The Deed Search in a Real Estate Transaction

Do I Need A Deed Search?

A Deed search is a review of all recorded deeds on a specific parcel of land to determine the history, ownership and liens of that land. This search is conducted at the local county recorders office. When the search is completed you receive either a chain of title or a abstract of title.

A chain of title is a list of each recorded document that pertains to the property. An abstract is a copy of every document in the order they were recorded.

What Is A Deed?

Deeds are used to transfer or encumber real property. The most common are Warranty Deeds, Quit Claim Deeds and Trust Deeds. The Warranty Deed and Quit Claim Deed transfer ownership of real property, while the Trust Deed adds a loan to real property. There are many other deeds but most either transfer land or add a loan.

When Do You Need A Search

There are many instances when you may want a search. If you are buying property at a tax sale or without title insurance you need one. If you plan on subdividing or developing land it may be helpful also.

The search is conducted by the title company before they issue title insurance so when you buy land you receive a title policy instead.

Who Does Deed Searches

Searches are conducted by title companies or independent title searchers. I recommend you use a title company. Title company personnel are required to be licensed by the state and are trained by the title underwriter.

Mineral Search

The mineral search is a special type of search. It is only used in areas that have mineral exploration such as oil or natural gas. In these areas the mineral rights are often owned separately from the land.

When you own land but not the mineral rights it is helpful to know who owns them. Unlike surface rights the mineral right ownership may be divided in percentages and owned by dozens or hundreds of people. Because of this a mineral search can be expensive.

Summary

A search is helpful when you need to know the current condition of the land title and the history of ownership. The search can be conducted by a title company or independent title searcher.

If you are buying property insist on a title policy. The title company will conduct a search to issue the policy. You can request a copy of the chain of title at closing so you will have a history of ownership in addition to the title policy.

February 26, 2016

The Quit Claim Deed and How to Use It

How To Use A Quit Claim Deed

The Quit Claim deed is the most common deed. It is literally a deed to quit any claim you have on real property. The deed does not guarantee you have interest in the property only that you are abandoning any interest you may have to the persons receiving the deed. It is mistakenly called a Quick Claim deed or quitclaim deed.

Purpose of the Quit Claim Deed

A quitclaim deed does transfer any ownership held by the seller to the buyer, but does this without guarantees. If a seller issues this deed on property they don’t own, they are not liable in any way. They are not guaranteeing they own anything, they are just transferring any interest they may own to the buyer.

When Are They Used

This type of deed was not meant to be used in standard real estate transactions. It was designed to be used for very specific purposes. These include:

Transferring property between family members.
Adding additional owners to your property.
Transferring your land to a Family Trust or Company.
Donating property.
Clearing up title problems.
Changing the vesting of your property.
Correcting errors in previous deeds.

The above uses do not include the transfer of money. When property is sold a Warranty Deed should be used.

How They Affect Real Estate Buyers

A buyer should never accept this deed in a real property transaction. It provides no guarantees that you now own the property. If the seller owned the property or a portion of the property it does transfer their ownership however, if you later find title problems you have no recourse against the seller.

How They Affect Real Estate Sellers

Using this deed is helpful to sellers. When transferring property they are not making any guarantees to the buyer. If there are title problems a seller may want to use a quit claim deed to transfer real estate. This should be a red flag to any buyer of possible title problems.

This type of deed is not appropriate for real estate transactions. It should only be used for purposes listed above or similar that do involve the transfer of money.

The Warranty Deed. The Warranty Deed is the most secure deed and should be used in all real estate transactions. This deed guarantees title to the buyer.

The Special Warranty Deed. The Special Warranty Deed is a compromise deed. It guarantees title only for the time the seller owned the real estate.

February 26, 2016

The Special Warranty Deed

The Special Warranty Deed

The Special Warranty Deed is a compromise deed. It guarantees clear title only during the time the real property was owned by the seller. It does not guarantee against any issues that may be present before the seller owned the property.

It is between a Quit Claim Deed and a Warranty Deed in guarantees. The Quit Claim Deed has no guarantees, while the Warranty Deed Guarantees the property is free and clear from the original owner until the time of sell.

General Purpose and Effects of the Special Warranty Deed

This deed transfers all of the owners interest to the buyer and guarantees against title problems from the time the owner purchased the property until the time of sell. It does not guarantee against problems that may have existed when the owner purchased the property.

When Are They Used

Government agencies and large companies often have a policy to issue this deed. Other sellers will also want to use one if they know of previous title problems. Attorney’s often advise their clients to use this deed.

How They Affect Real Estate Buyers

This deed transfer the sellers interest to the buyer and is usually a good transfer. However, if there are title problems before the seller owned the property the seller is not guaranteeing against these problems. The seller may not be aware of these problems.

How They Affect Real Estate Sellers

When using this deed the seller is accepting less legal liability that when using a Warranty Deed. This is definitely to the sellers advantage.

