Deeds

By: Scott Umstead

In South Carolina, there are three (3) types of deeds.  Each type fully conveys the interest of the grantor (Seller); the differences between/among the deeds is the level of warranty the grantor offers:

 

General Warranty Deed: This is by far the most common deed.  It offers the best protection to the grantee (Buyer) because it fully “warrants” the title is good and marketable and, therefore, protects the grantee against any title defects or claims existing at the moment the deed is executed, even though the defects have not yet have been discovered. 

 

Limited Warranty Deed (a/k/a Special Warranty Deed): Here, the grantor warrants only that no title defects arose during the grantor’s ownership of the property.** 

 

Quit Claim Deed:  Here, the grantor warrants essentially nothing.  A quit claim conveys “whatever title the grantor has,” but does not warrant the seller has title and also does not warrant the quality of the title (i.e. does not warrant the title is marketable or that it is free of liens, claims and/or encumbrances).  Quit claim deeds are not common in purchase transactions (exception – see tax deed comments below) but are oftentimes used to convey interests between spouses or in otherwise informal situations.  Attorneys many times use quit claim deeds to correct a title defect.**

**A person who takes title under this type of deed does not necessarily have a “less” of a title.  In the case of a limited warranty deed, the warranty is less and, in the case of a quit claim deed, there is no warranty at all, but the limits in or lack of warranty does not, in and of itself, mean the grantee does not have good and marketable title.  The title search reveals the quality of the title and, though the seller may elect not to warrant the title, the title is conveyed to the grantee and, presuming the title is marketable or at least insurable, the grantee can (and should) procure title insurance.

 

RELATED ITEMS

 

Marketable title:  The standard state contract requires the seller convey “marketable” title.  The term “marketable title” refers to title that is free and clear of any defects or clouds that a reasonable buyer would find objectionable.  Marketable title does not mean “perfect” title – for example, a prior deed may contain a typographical error or some other superficial defect that does not raise questions about the intent of the parties to that transaction nor to the recorded instrument in question.  A marketable title is always insurable. 

 

Insurable Title:  Insurable title is less stringent than marketable title.  An insurable title may contain some cloud or defect which would make it unmarketable, but a reputable title insurer has been informed of the defect and agrees to affirmatively cover the buyer.  Examples: uncanceled mortgages or unresolved judgments against prior owners.  Contracts promising only insurable title (as opposed to marketable title) are commonly used by REO companies, relocation companies, auction companies and governments.  An insurable title is not always marketable.  An insurable title is not necessarily bad for the buyer, but the buyer should be made aware the seller will not have to correct any title defects beyond those making the title insurable.          

       

Tax Deeds:  A grantor/seller who received his interest through a tax deed and who has not completed a quiet title action has title that is neither marketable nor insurable.  This seller should not contract to provide a warranty deed (therefore, the standard state contract should only be used with an appropriate addendum striking all warranty provisions contained in the contract); instead, the seller should only offer a quit claim deed.  The fact that title is neither marketable nor insurable means the buyer will not be able to get title insurance (there is one narrow exception to non-insurability), and no bank will accept a mortgage.  In other words, the buyer needs to pay cash and must be willing to accept a quit claim deed.     

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