A deed is a legal document that transfers ownership of a property from one person to another. It serves as evidence of ownership and provides legal protection for the property owner. It can also be used to resolve disputes over property rights. Deeds come in various forms, each with specific purposes. However, two of the most commonly used in California are the deed of trust and the grant deed. Deeds are usually recorded in the local county clerk’s office to protect the title and ownership.
Types of Deeds
A Deed of Trust is a legal document that creates a security interest in real estate for a loan. It is used by mortgage companies when a borrower takes out a loan on a property. In a deed of trust, the borrower conveys the property’s title to a trustee, who holds it as security for the loan. The trustee is typically a title company. The borrower also signs a promissory note, which is a written promise to repay the loan. If the borrower fails to make payments, the lender can foreclose on the property and sell it without a court process. Since it doesn’t require a court hearing, a deed of trust is faster and less expensive than foreclosing on a mortgage deed.
A grant deed is a legal document used to transfer ownership of real estate from a seller (grantor) to a buyer (grantee), signifying a change in property title. The grantor promises that they haven’t previously sold the property and that there were no encumbrances on the title during their ownership. However, the grant deed does not guarantee against any title issues that may have existed before the grantor acquired the property. It is also known as a limited warranty deed or special warranty deed.
A quitclaim deed is a legal document used to transfer ownership of real property from one person (the grantor) to another (the grantee). In a quitclaim deed, the grantor conveys whatever interest they have in the property to the grantee, regardless of whether the grantor actually owns the property or has a clear title. Quitclaim deeds are commonly used in situations such as family transfers, divorces, or to correct title errors.
An interspousal deed, also known as an interspousal transfer grant deed, is a legal document that transfers property ownership from one spouse to another. It is commonly used in marriages, divorces, and estate planning.
Conclusion
Although deeds come in various forms, choosing the right one can significantly impact your capital gains taxes. To minimize these taxes, it’s important to consult with your tax advisor before making any decisions.
