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Texas is one of the few states that is a “deed of trust” state. While many people take out a mortgage to purchase real estate, which is a loan borrowed from a bank to finance the purchase of a home, in most states, there are only two parties named on this legal document – the lender (bank) and the borrower (homeowner).
A deed of trust is similar to a mortgage, but in Texas and a few other states, there are three parties named on this legal device, with each delegated their responsibilities for the loan. Read on to learn everything you need to know about deeds and how they work in Texas.
Disclaimer – The information on this page is intended for general informational purposes only and not to provide legal advice.
What is a deed of trust?
A deed of trust is a legal agreement between a lender and a borrower to give the property to a neutral third party who serves as a trustee. The trustee holds the property deed until the borrower pays off the loan debt in full. During the repayment period, the borrower holds the property title to home while the trustee holds the legal title or deed to the property.
The property title provides the borrower with rights to use the property, modify it as they see fit, and transfer their equitable interest to others. It’s a legal term of saying one has ownership, but it’s not an actual legal document.
On the other hand, a deed is a legal document used to confirm or convey the ownership rights to a property.
Who are the parties listed in a deed of trust?
In a deed of trust, there are three parties listed:
1. The lending source, such as the bank, which is referred to as the beneficiary
2. The borrower, who is referred to as the obligator or trust grantor
3. The trustee, who is typically appointed by the beneficiary
Who can be a trustee on a deed of trust, and what do they do?
The trustee can be any person who is willing to take on the responsibilities of the role. However, lenders usually choose companies that specialize in trustee services, such as an escrow company.
In Texas, the trustee of a deed has many duties. These duties include the power of foreclosure, which allows them to sell the property through a non-judicial foreclosure, without having to go through the court. The trustee is also responsible for collecting the monthly payments from the borrower, on behalf of the lender.
What are the four primary types of deeds?
In Texas, there are four kinds of commonly used real estate deeds. Below is an explanation of each.
- General Warranty Deed – This provides the highest level of protection for the buyer. There are significant covenants or warranties conveyed by the seller/grantor to the buyer/grantee, and these warranties legally bind the grantor. These include that title comes without any liens, easements, or any other issues.
- Special Warranty Deed – This deed does not offer as much protection for the buyer as a general warranty deed, because fewer warrantees are accompanying it. The grantor warrants that they have received the title, and that the property was not encumbered during their period of ownership. However, it does not warrant that the title is free and clear of any defects from before they took ownership.
- Deed Without Warranties – This is the lowest form of deed in Texas. It transfers title without any warranties, expressed or implied which means that the seller/grantor would not be required to defend against any title defects if they arose.
- Quitclaim (or Quit Claim) Deed – This type of deed is typically used when the participants have a relationship, such as between family members or divorcing spouses. It allows for a simple transfer of property rights and claims to another party. Usually, there’s no money exchanged, and therefore, no warranties. Many people mistakenly think it’s called a “quick claim deed,” as the grantor is quitting their claim on the property quickly, but the proper term is “quit” not “quick.”
What is the biggest difference between a warranty deed vs. quit claim deed?
The most significant difference between a warranty deed and a quitclaim deed is that a warranty deed offers full protection for the buyer while the quitclaim deed offers no protection whatsoever. For this reason, most title insurance companies and attorneys in Texas recommend not using a quit claim deed. They advise using a warranty deed, or at the very least, a deed without warranties, as a better option.
Can you change a quit claim deed to a warranty deed?
If you acquired property through a quit claim deed, that cannot be changed. However, when you sell the property as the grantor, you can issue whatever type of deed you want, including a warranty deed.
A quitclaim deed means you took the property without any warranties from the seller that someone else had any claim to the property, or that the seller even had a valid title. If you wish to make assurances to your buyer that you will guarantee that the title has no defects, you may issue a new title as such and take on the associated risks.
To guarantee this, you would have to get a title search completed in depth. Property is not worth less because a quitclaim deed exists. Many properties have transferred this way through the chain of title, usually with a divorce and when heirs inherit property.
What does it mean to register or record a deed?
Texas is a “notice” state, which means all conveyances and agreements concerning real property must be in writing to make it enforceable. To be enforceable, they should be filed in the public record.
