Real Estate Exam: Title Transfer, Deeds, Recording, Title Insurance, Closing

A deed is a written legal document that transfers ownership of real property from a grantor to a grantee. Essential elements include a competent grantor of legal age and sound mind, an identifiable grantee, consideration stated or implied, words of conveyance such as "grant and convey," a legal description of the property, the grantor's signature, and delivery and acceptance. A deed must be in writing to satisfy the statute of frauds. The grantee does not need to sign the deed.

A general warranty deed provides the greatest protection to the buyer by guaranteeing clear title against all claims, past and present, throughout the entire chain of ownership. The grantor warrants they have the right to convey, the title is free of encumbrances except those listed, and they will defend the title against all claims. A special warranty deed limits the grantor's guarantees to only the period during which they owned the property. The grantor does not warrant against defects that existed before their ownership.

A quitclaim deed transfers whatever interest the grantor may have in a property without making any warranties or guarantees about the quality of title. The grantor may have full ownership, partial ownership, or no ownership at all, and the quitclaim deed conveys only whatever exists. Quitclaim deeds are commonly used between family members, to clear title defects, to transfer property between spouses during divorce, to add or remove someone from title, and to release a claim or interest in property.

Recording is the process of filing a deed or other legal document with the county recorder's office to provide public notice of the transfer or encumbrance. Recording protects the grantee by establishing priority over subsequent claims to the same property. Under recording statutes, an unrecorded deed is valid between the original parties but may lose priority to a later buyer who records first without knowledge of the prior transfer. Recording does not validate a defective deed. The type of recording statute, whether race, notice, or race-notice, determines how priority disputes are resolved.

Title insurance is a policy that protects the insured party against financial loss from defects in title that were not discovered during the title search, such as forged documents, undisclosed heirs, recording errors, missing liens, or boundary disputes. There are two types: a lender's policy that protects the mortgage lender for the loan amount, required by virtually all lenders, and an owner's policy that protects the buyer for the purchase price, optional but recommended.

A title search is an examination of public records to determine the legal ownership of a property and identify any claims, liens, encumbrances, easements, or defects that affect title. The search traces the chain of title through recorded deeds, mortgages, court judgments, tax records, and other documents. It reveals whether the seller has the legal right to convey, whether any outstanding liens must be paid at closing, whether any easements or restrictions limit use, and whether any title defects exist.

Closing, also called settlement or escrow, is the final step where ownership transfers from seller to buyer. At closing, the buyer signs mortgage documents and pays closing costs, the seller signs the deed and any required affidavits, the lender funds the loan, the title company distributes funds to pay off the seller's existing mortgage, real estate commissions, prorated taxes and insurance, and other costs. The deed and mortgage are sent for recording. The buyer receives keys and possession.

The chain of title is the complete history of ownership of a property from the original grant to the current owner, traced through recorded deeds and other documents. A clean chain of title means every transfer was properly executed, delivered, and recorded with no gaps, missing heirs, or conflicting claims. A break in the chain, such as a missing deed or an improperly executed transfer, creates a cloud on title that may prevent the current owner from proving clear ownership. Title searches examine the chain to identify and resolve any breaks before closing.

Adverse possession allows a person to gain legal ownership of another's property by occupying it openly, continuously, and without permission for a period specified by state law, typically ranging from five to twenty years. The possession must be actual, open and notorious, exclusive, hostile meaning without the owner's consent, and continuous for the statutory period. If all requirements are met, the possessor can file a court action to obtain legal title.

A Closing Disclosure is a five-page form that details the final terms of the mortgage loan, including the loan amount, interest rate, monthly payments, closing costs, and cash needed at closing. Under the TILA-RESPA Integrated Disclosure rule, lenders must provide the Closing Disclosure to the borrower at least three business days before the scheduled closing date. If any significant changes occur after delivery, such as a change in APR, loan product, or addition of a prepayment penalty, the lender must provide a corrected disclosure and the three-day waiting period restarts. ---