While there may not be previous title problems, the seller will not liable for any that do exist. If a seller insists on using this deed consider this a red flag of possible title problems. Also title companies may not insure the transaction unless a Warranty Deed is used.

February 26, 2016

The Warranty Deed

The Warranty Deed is the most secure deed and should be used in all real estate transactions. When signed the seller is guaranteeing there are no title problems on the land being sold.

General Purposes And Effects of the Warranty Deed

This warrants or guarantees the property from the original owner to the time of sale. The buyer receives this guarantee from the seller. Most real estate transactions are insured by title insurance so that becomes the main protection to the buyer. In this case the title insurance company has the right to go against the seller in the event of title problems.

When is this Deed Used

This deed is the standard in real estate transactions. If the seller wants to use a different Deed consider this a red flag of possible title problems. If you are buying, insist on a this Deed or do not complete the transaction. An exception to this might be government agencies and large corporations which have a policy of using Special Warranty Deeds.

How They Affect Real Estate Buyers

This deed gives the buyer the greatest amount of protection. The seller guarantees the property is free and clear of any title problems or liens, except those listed on the deed.

How They Affect Real Estate Sellers

When a seller signs this deed they are guaranteeing there are no title problems, loans or liens on the property, except those spelled out in the deed. This includes title problems the seller is not aware of. If a title company insures the property they have the right to come against the seller to resolve title problems that existed before the time of sell.

February 20, 2016

Joint Tenancy in Real Estate

Joint Tenancy allows the real estate to transfer to the surviving owner(s) on the death of one owner. It is most commonly used between spouses but is used in other situations and between more than two people.
There are many other ways to own land: Tenants in Common, Family Trusts, Partnerships, LLC’s, Corporations. Individuals usually hold real estate as joint tenants or tenants in common.

What It Does

This type of joint ownership allows for the surviving owners to receive the real estate upon the death of the other owner(s). It is most commonly used between spouses.

Upon the death of one, the surviving spouse records an affidavit of survivorship and a death certificate in the county recorder’s office. The ownership of the property is then transferred to that person.

The great advantage is the transfer happens without probate, attorneys, courts or major cost. The affidavit of survivorship is a simple one page document, easily prepared.

How To Use It

Using this type of vesting is simple. The following words “as Joint Tenants” is added after the buyer’s name on the purchase deed. If it isn’t added, the buyers can record a new deed at anytime to add it.

The following phrases are sometimes used instead of Joint Tenants; “husband and wife, as joint tenants”, or “as joint tenants with full rights of survivorship”. There are many combinations but the main part is “as Joint Tenants”.

In some states simply adding “husband and wife” after the buyers names is enough. To be safe always use “as joint tenants”. You can add the extra wording if you prefer.

Any owner can cancel this vesting between themselves and the other owner or owners. They record a deed transferring their interest to themselves or someone else without using the joint tenants wording. When they do, the remaining owners (if more that one) are still joint tenants.

When To Use It

The most common use of this joint ownership is between husband and wife but can be used in other situations and between more than two people. No matter how many people are joint tenants upon the death of one, ownership reverts to the survivors. Joint tenants is used anytime you want the surviving owners to own the property instead of the estate of the deceased owner.

Cautions

Several cautions are in order. First, make sure you want the property to go to the surviving owner(s). A common vesting error is when a couple with separate children buy real property as joint tenants when they intended their own children to receive their share of the land.

Summary

Joint Tenancy allows ownership of real estate to pass to surviving owner(s) upon the death of one of the owners. It is simple to use by adding the correct wording to a deed when purchasing land. It can be added or removed at anytime by recording a new deed at the county recorder’s office.

It is not the correct vesting for every situation. Decide what you are trying to accomplish and then choose the correct vesting.

February 15, 2016

Real Estate Foreclosures in Utah

The real estate foreclosures process is long and complicated. The documents used in real estate loans are standard across the nation, but the process is governed by state law, making the process unique to each state.

This is an in depth look at real estate foreclosures in Utah. Keep in mind each state has differences.

Default

Foreclosure starts when a default occurs. A default occurs due to the action or inaction of the borrower or property owner. The most common default is failure to make payments, but is not the only default.

Breaking any agreement in the closing documents constitutes a default. These include not paying property taxes, not maintaining property insurance, destroying the property, etc. This is the start of a real estate foreclosure.

Trustee

Foreclosure auctions, or Trustees Sales as they are more correctly termed, are conducted by a Trustee who handles all phases of the foreclosure process. Trustees must be a attorney, title company, lending institution or certain government agencies.

Regardless of who is the original Trustee on the Trust Deed, it is usually changed to an attorney or title company when a default occurs.

