12. ch 4 Types of Deeds Flashcards

• ch 4 Types of Deeds Flashcards

Types of Deeds: A RecapIf these deeds could talk, each of

them would say the following:

General warranty deed:"I own this property and I can vouch

for the title."Special warranty deed:"I own this property and

I can vouch for the title only during the time that I have

owned it."Bargain and sale deed:"I own this property, but I

can't guarantee anything beyond that."Quitclaim deed:"I'm

conveying my ownership interest to you, whatever that may be, and I may not even have ownership interest at all." Bargain and Sale DeedThis brings us to the third type of deed: a truebargain and sale deed,which is a deed withoutanycovenants or warranties against encumbrances. It only implies that the grantor has possession of the property and holds the right to convey title.Sometimes this is called adeed without warranty. Without warranties, the grantee has little legal recourse if defects later appear in the title. Plenty of lenders won't want to fund a mortgage if the deed will be a bargain and sale deed.Administrator's DeedAnadministrator's deedis used by a person who has been appointed by the court to act as an administrator and convey a deceased person's property. It's similar to the executor's deed (and also must state the full dollar value of the property), but it's used in cases where the deceased owner did not leave a will.AliasesA deed of trust can go by several different

names:Security deedDeed to secure debt

With a deed of trust, the right to real estate is held by another party until the terms of the loans are satisfied.

There are two things that can happen:If the borrower pays

off the loan, the third party will reconvey the property to the borrower.If the borrower defaults on the loan, the third party will reconvey the property to the lender.Judicial DeedsJudicial deeds are executed pursuant to court order.Full consideration is usually stated in these deeds. Ownership is generally implied, but judicial deeds usually don't contain any covenants or warranties. If a covenant is present, it typically states that the grantor hasn't encumbered the property.Types of Judicial DeedsSeveral kinds of deeds fall under the broad category of judicial deeds. They're all products of some kind of court order, but they are further defined by the

role of the person who executes the deed. They include:

Guardian's deedExecutor's deedAdministrator's deedSheriff's deedReferee's deedTax deedDeed in lieu of foreclosure Executor's DeedAnexecutor's deedconveys the title to the property of a deceased person. Title will be transferred to the heir(s) designated in the decedent's will. The full dollar value of

the property will be stated on the deed.DisadvantagesA disadvantage of a deed in lieu of foreclosure is that it does not eliminate junior lien holders

the way that foreclosure does. That can create a problem for both the lender and the borrower. If a lender is going to accept a deed in lieu of foreclosure, they will probably run a title check to determine if there are any junior liens. They will also put some verbiage in the documents that if anything shows up later, the borrower, not them, will be responsible for the other lien.A borrower does not, however, just deed the property to the lender when they cannot make the monthly payments. Both the borrower and the lender must agree to an arrangement whereby the lender receives title and the borrower receives consideration, such as a release from repayment of the loan.Lenders may be willing to enter into such an agreement to avoid the expense and legal difficulty associated with

foreclosure. However, borrowers seeking to declare bankruptcy may be prevented from a deed in lieu of foreclosure if they would otherwise have to include the collateral property in the bankruptcy.There is, however, yetanotheralternative to the foreclosure, or the deed in lieu of foreclosure, should a borrower ever find themselves in default - the short sale.

Types of Deeds: A RecapPICTURE

Short SalesIf the property owner cannot afford to keep the property and there is not enough equity to market the property, the lender may agree to a short sale. Ashort saleis a sale in which the lender will agree to accept less than what is actually due on the mortgage before the property goes into foreclosure.

The Six CovenantsThe six covenants can be sorted into two groups: present

covenants and future covenants. I can't help but feel like I'm trying to teach you about witchcraft, you know?Short Sale TypesThere are two types of short sales:The lender forgives the debt.(This is considered debt forgiveness and at times has been taxable income for IRS purposes; clients should check with a tax consultant.)The lender requires the buyer to sign a note to repay the differencebetween the amount due on the mortgage and the amount they receive at the time of the sale. In this instance, the debt is not forgiven.Referee's DeedAreferee's deedcontains no covenants or warranties, although ownership is implied. It is utilized in foreclosure and bankruptcy proceedings. It gets its name from the court-appointed person who handles the sale, the referee.Speaking of foreclosure, there are actually a couple more

deeds related to foreclosure: the deed in lieu of foreclosure

and the tax deed. Let's take a look at each of these.Types of DeedsThere are four main types of deeds that are commonly used in Michigan to convey real estate. In order

of the most protection for the grantee to the least, they are:

General warranty deedSpecial warranty deedBargain and sale deedQuitclaim deedOther instruments affect title, but do notconveytitle, such as mortgages. These documents are not intended to convey title but are financing instruments that establish real estate as security for the payment of a debt.Special Purpose DeedsLastly, there are two special

purpose deeds worth knowing:

Master deedDeed in trust The Six CovenantsCovenant of seisinCovenant of right to conveyCovenant against encumbrancesCovenant of quiet