2.2 Deeds, Title Transfer, Title Insurance, and Recording
Key Takeaways
- A valid deed requires a competent grantor, named grantee, words of conveyance, legal description, and the grantor's signature; delivery and acceptance complete the transfer.
- A general warranty deed gives the broadest covenants; a quitclaim deed gives none and conveys only whatever interest the grantor may hold.
- Title passes on delivery and acceptance, not on recording; recording protects priority and gives constructive notice.
- Title insurance is a one-time premium indemnity policy: an owner's policy protects the buyer, a lender's policy protects the loan.
- Recording acts (race, notice, race-notice) determine which competing claimant prevails.
Deeds, title transfer, title insurance, and recording
A deed is the written instrument that transfers an interest in real property from a grantor (seller) to a grantee (buyer). Title is the legal evidence of ownership — the abstract concept; the deed is the document that conveys it.
Essential elements of a valid deed
| Element | Requirement |
|---|---|
| Grantor capacity | Competent, of legal age, and identified |
| Grantee named | Identifiable person or entity |
| Words of conveyance | The granting clause ("I hereby grant") |
| Legal description | Adequate to identify the parcel |
| Consideration | Stated (often nominal, e.g., "$10 and other valuable consideration") |
| Grantor's signature | Required; the grantee does not sign |
| Delivery and acceptance | Transfer is complete only when delivered and accepted |
Trap: the grantee never signs the deed and need not be competent. A deed to a minor is valid. Recording and notarization (acknowledgment) are not required for a deed to be valid between the parties — but acknowledgment is required to record.
Types of deeds, ranked by protection
The general warranty deed gives the broadest protection. The grantor warrants against defects arising at any time, even before the grantor owned the property. Its covenants include seisin, right to convey, against encumbrances, quiet enjoyment, and warranty forever.
The special (limited) warranty deed warrants only against defects arising during the grantor's own period of ownership. It is common from corporations, executors, and other fiduciaries who cannot vouch for prior owners.
The bargain and sale deed implies the grantor holds title but adds no warranties; some versions add a covenant against the grantor's own acts only.
The quitclaim deed carries no warranties at all. It conveys only whatever interest, if any, the grantor happens to hold. It is the tool to clear a cloud on title or release a possible claim — never the buyer's first choice for a purchase.
Voluntary vs involuntary transfer
Voluntary transfer happens by deed (sale or gift) or by will (devise of real property) and intestate succession. Involuntary transfer happens by escheat (to the state when an owner dies with no heirs), eminent domain, adverse possession, foreclosure, or partition.
A buyer wants the strongest possible guarantee that the seller will defend against title defects that occurred even before the seller owned the property. Which deed should the buyer require?
When title actually passes
Title passes upon delivery and acceptance of a valid deed — not upon recording. Recording is not what makes the transfer valid; it protects the grantee's priority against later claims and provides constructive notice to the world.
Notice concepts
- Actual notice — what a person actually knows.
- Constructive notice — what a person is presumed to know because it is recorded in the public record or visible by inspection.
Recording acts
When two buyers claim the same parcel, the recording statute decides who wins:
| Recording act | Who prevails |
|---|---|
| Race | First to record, regardless of notice |
| Notice | The last bona fide purchaser without notice |
| Race-notice | A purchaser without notice who records first |
Most states use notice or race-notice. A bona fide purchaser (BFP) pays value and takes without notice of a prior unrecorded claim.
Worked example: race-notice
Seller deeds to Buyer 1 on March 1; Buyer 1 does not record. Seller fraudulently deeds the same parcel to Buyer 2 on April 1. Buyer 2 pays value, has no notice of the first deed, and records April 2. Buyer 1 finally records April 10.
In a race-notice state, Buyer 2 wins: a purchaser without notice who recorded first. Buyer 1's remedy is against the seller for fraud, not against Buyer 2's title.
Title search, chain of title, and abstract
A title search reviews the public record to trace the chain of title — the recorded succession of owners. A gap or defect creates a cloud on title, often cured by a quitclaim deed or a suit to quiet title. The abstract of title is a summary of all recorded documents; an attorney or examiner renders an opinion of title on its marketability.
Title insurance
Title insurance is an indemnity policy: a one-time premium paid at closing covers loss from covered title defects existing as of the policy date (it is backward-looking, unlike casualty insurance).
| Policy | Protects | Coverage amount |
|---|---|---|
| Owner's policy | The buyer/owner | Usually the purchase price |
| Lender's (mortgagee) policy | The lender | The loan balance, declining over time |
Worked numeric example
A buyer purchases a home for $400,000 with a $320,000 loan. The owner's policy is written for the $400,000 purchase price; the lender's policy is written for the $320,000 loan amount. If a covered prior lien of $50,000 surfaces, the owner's policy indemnifies the owner up to policy limits for the covered loss; the separate lender's policy protects the lender's secured position.
Trap: a standard owner's policy excludes matters an extended policy or survey endorsement would cover — such as unrecorded mechanic's liens, rights of parties in possession, and survey/boundary issues not shown by the public record. Reading "the title is insured, so all risks are covered" is the wrong answer.
A home sells for $500,000 financed with a $400,000 mortgage. Two years later a covered title defect is discovered. For what amount was the owner's title insurance policy most likely written?