property. We’ll get more into it in a few screens, don’t worry!
Types of Deeds
Before we start defining all of these deeds, let’s take a second to talk about covenants – they’re crucial to our definitions of deeds!
Covenants are a type of protection for grantees that are included (or not) in certain types of deeds. There are six covenants. They are… drumroll, please… 🥁
The covenant of seisin
The covenant of right to convey
The covenant against encumbrances
The covenant of quiet enjoyment
The covenant for further assurances
The covenant of warranty forever
These covenants are also sometimes referred to as warrants or warranties.
Covenant of Seisin
With the guarantee of the covenant of seisin, the grantor states that they hold the title that is being conveyed in the deed. That’s always good news. The name of this covenant comes from the livery of seisin we talked about a few chapters ago, remember? The ceremony with the dirt?
This is also known as the covenant of seizin. Why? Because the English language does weird stuff with words and spelling.
The covenant of seisin is the most central and important of all the covenants.
Covenant of Right to Convey
This warrants that the grantor is the property owner and have the right to convey title. If this is broken, the grantee can recover the full purchase price.
Covenant Against Encumbrances
In this covenant, the grantor warrants that the property is free from liens or encumbrances (except those named in the deed). If this covenant is broken, the grantee can sue for the cost of removing the encumbrance.
Covenant of Quiet Enjoyment
With this covenant, the grantor guarantees that the title is good, at the current time, against any third party who might bring court actions to establish superior title to the property. (Sorry, it doesn’t protect you from your teenage neighbor’s band practice.) 🎸
Covenant of Further Assurances
In the covenant of further assurances, the grantor promises to obtain and deliver any instrument needed to make the title good. They also promise to help solve title disputes that come up later.
Covenant of Warranty Forever
Lastly, in this covenant, the grantor guarantees that they will compensate the grantee for losses if the title fails in the future. The grantor will help the grantee handle any third-party claims to the title. This is also referred to as the covenant of warranty of title.
The Six Covenants: Getting Started
The six covenants can be sorted into two groups: present covenants and future covenants.
Present Covenants
Present covenants make guarantees to the grantee about the present state of the title. These include:
The covenant of seisin
The covenant of right to convey
The covenant against encumbrances
Future Covenants
Future covenants express the grantor’s ongoing commitment to the grantee as well as any future grantees who own the property next. The title will remain good for the grantee(s), with no mistakes or wrongdoing committed by the grantor.
Future covenants include:
The covenant of quiet enjoyment
The covenant for further assurances
The covenant of warranty
Present and Future Covenants
Okay, now we know what covenants are, let’s start defining those deeds! Remember that there are four main types of deeds that are commonly used to convey real estate. They are:
General warranty deeds
Special warranty deeds
Bargain and sale deeds
Quitclaim deeds
And just a reminder: in Arizona, only the first three are considered deeds of conveyance.
General Warranty Deeds
General warranty deeds provide the greatest protection for the grantee (buyer). A general warranty deed, sometimes called a full covenant and warranty deed or simply warranty deed, is a deed containing the strongest and broadest form of guarantee of title.
With this sort of deed, certain covenants or warranties legally bind the grantor. A warranty is like a legal promise that the grantee will get to own and enjoy their property to the fullest. It’s kind of like a warranty on your car or the new deep fryer you just bought that protects you if anything breaks. With a general warranty deed, the grantor promises to defend the title, no matter the claim against it. General warranty deeds come with all six of the covenants we just discussed.
Warranties can be directly stated in the deed or implied by the use of certain language, such as “convey and warrant,” “warrant generally,” and “grant, bargain, and sell.”
Take Note: Covenants = protection for grantees, but that doesn’t mean buyers can skip the title search and title insurance (both things we’ll discuss later on). Their attorney should still do their research to see if any liens, encumbrances, etc. exist.
A general warranty deed would require the grantor to help defend the title against items discovered in the future, such as:
Liens
Encumbrances
Easements
Ownership disputes
Scenario: Imani and Abigail
Imani is conveying the title to her two-bedroom home to a buyer, Abigail. Imani and Abigail agree to use a general warranty deed. (This makes Abigail more comfortable, as she knows it will help protect her in the future.) Imani knows that, in agreeing to the general warranty deed, she is agreeing to support Abigail and help her clear the property title should there be any issues in the future.