Therefore, the grantor must execute the deed to the property in front of a notary public. The deed is then presented to and accepted by the grantee, and filed of record in the county clerk’s office, so there is public notification of the transfer. Failure to register or record the deed can put the property at risk to future claims by other parties.
What does consideration mean in reference to a deed?
Real estate may be transferred with or without consideration, which is the legal term used to describe the value that changes hands as part of an agreement between two or more parties.
For instance, the contract requires the buyer to pay a certain amount to purchase the property, as consideration to the seller. The contract also requires the seller to sign and deliver a deed, as consideration to the buyer. The obligation of the buyer to pay the sale price and the obligation of the seller to sign and deliver the deed constitutes mutual consideration for the real estate contract.
Why is the sales price of the property not listed on the deed?
In Texas, it’s common for a deed not to list the actual sales price. Instead, it will show that the consideration paid is “$10 and other valuable consideration.” This omission is for confidentiality purposes. While recording gives the public notice of the transaction and preserves the integrity of the chain of title, it is Texas tradition that the sales price should not be the public’s business. However, if the parties wish to, they can certainly include the actual price on the deed.
How does a deed get executed?
In Texas, there’s no requirement that a deed be recorded in the county clerk’s records to be valid. The only requirement is that it be executed and delivered to the grantee, at which time the transfer becomes fully effective between the grantor (seller) and the grantee (buyer).
However, a deed must be adequately acknowledged and notarized if it is to be recorded in the county clerk’s real property records. The recording makes it easier for title companies to research and insure the chain of title, and they insist on it for this reason. The recording also informs the taxing authorities where property tax bills should be sent.
How does a deed get transferred?
There are many reasons to transfer deeds, and it is done when someone’s name is removed or changed on the property title. This need to transfer happens when the home is sold or transferring ownership between family members. The transfer is typically done with the four steps below:
1. Find the most recent deed to the property. Start with the most recent deed to the property (the deed that transferred the property to the current grantor). You’ll need information from this deed, including the exact spelling of the names and wording of the property description. If you don’t have a copy of the deed, you can obtain a copy from the county clerk’s office.
2. Create a new deed. Create a new deed that transfers the property from the grantor to the grantee, selecting the type of deed you’d like to use. To create the deed, you can use online software to generate it for you, or use an attorney.
3. Sign and notarize the deed. The grantor must sign the deed and have it notarized. Depending on the type of deed, the grantor’s spouse may also need to sign it. The grantee does need to sign the deed but may need to sign related agreements in some circumstances.
4. File documents with the county records. The deed and any related agreements should be filed in the land records of the county where the property is located. Recording fees can vary but usually range from $11.00 to $30.00 for the first page and $4.00 for each additional page.
How does a deed get changed when someone inherits property from a deceased relative?
Starting in 2015, Texas allows a transfer on death deed (TODD), which is a simple method of transferring the title when the owner dies. A TODD becomes effective without consideration and without notice or delivery to or acceptance by the designated beneficiary during the life of the grantor. As long as the TOOD is properly recorded, no probate is needed to transfer the deed.
What is a subordinate deed of trust?
A subordinate deed of trust is when a person has two deeds (loans) on a single property. Deeds of trust have a hierarchy based on their recording date, and this affects the order a deed will receive repayment in the event of a foreclosure. In most cases, the deed with the earliest filing date will receive full repayment before any of the other subordinate deeds of trust are repaid.
What is a revocable deed of trust?
If the name of a revocable trust appears on a deed, it means that the property belongs to that trust. Revocable trusts work differently from other types of trusts, as the owner (grantor) doesn’t lose full control of their property when the deed is signed over to their trust.
A revocable deed of trust is an agreement including a list of assets that belong to the trust and the name of the trustee. The trustee oversees the management of all the assets in the trust, including real estate. The trust agreement must also list the beneficiaries who are entitled to a share of trust’s assets upon the owner’s death.
What is a life estate property deed?
A life estate property deed allows the owner to use the property during their lifetime and have the property automatically transferred after their death. Life estate deeds are the oldest form of a deed for avoiding probate at death. It’s often used in states that don’t recognize the transfer on death deeds.
