2.2 Deeds, Title Transfer, Title Insurance, and Recording

Elements of a valid deed

A deed is the written instrument that conveys title. To be valid it needs:

1. A competent grantor (of legal age and sound mind) who is named and identifiable.
2. A named grantee.
3. Words of conveyance (granting clause) showing intent to transfer.
4. Consideration recited (often a nominal "$10 and other good and valuable consideration").
5. An adequate legal description of the property.
6. The grantor's signature (the grantee does not sign).
7. Delivery and acceptance during the grantor's lifetime.

Trap: only the grantor signs the deed. Acknowledgment (notarization) is not required for validity between the parties, but it is required to record the deed. Title passes on delivery and acceptance, not on recording.

Deed warranties — strongest to weakest

Deeds differ by the covenants of title the grantor promises.

Trap: a quitclaim deed conveys whatever the grantor owns — which may be nothing. It carries no warranty, so it is used to release a possible claim, not to assure marketable title.

Voluntary vs. involuntary transfer

Voluntary transfer happens by the owner's choice:

• Deed during life (sale or gift).
• Will (devise) at death — the recipient is a devisee.

Involuntary transfer happens without the owner's consent:

• Descent / intestate succession — owner dies without a will; state law directs heirs.
• Escheat — no heirs and no will; property reverts to the state.
• Eminent domain — government takes for public use with just compensation (condemnation).
• Foreclosure / tax sale — forced sale for unpaid debt or taxes.
• Adverse possession — a trespasser gains title by open, notorious, continuous, hostile, and exclusive possession for the statutory period (often paying taxes; the acronym is OCEAN or ANCHOR depending on the source).

Recording and notice

Recording the deed in the county land records gives constructive notice to the world and establishes priority among competing claims.

• Actual notice: what a person actually knows.
• Constructive notice: what the public record (or possession) imputes, whether or not the person looked.

Most states use notice or race-notice statutes. The practical rule of thumb: first to record, first in right — a later buyer who records first, and took without notice, can defeat an earlier unrecorded deed. This is why a closing agent records immediately.

Title insurance and the math

A title search and abstract trace the chain of title; marketable title is title free of reasonable doubt. Title insurance protects against pre-existing, undiscovered defects (forged deeds, missed liens, errors in records) — not future events.

Worked example — who is covered

A buyer purchases a home for $400,000 with a $320,000 loan. An owner's policy is issued at $400,000; the lender's policy is issued at $320,000. Two years later, a forged easement from before the sale surfaces and costs $50,000 to clear.

• The owner's policy pays the owner's covered loss up to $400,000, so the $50,000 defect is covered.
• The lender's policy protects the lender only and pays nothing to the owner; it would respond only if the defect threatened the lender's secured position.

Prorations at closing

Title transfer questions often pair with prorations. If annual property taxes of $3,650 are paid in arrears and closing is on day 200 of a 365-day year, the seller owes the buyer for the days the seller owned the property:

$3,650 / 365 = $10/day. 200 days x $10 = $2,000 seller's debit / buyer's credit.

Trap: "paid in arrears" means the seller has not yet paid for the time owned, so the seller is debited at closing. If taxes were paid in advance, the seller would be credited for the unused portion. Always confirm the proration date convention (statutory 360-day year vs. actual 365 days) the exam states.

Closing the chain: title, ownership, and recording together

Many transfer questions chain three ideas: the deed moves title, the owner's form (from 2.1) sets how the new owner holds it, and recording protects that ownership against later claims. A buyer can take a valid general warranty deed and still lose priority to an earlier-recorded interest, which is why the closing agent records immediately and the buyer carries an owner's policy.

Watch the distinction between legal title and equitable title. Once a purchase contract is signed, the buyer holds equitable title (the right to obtain legal title at closing), while the seller holds legal title until the deed is delivered. This split underlies the doctrine of equitable conversion and explains who bears risk of loss during the contract period.

Finally, match the tool to the job: a deed transfers title, a quitclaim deed clears a cloud, title insurance pays for a hidden defect, and recording defeats a later good-faith purchaser who fails to record first.