Six months after conveying the property title, a mechanic’s lien on the property surfaces. Imani didn’t know about the lien (it wasn’t established while she owned the property), but it is still her responsibility to help clear it up.
Special Warranty Deeds
The next type of deed is the special warranty deed, also known as the bargain and sale deed with covenants. This type of deed only protects against defects that occurred while the grantor held title.
The grantor warrants only that the property was not encumbered during the time they held title, except as noted in the deed, and that they have done nothing during ownership to cloud or damage the title. It has the same six covenants as a general warranty deed, but only for the time that the previous owner held title.
Scenario: Imani and Abigail Return
Let’s go back to our seller and buyer, Imani and Abigail.
If they had conveyed title with a special warranty deed instead of a general warranty deed, Imani would NOT be required to help sort out the mechanic’s lien. However, if the mechanic’s lien was established while Imani held title (maybe leftover from her kitchen remodel), Imani would be responsible for helping sort everything out.
Let’s Recap
A general warranty deed and a special warranty deed do have a lot in common, but they are distinct in use and in the guarantees they provide. Check out this graphic to help you compare and contrast!
Venn diagram showing differences and similarities between a general warranty deed and a special warranty deed.
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Warranty Deeds
Warranty deeds are a little more concrete in the interests they convey and the guarantees they offer. Next up, we’ll define two types of deeds that are a little more uncertain:
Bargain and sale deed
Quitclaim deed
Bargain and Sale Deeds
A true bargain and sale deed is a deed without any covenants or warranties against encumbrances. It only indicates that the grantor has possession of the property and holds the right to convey title.
Sometimes this is called a deed without warranty. Without warranties, the grantee has little legal recourse if defects later appear in the title. Plenty of lenders won’t want to fund a mortgage if the deed will be a bargain and sale deed.
Covenants
Bargain and sale deeds can be written with covenants. When this happens, it is essentially a special warranty deed.
When Bargain and Sale Deeds Are Used
Bargain and sale deeds are typically used as:
Sheriff’s deeds: used to convey properties foreclosed on for failing to pay the loan
Tax deeds (also called treasurer’s deeds): used to convey properties foreclosed on for failing to pay taxes
Trustee’s deeds: used to convey property to a trustee for disposal, for example after a bankruptcy or in a deed of trust foreclosure
Quitclaim Deeds
A quitclaim deed is a type of deed that conveys any interest, title, or right to a parcel of land the grantor has at the time the deed is executed. However, the interests, title, and rights conveyed are uncertain, as the grantor makes no guarantees.
It carries no covenants or warranties and conveys only such interest that the grantor may have when the deed is delivered.
Quitclaim deeds allow the grantor to transfer an uncertain interest in real property. If the grantor has no interest, the grantee will acquire nothing, nor will the grantee acquire any right of warranty claim against the grantor. In other words, a quitclaim deed basically says, “I’m conveying my ownership interest to you, whatever that may be, and I may not even have ownership interest at all.”
Quitclaim deeds are not used to convey property in Arizona. Instead, they’re usually part of clearing up a title dispute after a property is transferred.
The Uncertainty
Quitclaim deeds are even less certain in their protections and covenants than bargain and sale deeds.
A quitclaim deed provides the grantee with the least protection of any deed, while putting the least liability on the grantor.
The Grantor
The grantor does NOT represent that there is any interest at all.
The grantor simply conveys what they own with no covenants, guarantees, or warranties.
When They’re Used
Quitclaim deeds are frequently used to correct a title defect usually discovered after the fact. While it carries no covenants or warranties for the grantee, it does effectively correct a title issue. A misspelling of the seller’s (grantor) or buyer’s (grantee) name, an incorrect legal description, or a recorded easement that was missed are all examples of problems that a quitclaim deed can solve.
In addition to correcting title defects, a quitclaim is also used when a property transfers ownership without being sold — a fairly common occurrence when transfers occur between family members (for example, spouses going through a divorce).
They’re also used to clear any clouds on a title after a property had been inherited with an unprobated will. If there are family members out there who could potentially have a claim to the property, they can sign quitclaim deeds to clear up the title for the person who inherited the property.
