2.2 Deeds, Title Transfer, Title Insurance, and Recording

Deeds: the instrument that transfers title

Title to real property transfers by a written instrument called a deed. Distinguish two parties: the grantor (seller/giver, who must sign) and the grantee (buyer/receiver, who need not sign). A deed transfers ownership; it is not the same as the title itself, which is the abstract evidence of ownership, nor the same as a mortgage, which only pledges the property as security for a debt.

Essential elements of a valid deed

For a deed to be valid, the exam expects these elements:

• Competent grantor — of legal age and sound mind.
• Named, identifiable grantee — the receiving party must be ascertainable.
• Words of conveyance (granting clause) — language showing intent to transfer.
• Adequate legal description — metes and bounds, lot and block, or government survey; a street address alone is insufficient.
• Consideration — something of value recited (often "$10 and other good and valuable consideration").
• Grantor's signature — sometimes notarized/acknowledged for recording.
• Delivery and acceptance — the deed must be delivered by the grantor and accepted by the grantee while the grantor is alive.

The single most-tested element is delivery and acceptance: title passes at delivery, not at signing and not at recording. A deed found in a drawer after the grantor dies, never delivered, transfers nothing.

Types of deeds and the protection they give

The deed type controls how much the grantor promises about the title.

The general warranty deed includes covenants such as seisin (grantor owns the estate), right to convey, against encumbrances (no undisclosed liens), quiet enjoyment, and warranty forever. A quitclaim deed makes no promises at all — it simply releases whatever interest the grantor may (or may not) have, which is why it is used to clear clouds on title, not for a normal arm's-length sale.

Voluntary and involuntary transfer

Title can change hands voluntarily (sale, gift, dedication, or by will — the giver is the devisor and the receiver of real property a devisee) or involuntarily:

• Intestate succession — owner dies with no will; state law directs heirs.
• Escheat — owner dies with no will and no heirs; property goes to the state.
• Adverse possession — a trespasser who possesses openly, notoriously, continuously, hostilely, and exclusively for the statutory period may acquire title.
• Eminent domain — government takes private property for public use with just compensation.
• Foreclosure / tax sale — forced sale to satisfy a debt or unpaid taxes.

Recording and constructive notice

Recording the deed in the county land records does not transfer title — delivery did that. Recording protects the new owner's priority and gives the world constructive notice (legal notice everyone is presumed to have, whether or not they actually read the records). Actual notice is what a party truly knows.

Most jurisdictions follow one of three recording-act rules:

The practical exam point: an unrecorded deed is valid between the parties but can be defeated by a later buyer who records first without notice. Recording promptly is the protection.

Title evidence and title insurance

Before closing, an abstract of title (a history of recorded documents) or a title search is examined to render an opinion of title and reveal clouds (defects). Title insurance then protects against covered hidden defects such as forged deeds, undisclosed heirs, recording errors, or missed liens.

• Owner's policy — protects the buyer up to the purchase price; premium paid once at closing; coverage lasts as long as the owner (or heirs) holds an interest.
• Lender's (mortgagee's) policy — protects the lender for the loan balance and decreases as the loan is paid down; usually required by the lender.
• Standard vs. extended coverage — standard covers record defects; extended (with survey) adds off-record risks like encroachments and unrecorded easements.

Worked numeric: title insurance and prorated recording

A buyer purchases a home for $400,000 with a $320,000 loan. The owner's title policy is written at the $400,000 purchase price; the lender's policy is written at the $320,000 loan amount. If a covered defect later causes a $50,000 loss, the owner's policy responds up to its $400,000 face limit; the lender's policy responds only up to the then-outstanding loan balance.

Trap: candidates assume one policy covers everyone. It does not — a buyer who pays cash or who is told "the lender has a policy" still needs a separate owner's policy to be protected, because the lender's policy benefits only the lender.

Comparing the closing instruments

New licensees blur three documents that travel together at closing. Keep them distinct:

The deed conveys; the note creates the debt; the mortgage or deed of trust secures it. A question that asks "which document transfers title" points to the deed, while "which document is the evidence of the debt" points to the note. The mortgage merely gives the lender a lien and the right to foreclose on default.