Realty411 Magazine The Future of Real Estate is Here | Page 81

Taking Title by Garrett Sutton, Esq.
a policy you won’t buy the property. It is
that simple. Follow their lead.
Transferring Title
The specter of title insurance affects the
way you will transfer title to property.
There are two ways to transfer title:
T
itle to real estate sounds
grand. As you think of ti-
tles let your mind wander
back again to medieval
England
when titles
such as Baron and Duke
meant you were part of
the nobility and peerage
system. And not coinciden-
tally, if you had such a title
you also owned land.
As our legal systems
evolved, real estate title–the
means by which you owned
valuable property rights –
remained ever so important.
Because title conveyed
power (and with power
came corruption and fraud),
a system to accurately
record the chain of title de-
veloped. Over time you had
to defend your title with
the proper paperwork. The ‘checking
system’ that evolved means that there
are two steps for the transfer of title.
The first step is the granting of a deed
whereby the grantor transfers the prop-
erty to the grantee. An investigation of
the sequence of deeds to establish an
accurate chain of title is then performed.
If the grantor actually has clear title,
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according to the public records, a policy of
title insurance may be issued and the prop-
erty transferred. (Please note that property
can be transferred without title insurance
but that most
banks won’t take
the risk in making
a loan without it.)
A noticeable break
in the chain of
title means that
the buyer–even
though they be-
lieve they are the
rightful owner–
can be subject to
the possible claims
of others contest-
ing the title. It can
also mean that
the property is
now very difficult
to sell, because
future potential
purchasers don’t want any doubts about
clear title.
Accordingly, title insurance is import-
ant. Before insuring you against the risk
of future claimants, a title company is
going to check the public records to see if
there are any troubling gaps in the chain
of title. If gaps exist they won’t issue a
title insurance policy. If they won’t issue
PAGE 81 • 2014

1. A Grant Deed. This deed (or ‘War-
ranty Deed’) implies or warrants that:
a. The Grantor (the person granting the
property) has not transferred the property
before, and that absolute ownership (‘free
and clear’ title) is conveyed.
b. Unless the Grantee (the person receiv-
ing the property) agrees otherwise, the
property is free from any liens or encum-
brances against it.
c. Any after-acquired title (ownership that
goes to a Grantor later) is also conveyed
to the Grantee.
2. A Quit Claim. This much weaker
deed only:
a. Transfers whatever present right, title
or interest the transferor may have. (If the
transferor doesn’t have any rights, neither
do you.)
b. No warranties are made as to any liens
or encumbrances. (So if there are undis-
closed mortgages against the property
it’s not the transferor’s problem – as it is
in a grant deed. Instead, it is now your
problem.)
c. No after acquired title is transferred.
While often advocated by promoters as
the easiest means for transfer, the quit
claim deed is not your best choice. First,
know that in many bank involved REO
(real estate owned) transactions the REO
lender selling a foreclosed property will
only use a Quit Claim deed.
Why is this?
It is because the lender has no idea
what happened on the property prior to
foreclosure. During the boom documents
were not properly kept or transferred,
the banking industry’s MERS electronic
recording system failed to keep up with it
all, and many documents were just plain
lost. This is no way to maintain a good
chain of title on the nation’s real estate.
Continued on pg. 86

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