Quitclaim Deeds and Adverse Possession
As you know, adverse possession is the involuntary transfer of title from an owner who does not use or inspect their land for a number of years to another person who has some claim to the land and takes possession.
A nice, formalized way to transfer interest is with a quitclaim deed. If your neighbor has been using and benefiting from a piece of your property and you’re cool with it, the quitclaim deed would serve to officially relinquish the property to your neighbor, ending or preventing disputes.
EXAMPLE
Moira owns a small farm just outside the city limits. Her neighbor has been using part of her land for their chickens for the last 15 years. Moira decides to transfer the small tract of land officially through a quitclaim deed because she wants her neighbor to continue to be able to use the land even if she (Moira) sells or passes away.
Bargain and Sale Deed vs. Quitclaim Deed
Bargain and sale deeds and quitclaim deeds are both more uncertain than warranty deeds, but they are still distinct from one another. Look over this image to review their core concepts.
Venn diagram showing differences and similarities between a Bargain and Sale deed and a quitclaim deed.
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Deeds of Uncertainty
Quitclaim deeds can come in many different varieties, kind of like apples (you’ve got your Galas, your Granny Smiths, and my personal favorite, Honey Crisps). 🍎🍏
Correction Deed
You already know that even deeds make mistakes and have problems or errors sometimes. When quitclaim deeds correct some kind of deed error (such as a misspelled name or an inaccurate description of a property’s features), they can be called correction deeds or deeds of confirmation.
EXAMPLE
Eloise Randal has just bought a property. When she looks over the deed with her agent, she realizes her name is listed incorrectly on the deed: she is listed as Randal Eloise instead of Eloise Randal.
Her agent helps her go about the process of correcting the deed with a correction deed.
Cession Deed
A cession deed or deed of cession is also a type of quitclaim deed. A cession deed transfers property rights to the government. Usually, this looks like a property owner transferring street rights to their city government or other small-scale transfers.
Quitclaims: One Deed, Many Forms
If these deeds could talk, each of them would say the following:
General warranty deed: “I own this property and I can vouch for the title.”
Special warranty deed: “I own this property and I can vouch for the title only during the time that I have owned it.”
Bargain and sale deed: “I own this property, but I can’t guarantee anything beyond that.”
Quitclaim deed: “I’m conveying my ownership interest to you, whatever that may be, and I may not even have ownership interest at all.” 🤷♀️
Primary Deeds
Definitions of primary deeds general warranty deed, special warranty deed, bargain and sale deed, and quitclaim deed.
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Now let’s test your knowledge of these four fine deeds!
If Deeds Could Talk
So those are the primary types of deeds:
General warranty deeds
Special warranty deeds
Bargain and sale deeds
Quitclaim deeds
But there is another group of deeds known as judicial deeds.
Judicial deeds are executed pursuant to a court order. Full consideration is usually stated in these deeds. Ownership is generally implied, but judicial deeds usually don’t contain any covenants or warranties. If a covenant is present, it typically states that the grantor hasn’t encumbered the property.
Types of Judicial Deeds
Several kinds of deeds fall under the broad category of judicial deeds. They’re all products of some kind of court order, but they are further defined by the role of the person who executes the deed. They include:
Guardian’s deed
Executor’s deed
Administrator’s deed
Sheriff’s deed
Referee’s deed
Tax deed
Deed in lieu of foreclosure
Let’s take a closer look at each of these.
Judicial Deeds
A guardian’s deed conveys property by a court-appointed representative acting on behalf of an incompetent person or a minor who cannot serve as a grantor on their own. This may also be called a conservator’s deed.
For example, consider Coral, a woman who is 95 years old and suffers from dementia. She wants to sell her property but can’t officially do so because she is considered incompetent. The court issues a guardian’s deed to convey Coral’s property title.
Guardian’s Deed
An executor’s deed conveys the title to the property of a deceased person. Title will be transferred to the heir(s) designated in the decedent’s will. The full dollar value of the property will be stated on the deed.
Scenario: Ray’s Will
Ray owns a small home. He tragically passes away in a car accident on his way home from work. According to his will, Ray wished for his property to transfer to his son in the case of his death. To officially convey title, the court issues an executor’s deed on Ray’s behalf.
Question: In Ray’s case, why might it be better for a court to convey his property instead of a family member or friend?
