Deed

A deed is the signed written instrument by which an owner of real property, called the grantor, transfers an interest in it to someone else, called the grantee. It is the document that moves ownership. The word is often used loosely as a synonym for title, and the two are not the same: title is the legal state of owning the property, while the deed is the piece of paper that changed that state. You do not hold a deed the way you hold a car title; you hold ownership, and the deed is the evidence of how you got it.

Two documents sit beside the deed in a financed purchase and are routinely confused with it. The promissory note is the buyer's personal promise to repay the money. The security instrument, called a mortgage in some states and a deed of trust in others, pledges the property as collateral. The Bankruptcy Code names the category the second one belongs to precisely: 11 USC 101(51) provides that "the term 'security interest' means lien created by an agreement." A deed creates no lien and secures nothing. It conveys. That distinction is the source of most of the practical confusion covered below, and the reason a document with "deed" in its name can be either a conveyance or a security instrument depending on which one it is.

Deeds are state law, and the site of that law is the county. There is no federal statute defining a deed or setting out what one must contain. Each state supplies its own requirements, and while the common elements are familiar everywhere, the details that void a deed are local: who must sign, whether a notary or witnesses are required, what description of the land is sufficient, and what the recording office will accept. A deed prepared from a template found online is a genuine risk for exactly this reason, because the template cannot know which state's formalities it needs to satisfy.

Delivery is the step people skip. A deed signed and left in a drawer has generally not transferred anything. The conveyance takes effect on delivery to the grantee and acceptance by them, which is why a deed prepared in advance and held until death is a standing source of litigation among heirs. Recording is a separate act again. Recording is not what makes the transfer good between grantor and grantee, but it is what makes the transfer known to the world, and in a contest between two people claiming the same land, who recorded and when usually decides it. The title search that precedes a closing is a search of these recorded instruments.

The deed and the loan are changed by different acts, and this is where real money is lost. Paying a mortgage off in full extinguishes the debt and clears the lien, but it does not alter the deed, because the deed never mentioned the debt. Running the point the other way is the version that actually hurts people. In a divorce, one spouse commonly signs a deed transferring their interest in the house to the other, and both parties then believe the house has been dealt with. It has not. The signer is still a borrower on the note they signed, still liable for every payment, and still exposed to a foreclosure and a credit file entry if the other spouse stops paying. A property settlement between two spouses cannot bind a lender that was not party to it. The only routes off the note are a refinance in the remaining owner's name alone, an assumption the lender approves with a written release, or paying the loan off.

Deed types describe the promise, not the size of the interest. The family of named deeds, including warranty deeds, special or limited warranty deeds, quitclaim deeds and the various transfer-on-death deed forms, differ chiefly in what the grantor guarantees about the state of the title, and in one case in when the transfer takes effect. A deed with the strongest covenants promises that the grantor owns what they are conveying and will defend the grantee against claims arising at any point in the property's history. A quitclaim promises nothing at all about the title and simply hands over whatever interest the grantor happens to have, which may be everything or nothing. Both can transfer complete ownership; they allocate the risk of a defect differently. That difference is also why a lender in a purchase transaction will not accept the weakest form, and why a transfer between family members frequently uses it.

A transfer by deed runs through four steps. The grantor signs a deed naming the grantee and describing the property, in the form the state requires. The deed is delivered to the grantee and accepted. The deed is then taken to the county recorder, where it is indexed against the property and becomes part of the public chain of title. Any lien already recorded against the property stays exactly where it was, because a conveyance does not disturb the rights of people who are not party to it.

A hypothetical example of the deed-and-note gap. Rosa and Ken bought a house together and signed one promissory note for $310,000. They divorce, and the settlement gives Ken the house. Rosa signs a deed conveying her interest to him, and it is recorded. Rosa now owns none of the house. She is also still one of two borrowers on the full $310,000, because the lender never agreed to anything. If Ken misses payments, the servicer reports the delinquency on Rosa's credit file as well as his and can pursue her for the balance, even though her name is nowhere on the deed. To end that exposure Ken has to refinance the $310,000 in his own name, or obtain the lender's written release of Rosa's liability. Note the asymmetry in what each document required: the deed needed only Rosa's signature, and getting her off the note requires the lender's consent.

Pros

• A recorded deed puts the world on notice of who owns the property, which is what makes ownership defensible against later claimants.
• The recording system is public and searchable, so the history of a parcel can be reconstructed by anyone willing to look.
• Deed forms are flexible enough to handle transfers between spouses, into trusts, and at death without a sale.

Cons

• Requirements are set state by state, so a form that works in one state can be invalid in the next one over.
• A deed transfers ownership and does nothing about debt, and the gap between those two facts is the single most common and most expensive misunderstanding here.
• Signing a deed to a property that carries a mortgage can trigger the lender's right to demand the balance, unless the transfer falls into one of the categories federal law protects.
• The weakest deed forms transfer whatever the grantor owns and promise nothing, so a grantee who accepts one has taken the title risk.