Deeds are legal documents that show ownership of a specific real estate property. A deed must be signed by the seller and the buyer in order for the transfer of ownership of the property to take place. Phrases used to describe the transfer of a property include: grant, assign, warrant, convey. Regardless of the words used, they all apply to the process of transferring ownership from the former property owner to the new one. 

Deed of Sale

Also known as a property title, a deed of sale is the contract that finalizes the sale of the home or land between the buyer and the seller. A deed of sale must be signed by a public officer, normally a notary. Situations where a deed of sale are needed include:

  • The bank is seeking proof of ownership of the property
  • Inheritance situations
  • Seeking more details concerning the sale
  • You are no longer in possession of the estate’s property title.

Bill of Sale

A deed and bill of sale are similar in that they both provide written evidence of the transfer ownership. The only difference is the bill of sale applies to a tangible object and not real estate. A signed deed shows the sale’s date. 

Quit Claim Deeds

This legal document allows an owner of real estate to legally terminate their rights or claims to that real estate by transferring all rights and claims to another individual or entity. A common scenario would be in a divorce situation where there is joint ownership of real estate. While dividing up the assets, it is decided that the real estate will be transferred to one of the homeowners. One of the homeowners acts as the grantor and releases all claims and rights to the real estate to the other homeowner, the grantee. This termination of rights and claims by the grantor would allow the grantee full ownership of the real estate. Quit claim deeds are also used when gifts are given. It grants the receiver of the gift some certainty that the giver of the gift will not try to lay claim to the gift in the future.

Deeds in Lieu of Forclosure

This is a legal document that transfers the ownership of a real property from a homeowner to a bank that owns the mortgage of that real property. This is an action that is taken instead of having the homeowner go into foreclosure with the real estate. Banks may be in favor of a deed in lieu of foreclosure in some cases as it will ultimately save them money in the long run. If the real estate is located in a state that has litigation laws around foreclosure, the bank can skip the court time and move faster with a deed in lieu.
The rules and procedures of the deed in lieu of foreclosure will vary from bank to bank. For example: the bank may require the home to be placed on the market for sale for a period of time, the bank may require proof of financial hardship or may require an evaluation of the real estate. Whether a bank agrees to a deed in lieu of foreclosure is strictly up to the bank and they are under no obligation to do so. Banks could end up rejecting the proposal for a deed in lieu of foreclosure-based liens, back taxes or other financial issues tied to the real estate. Also, the bank could add specifications to the deed in lieu. An example of this would be having the homeowner pay any liens, pay any difference between the mortgage amount and the fair market price of the real estate.
While releasing real estate back to the bank will impact the borrower’s credit score, this impact is less than going into foreclosure with the home. Also, the homeowner will have issues getting another mortgage for the next four years and the homeowner could receive a 1099 from the bank for taxable debt forgiveness.