What is a gift deed?
A gift deed is a simple instrument that transfers ownership of a property to another person, usually between family members and friends. The person gifting the property is referred to as the donor, and the person receiving the property is referred to as the recipient.
Gifts of property must be reported by the recipient on their federal income taxes and can be used only when there is no payment or compensation in exchange for the property. Gift deeds must also be signed and notarized.
What is a tax deed?
A tax deed grants ownership of a property to a government body when the property owner defaults on paying their property taxes, and their home goes into tax foreclosure. A tax deed allows the government to sell the property to collect the delinquent taxes and transfer the property to the purchaser.
What is a Sheriff’s deed?
A Sheriff’s deed gives property ownership rights to the purchaser of a property bought at a Sheriff’s sale. A Sheriff’s sale is an auction conducted when the homeowner becomes delinquent on paying their property taxes, and the home goes into tax foreclosure.
The state of Texas allows homeowners the right to redeem after the sale and buy back their foreclosed home. Homestead and agriculture property owners have a two-year redemption period, while other types of properties have a 180-day (6 months) redemption period. To redeem within that period, the owner must pay off the tax debt in full (taxes, interest, penalties, and other costs), and this will release the tax lien and stop the foreclosure.
What is a lady bird deed?
A lady bird deed is commonly used by the elderly who are seeking Medicaid eligibility to cover long-term medical care expenses. Lady bird deeds can allow one to remain in their home for their lifetime and transfer ownership to their heirs after their death (providing the mortgage is properly dealt with if it was the mortgage holder who died), while still maintaining their Medicaid eligibility while living.
What is deed in lieu?
A deed in lieu of foreclosure transfers the home title from the owner to the bank that holds the mortgage. Deed in lieu is an option for homeowners who are delinquent on their mortgage payments, don’t have any equity in their home, and have been denied a loan modification or short sale by their lender. With a deed in lieu, the property owner has to relinquish the property and relocate. However, they are usually relieved from owing the remaining balance on the loan.
Can a property be sold without a deed?
As a deed proves property ownership, it is needed when selling your house or taking out a second mortgage. If you or your attorney do not have a copy on hand, you can locate the deed at the county recorder of deeds office or through your jurisdiction’s online records.
I recently got married. How do I add my spouse to the deed?
In Texas, you can’t add your spouse’s name to an existing deed, but you can create a new deed by transferring the property from yourself to you and your spouse jointly. You can do this by using either a deed without warranty or a quit claim deed. However, use a quitclaim deed with caution, as it doesn’t officially transfer title in Texas. Additionally, Texas is a community property state.
Can you transfer the deed of a house to a minor child?
A minor child under the age of 18 cannot own property. Therefore, a quitclaim deed transferred to a minor would not be legally valid unless the property owner establishes a conservatorship to make the transfer.
A conservatorship is a legal status that refers to a person the court has determined is unable to care for himself or handle their business affairs. A minor child unable to sell or mortgage property would need a conservator to take legal control of the property until they turn 18.
Can you remove someone’s name from a deed?
A person cannot be passively removed from a deed. If the person is still living, you may ask them to remove themselves by signing a quitclaim, which is common after a divorce. The individual who signs and files a quitclaim is asking to have their name removed from the property deed. This quitclaim relinquishes their ownership and interest in the property.
However, with a quitclaim, it doesn’t remove the person from the associated liability, such as the mortgage. If your ex-spouse defaults on the mortgage, the lender could force you to pay even though you’re no longer on the deed. One way to avoid this is to have the remaining owner refinance the mortgage in their name only.
If co-owners disagree about whose name should remain on the dead, they have the option of going to court. A court order can force a change in ownership or override the names listed on the deed.
Are deeds of trust public record?
Yes, as deeds of trust are recorded, they become public record. Anyone searching these records can see that you are the legal owner of the property.
How do I find deeds in a specific Texas county?
- Harris Country deed records can be found here.
- Fort Bend deed records can be found here.
- Waller County deed records can be found here.
For all other counties in Texas, refer to the full list, which can be found below.