Answer: Similar to Coral’s case, it’s very possible Ray’s family and friends could take advantage of the situation and transfer title in a way that would benefit them, but not honor Ray’s wishes. That’s why judicial deeds help regulate and protect.
Administrator’s Deed
An administrator’s deed is used by a person who has been appointed by the court to act as an administrator and convey a deceased person’s property. It’s similar to the executor’s deed (and also must state the full dollar value of the property), but it’s used in cases where the deceased owner did NOT leave a will.
Executor’s Deed
There are several deeds used in cases of foreclosure. Two of them, the sheriff’s deed and the referee’s deed, are very similar.
Sheriff’s Deed
A sheriff’s deed is used in a sheriff’s sale or auction when the owner’s property is sold because of a court decision against them. A sheriff’s deed may also be used in foreclosure and tax debt situations, making it very similar to tax deeds and referee’s deeds. Like we talked about a few screens ago, it will generally be a bargain and sale deed.
Scenario: Jacki’s Foreclosure
Jacki does not meet her mortgage payments, and her home is foreclosed on. A buyer purchases the home in a sheriff’s auction, and the courts issue a sheriff’s deed to convey the title to the new owner.
Question: In Jacki’s case, why might it be better for a court to convey the property instead of Jacki, herself?
Answer: Well, Jacki’s home was foreclosed on, so she doesn’t really have the right to convey her property’s title anymore (she lost that right). It’s also possible that Jacki might not want to convey her property title (most people don’t choose foreclosure, it’s not super fun) and might choose to make conveyance difficult for the new owner.
Referee’s Deed
A referee’s deed (also called a referee’s deed in foreclosure) contains no covenants or warranties, although ownership is implied. It is utilized in foreclosure and bankruptcy proceedings. It gets its name from the court-appointed person who handles the sale, the referee.
Speaking of foreclosure, there are actually a couple more deeds related to foreclosure:
Deed in lieu of foreclosure
Tax deed
Let’s take a look at each of these.
Foreclosure and Deeds
A tax deed (also called a treasurer’s deed) is a deed used to convey the title to a property sold in a tax foreclosure sale. This is typically conveyed to the highest bidder at an auction known as a tax sale. A tax sale is the forced sale or auction of a property to cover outstanding tax debts. So, tax deeds and tax sales go hand in hand.
A tax deed is used when a property is foreclosed on by a government agency to recoup unpaid real estate taxes.
EXAMPLE
The owner of a three-bedroom home in the suburbs does not pay their property taxes. Because of this, the house is put up for sale in a tax auction. Jeremy is the highest bidder and ends up winning the rights to the property.
A tax deed is used to convey the property title to Jeremy.
Deficiency Judgment
A deficiency judgment is an important concept in the world of foreclosures. A deficiency judgment is exactly what it sounds like: it’s a judgment (in the form of a lien) passed on a monetary deficiency. In other words, a deficiency judgment is a court’s decision to attach a judgment (lien) against a debtor in the event that a property’s sale price does not cover any outstanding debt.
The deficiency judgment is really sticky – it will stick to almost anything. This includes any real or personal property the borrower owns. In Arizona, deficiency judgments are generally not allowed in residential real estate (at least for single-family properties) thanks to ARS 33-814.G and 33-729.A.
EXAMPLE
Alondra owns a house but is not able to pay her mortgage. Her home is foreclosed on and sold in a tax sale. She still owes $150,000 on her home, and the home sells for $100,000.
There is still $50,000 of unaccounted for debt. In this case, the mortgagee (remember, that’s the lender) can attach a deficiency judgment to a different property (the lakehouse Alondra owns) to make sure the debt eventually gets paid.
Tax Deed (Treasurer’s Deed)
The deed in lieu of foreclosure is an alternative to foreclosure in which the defaulting borrower voluntarily transfers the property title to the lender. As a result, the borrower cancels the foreclosure.
This might occur when a borrower who cannot make the monthly payments for a loan voluntarily transfers title to the lender to avoid foreclosure.
EXAMPLE
Shane defaulted on his mortgage and his lender initiated the foreclosure process on his property. To avoid going through the entire foreclosure process, Shane uses a deed in lieu of foreclosure to transfer title to the lender. In exchange, Shane’s lender cancels the foreclosure proceedings. In a way, the property itself serves as a substitute for the mortgage payments Shane can’t make.
