Real Estate Deeds & Documents

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Know the types of deeds and taking title in California to protect yourself.

A surprising number of buyers live far away from the real property’s location whether in a different state or a country. For instance, a buyer proclaims: “Craigslist photos look great! A steal at the listed sales price. Better buy it now or I’ll never get the same bargain again.”

As an old saying goes in Latin: “Caveat emptor” or “Buyer beware”.

Let’s explore the different types of real estate title deeds and ways to take the title.

You’ll learn how to protect yourself even if buying from a long distance.

In the U.S., five common types of real estate deeds exist:

  • Grant Deed.
  • Quit Claim Deed
  • General Warranty Deed;
  • Special Warranty Deed;
  • Bargain and Sale Deed
                                                                             General Warranty Deed in California

Offering the biggest protection to buyers.

The seller makes a guarantee that no problems with the title exist, such as clouds, liens, and claims. This warranty extends from when the property first sold to the current buyer.

In California, a General Warranty Deed known as the “California Warranty Deed” gives unlimited warranty of title. It guarantees the seller maintains good title to the property. Source

Special Warranty Deed in California

Offers less security as the seller only guarantees the property is free from title clouds and liens during the time the seller owned it.

If the seller recently bought it, the guarantee doesn’t amount to much. Properties bought through foreclosure and bank repossession sales often use this deed.

California allows the use of a Specialty Warranty Deed. But, it’s not used very often. Mainly used in commercial real estate sales than residential. Also, title insurance typically bought to protect the buyer. Source

Trust Deed in California

Many states use a Bargain and Sale Deed.

Often used during court seized residential properties sales. While conveying title, the seller does not guarantee free and clear ownership. There may be other liens needing payment.

California does not allow Bargain and Sale Deeds. Instead, California uses a Trust Deed with a “Power of Sale” clause for lenders so they foreclose on a default property without filing a lawsuit. The property sold at a foreclosure auction known as a “Trustee’s Sale”. Source

Quit Claim Deed in California

Mostly used for quick title transfers like a divorce when one spouse quitclaims to the other.

Basically, the person using a Quit Claim Deed simply quits all claims to the property, whether any exist or not. Scammers use this deed a lot as it contains no guarantees at all.

Read our blog post about protecting yourself from scammers. Here

California laws allow the use of Quit Claim Deeds. However, the law requires all quitclaim deeds signed and notarized to become valid. In addition, quit claim deeds recorded with the county recorder’s office or county clerk. Source

Also, California provides a five-year statute of limitations to challenge the validity of a quit claim deed. Source

Grant Deed in California

Often used in residential property sales.

The seller conveys the property to the buyer with a guarantee of owning the property with the right to sell. But, no guarantees that the title contains clouds and liens.

California Section 1092 of the Civil Code allows the use of a Grant Deed. Only two promises exist with a Grant Deed. The seller didn’t transfer title to another party and the property is free of encumbrances and liens unless otherwise stated in the deed. Again, title insurance protects California buyers using this deed. Source

As you see, these five deeds differ. Obviously, the best deed remains the General Warranty Deed almost always used in the sale of residential properties.

The Benefits of Title Insurance

The problem with most of the deeds mentioned above become solved by getting title insurance. Every lender requires title insurance to protect their mortgage or loan.

But, cash sales without a lender doesn’t require title insurance. Therefore, every buyer needs to purchase title insurance to protect themselves in an all-cash sale.

Title insurance involves conducting a search of the title’s history in the public records to ensure the title properly transferred from the first owner to the current buyer. Any liens, encumbrances, and title clouds get resolved before the escrow closing.

If a mistake occurs during the title search the title insurance policy requires the insurance company to fix any clouds, liens, and encumbrances. These mistakes most often occur with the sale of distressed properties where an unrecorded lien or a claim to its ownership shows up after the closing.

Now after learning about the different types of deeds and how title insurance protects against any problems let’s explore the different ways to take the title.

The four ways to take title to real estate in California include:

  • Tenancy in Common
  • Joint Tenancy;
  • Separate Property
  • Tenants in Common with Right of Survivorship.            Sometimes used for married couples that bought property together.
Tenancy in Common in California

A property with multiple owners with each owning a percentage.

While the percentage doesn’t have to be equal it often occurs with small numbers. Like three owners each owning 1/3 percentage. Or, they own in different percentages like A owns 20%, B owns 25%, C owns 40%, and D owns 15%.

Each one can sell their shares or mortgage it without getting the other owners consent. Upon the death of each owner that percentage does not automatically go to the other owners. Instead, it goes to the deceased owner’s heirs.

California law follows the above-mentioned explanation. Except, allowing a property held by some owners as Tenancy in Common and others in Joint Tenancy. Source

Joint Tenancy in California

Another property with multiple owners. However, each one maintains an equal ownership percentage.

The difference with Tenancy in Common involves the Right of Survivorship.

When one owner passes away the other owners receive an equal percentage of that deceased’s ownership. Joint Tenancy owners can’t sell their shares or will them to heirs.

California law allows individuals to own real property as Joint Tenants with the Right of Survivorship.

When one party dies the other party receives the deceased’s share. In addition, California’s Community Property Law automatically allows married couples and registered domestic partners the same rights as Joint Tenancy. Source

Ownership in Severalty in California

Only a single person or legal entity (like a corporation or Limited Liability Company LLC) owns the property. The term “severalty” means the owner “severed” from any other owners.  LLC’s frequently own real property in California.

California also recognizes Ownership in Severalty as described above. Source

Tenancy by the Entirety in California

Similar to Joint Tenancy except only two tenants own the property.

In addition, they must be legally married and can’t convey or sell their share without the other tenant’s consent.

California does not recognize Tenancy by the Entirety because its Community Property laws already protect a married couple in a similar manner

 

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