Notice of Default

When a default occurs a Notice of Default is recorded at the county recorder’s office. A certified copy is also sent to the owner no later than 10 days after recording. The Notice of Default states what the default was. The lender must then wait 3 months before taking further action. During this three month period, the Borrower is allowed to correct the default.
Correcting the default would include paying the overdue payments including interest and penalties, paying the taxing, obtaining insurance or correcting whatever default occurred.

Notice of Trustee’s Sale

As the name implies a Notice of Trustee’s Sale is a public notice that a default has occurred and was not cured within the three month period.

If the default is not cured in the three months, the Trustee publishes a Notice of Trustee’s sale. This notice must be posted in at least three conspicuous places in the city or county where the property is located. It must also be posted on the property. It is then published in a local newspaper, once a week, for 3 consecutive weeks. The last publication must be at least 10 days, but not more than 30 days before the sale date.

During this period the borrower has the right to payoff the property but the lender is not required to accept just delinquent payments as during the Notice of Default phase.

Trustee’s Sale

If the default is not cured by the time of sale the Trustee holds the sale at the published location and time. The first bid is automatically placed in behalf of the lender and is usually the amount of the loan payoff plus interest, penalties and foreclosure fees. Anyone can bid at the Trustee’s sale as it is held as a public auction.

Funds to Purchase

To place a bid at a foreclosure auction or trustee’s sale, bidders are usually required to have certified funds for a set amount (often $5,000) and must pay the remaining bid price within 24 hours. The amount needed at the auction will be listed in the newspaper in the Notice of Trustee’s Sale.

Trustee’s Deed

After the auction is completed a Trustee’s Deed will be issued by the Trustee to the successful bidder. This deed conveys all interest of the Lender but may not convey all the property interest.

Conclusion

The real estate foreclosure process is painful for homeowners. For those looking for a great investment it is worth a look.

January 30, 2016

Utah Real Estate Vesting: A Tale of Stolen Inheritance

A Tale of Stolen Inheritance of Utah Real Estate

The following story is the best way to illustrate the importance of Utah real estate vesting.

Jim Duncan was a 70 year old widower with 3 grown children. His 2 daughters were married and lived out of state. His son Thomas, also married, lived next to him on the family farm, which had been in the family for 5 generations. His son now handled most of the work on the farm. The farm was on the edge of a mid-size city and was worth several million dollars. Neither Jim nor his son had any interest in selling the farm, to them it was a way of life.

Thomas Duncan would be the 6th generation to own and run the farm. He would pass it on to his children, as the family had done for over 100 years. Thomas was happy when his dad decided to remarry. His new step mom was a few years younger than his father, with two grown children, which he met at the wedding.

Just 2 years later his father, and his fathers wife, were killed in a car accident. His father died at the scene, the wife died 2 days later in the hospital, without regaining consciousness. The funeral was the second time he met her children. A week later they offered to sell him the farm – for 2 million dollars! Thomas thought it was a joke. After consulting with his attorney, he learned they owned everything. Thomas was unable to pay the price and the farm was sold to someone else.

How Did This Happen?

I have seen this type of scenario happen several times. Here is what happened. When Jim Duncan remarried he transferred the farm to himself and his new wife, as “joint tenants”. Joint Tenants is the vesting (type of ownership) which allows the property to go to the owner that lives the longest; in this case the new wife.

This is the most common way of transferring property, to a married couple, and is usually the correct way. Using “Joint Tenants’ when a spouse dies, the property goes to the surviving spouse without attorneys or courts involved. Upon the death of Jim Duncan, in the car accident, the property automatically transferred to his wife. On her death, the property transferred to her heirs, as she was now the sole owner. Her heirs were her 2 children, not Tom Duncan.

The Moral of Utah Real Estate Vesting

Make sure you know the correct way to have property transferred, or the correct real estate vesting. It really does matter!

Note: The names and some details have been changed to protect the privacy of the parties involved. In this case the property should have been tenants in common.

Joint Tenancy in Real Estate. Joint Tenancy allows the real estate to transfer to the surviving owner(s) on the death of one owner. It is most commonly used between spouses but is used in other situations and between more than two people.

Tenancy in Common in Real Estate. Tenancy in Common is the standard form of vesting, allowing real estate to pass to the owner’s heirs. When a owners dies their part of the land passes to their heirs instead of the remaining owners. In contrast, Joint Tenancy passes the property to the surviving owners.

The Family Trust and Real Estate. A Family Trust, also known as a Family Living Trust or a Revocable Family Trust, is a legal entity created by a Trust Agreement to hold ownership to your personal and real property. Your attorney will create the necessary documents to establish the trust. A Trust is created for estate planning purposes.

January 30, 2016

Warranty Deed says “Ten Dollars”?

Question: Why does my Warranty Deed say the purchase price is “Ten Dollars”?

Answer: Utah is a non-disclosure state, which means you are not required to disclose the purchase price of your property. The wording put in the deed protects the confidentiality of the purchase price.