Pros and Cons
The deed in lieu of foreclosure arrangement has several advantages over foreclosure:
The borrower’s credit is not as damaged, as in the case of a foreclosure.
The borrower need not worry about a deficiency judgment as long as it is written into the arrangement that the deed in lieu of foreclosure is “in full satisfaction of” the debt.
The lender does not have to incur the expense of a foreclosure.
A disadvantage of a deed in lieu of foreclosure is that it does not eliminate junior lien holders the way that foreclosure does. That can create a problem for both the lender and the borrower. If a lender is going to accept a deed in lieu of foreclosure, they will probably run a title check to determine if there are any junior liens. They will also put some verbiage in the documents that if anything shows up later, the borrower, not them, will be responsible for the other lien(s).
Two-Way Street
A borrower does not, however, just deed the property to the lender if they cannot make the monthly payments. Both the borrower and the lender must agree to an arrangement in which the lender receives title and the borrower receives consideration, releasing the borrower from repaying the loan. It’s a two-way street, and it’s possible the lender might not agree to this arrangement, so it’s not always an option (and should never be a “Plan B” for borrowers).
Lenders may be willing to enter into such an agreement to avoid the expense and legal difficulty associated with foreclosure. However, borrowers seeking to declare bankruptcy may be prevented from a deed in lieu of foreclosure if they would otherwise have to include the collateral property in the bankruptcy.
Deed in Lieu of Foreclosure
Arizona has a few types of deeds that aren’t used in every state. Special deeds for a special state! They are:
Beneficiary deeds
Disclaimer deeds
Let’s learn about them!
Beneficiary Deeds
Beneficiary deeds allow a property owner to designate a beneficiary that the property will go to when they die. They’re different from executor’s deeds because the property doesn’t have to go through any kind of third party to transfer. It just magically becomes the property of the beneficiary. The new owner is still subject to any liens, mortgages, deeds of trust, or other encumbrances the property had before the transfer.
An owner can specify more than one beneficiary in a beneficiary deed. Beneficiary deeds are only valid if they’re executed and recorded before the death of the original owner (makes sense!). Want to learn more about these exciting deeds? They’re regulated by ARS 33-405.
Disclaimer Deeds
Disclaimer deeds are used in community property states like Arizona. They come into play when one spouse wants to hold property outside of the communal spousal property. To make this happen, the non-owning spouse has to execute and record a disclaimer deed (so disclaiming any ownership) when the property is acquired.
If they don’t, they may have a claim on the property as community property. If a couple fails to properly execute the disclaimer deed at acquisition but still want to hold the property separately, the non-owning spouse would need to execute and file and quitclaim deed.
The only exception to this rule is inherited property. In Arizona, inherited property is automatically excluded from community property.
Visualize It
Descriptions of two types of Arizona deeds.
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Arizona Deeds
I bet you never thought there were so many deeds! You’ve come so far, but there is still one more category of deeds to cover: special-purpose deeds. There are two special-purpose deeds worth knowing:
Master deed
Deed in trust
I bet you can’t guess what a master deed is. Go ahead, guess!
Master Deed
A master deed is a deed used to convey land to a condominium developer. That’s a pretty specific use for an instrument that goes around calling itself a “master deed.” But, hey, I’m not here to judge. I’m just here to educate!
As a real estate professional, you can expect a master deed to be used if you find yourself involved in the sale of land to condominium developers.
Deed In Trust
A deed in trust is a deed used to convey ownership interest to the trustee under a land trust, which is a trust in which land is purchased to be held for a long period of time for the benefit of a named party. Like a master deed, this one is used in a very specific case. I guess that’s why these are known as “special purpose” deeds, huh?
The deed in trust grants the trustee (specifically, the trustee of a land trust) the power to sell or divide a parcel of land. Under the terms of the trust agreement, the beneficiary is able to control the scope of the trustee’s powers.
🚨Important Note: The deed in trust should NOT be confused with the deed of trust. Let’s just do a quick comparison so you don’t confuse these two key concepts.
Visualize It
Descriptions of two types of special purpose deeds.
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Special-Purpose Deeds
