In any real estate transactions that involve properties in Texas, it is important to know the various types of deeds. Deeds are the documents that convey the property from one individual to another, and every type of deed has its own protections and rights. At The Farah Law Firm, we help our clients navigate the legal landscape of real estate transactions and defend their legal position. In the following sections, we will look at the most common types of deeds used in Texas and when each is suitable.
1. General Warranty Deed
A general warranty deed provides the highest level of protection to buyers in Texas. The general warranty deed is a deed in which the seller warrants that they own the property and have the right to convey it. Further, the seller warrants that the property is unencumbered or not subject to any claims or encumbrances of any kind at the time of the sale and at any time in the past by the seller or any previous owner of the property.
When to Use It:
General warranty deeds are used mostly in conventional home sales where the buyer requires the maximum protection against any future claims of the title to the property. It is the most common type of deed in use, especially in the conveyance of residential and commercial properties.
2. Special Warranty Deed
A special warranty deed is very similar to a general warranty deed but is considered slightly less comprehensive in terms of the protection it provides to the buyer. The only major difference is that the seller only warrants the property title during their ownership term. Liabilities are excluded, as the seller does not warrant any previous owners, hence any claims or liens that may have been placed before the seller acquired the property.
When to Use It:
Special warranty deeds are commonly employed in business sales of land or other properties or transfers where the buyer is willing to take some responsibility for prior problems with the title. It is also used when a bank disposes of a property in a foreclosure sale.
3. Quitclaim Deed
A quitclaim also commonly referred to as a “quitclaim deed” provides the least protection to the buyer of the property. In a quitclaim deed, the seller is relinquishing whatever interest they have in the property, if any, without warranty of the quality of the title. The seller does not warrant that the title is clear or that they have clear ownership of the property as far as third parties are concerned. Quitclaim deeds are generally not suggested for use in Texas without the guidance of an attorney and are mostly use to resolve litigation, rather than transfer property. Worst yet, they can be an encumbrance on your title if you mistakenly use one.
When to Use It:
Caveat Emptor! Quitclaim deeds are typically only used in a litigation context whereby one party relinquishes disputed rights of a property to another party; alternatively, they are used commonly by mistake since they are readily available online and many other states utilize these for standard transfers (NOT TEXAS!)
4. Lady Bird Deed (Enhanced Life Estate Deed)
A Lady Bird deed, also known as an enhanced life estate deed, allows a property owner to use the property during their lifetime, and upon their death, the property passes to the beneficiary without going through the probate process. This type of deed is very useful for estate planning, as it enables the owner of the property to avoid the probate process, allowing the property to pass directly to the beneficiary.
When to Use It:
This deed is perfect for those who want to avoid having their property go through probate but at the same time want the ability to use, sell, or even mortgage the property while they are alive. It is commonly applied in estate planning to facilitate the transfer of property to the next generation.
5. Deed of Trust
In Texas, the deed of trust is used as the security instrument in a real estate transaction. It is used in conjunction with a promissory note and involves three parties: the borrower, the lender, and a trustee. The deed of trust entitles the lender to have a right or claim on the property until the loan is fully paid. If the borrower fails to pay the loan, the trustee is empowered to sell the property, a process referred to as a foreclosure, which can be judicial or non-judicial depending on the type of lien.
When to Use It:
In Texas, deeds of trust are employed when a property is being financed through a loan at the time of purchase or anytime thereafter. Both the buyer and the seller have their interests served when they understand the consequences of such a deed in the event of a default. If you are a lender on a property, be sure to secure an attorney prepared deed of trust to protect your investment.
Why the Right Deed is Important
The type of deed used in a real estate transaction significantly affects the legal status of both the buyer and the seller. At The Farah Law Firm, we provide legal advice to help our clients decide which deed best suits their needs. Our team is ready to provide you with comprehensive legal assistance for any real estate transaction you undertake in Texas.
How The Farah Law Firm Can Help
The Farah Law Firm has been practicing real estate law in Texas for several years and offers a full range of legal services related to real estate transactions. We assist with deeds, title searches, and closing to ensure your interests are protected and the closing process goes smoothly.
If you have any questions about which deed is right for your situation or need help with a real estate transaction, please contact The Farah Law Firm. Our team of experienced attorneys will ensure you are well-advised and your property is protected.
For more information or to set up a consultation, call 817-467-1889. Let The Farah Law Firm be your law firm of choice for all your real estate law matters in Texas.
