2 Functions of a Real Estate Title 1.Represents the Bundle of - - PDF document

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Chapter 5

Transfer of Title to Real Property

• Methods of Transferring

Title

• Essential and Nonessential

Elements of a Deed

• Types of Deeds
• Title Examination &

Recordation

• Excise Tax

2 Functions of a Real Estate Title

1.Represents the Bundle of Rights 2.Enables a person to claim

• wnership of a parcel

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• Alienation - the act of transferring property

voluntarily as a gift or sale or involuntary as eminent domain or adverse possession.

• Deed – written instrument that

intentionally conveys right, title or interest to another person

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• Grantor – owner
• Grantee – the receiving party

Only the grantor needs to sign the deed

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• “OR” – Giver
• “EE” - Receiver

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Essential Elements in a Deed

• 1. Must be in writing
• 2. A Grantor must have legal capacity to

execute deed.

Sigmund Freud

• 3. Grantee named with reasonable

certainty must be identified Essential Elements in a Deed

• 4. There must be adequate

words of conveyance

• The Granting Clause

Consideration…Something of Value

To be legally binding, there must be adequate consideration.

Essential Elements in a Deed

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• 5. Must contain an accurate legal

description of the property conveyed Can a surveyor find your land ?

• 6. Must be signed by ALL grantors

In NC both husband and wife must sign even if only one is listed! One to Buy, Two to Sell Essential Elements in a Deed

• 7. Delivered to and voluntarily

and Acceptanced by Grantee

(or implied acceptance) In North Carolina, recordation of the deed serves as acceptance.

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Witness Date* Consideration Amount

Elements that are Not Required

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Notorization Recordation*

If you’re going to record a deed it first has to be notarized

Elements that are Not Required

Type of Deeds

• General Warranty Deed
• Special Warranty Deed
• Bargain and Sale Deed
• Quitclaim Deed

North Carolina utilizes some other special purpose deeds

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General Warranty Deed aka Full Covenant and Warranty Deed aka Warranty Deed

**Best for Grantee but most liability for Grantor**

• 1. Covenant of Seisin & Right to Convey
• 2. Covenant against Encumbrances
• 3. Covenant of Quiet Enjoyment
• 4. Covenant of Further Assurance
• 5. Covenant of Warranty Forever

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Special Warranty Deed aka Limited Warranty Deed Only Guarantees 2 Covenants: 1.Grantor received title 2.Property was unencumbered by grantor Any additional warranties must be specifically stated

Bargain & Sale Deed

• No expressed warranties against encumbrances
• Only implies grantor has the title and possession
• f the property

Little recourse if defects appear later – get title insurance for protection Quitclaim Deed aka non warranty deed ** least protection **

• No covenants or warranties
• Cure “cloud on the title”
• Only conveys interest, if any, from

Grantor

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North Carolina Special-Purpose Deeds

Correction deed – error in previous deed: Deed of Gift – no or token consideration Deed of Release – when loan is paid in full

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North Carolina Special-Purpose Deeds Trustee’s Deed – used when selling land to anyone but Trustor – usually to transfer title after foreclosure auction Timber or Mineral Deed –items severed from the land North Carolina Special-Purpose Deeds Deeds Executed Pursuant to Court Order

• sheriff’s deed
• tax deed
• guardian’s deed…

** full amount of consideration is usually stated**

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Involuntary Alienation

Without owner’s wishes – usually carried out in court of law

Action Process Property Taken By Person dies intestate; no heirs Escheat State Eminent Domain (Land Needed for Public Use) Eminent Domain (Condemnation) Public or Governmental Agency Nonpayment of a debt secured by real property Foreclosure Creditor Adverse use of another’s property for a prescriptive period Adverse Possession through suit to quiet title Adverse Possessor Page 92

Escheat – no will – no heirs  NC State Eminent Domain –- right to take privately

• wned real estate for public use.

Condemnation is the process ie, schools, highways, urban renewal, public housing

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Kelo v City of New London

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Lien Foreclosure

• Property is sold to pay off debts:
• Mortgage Loans
• Real Estate Taxes
• Mechanics’ Lien and
• General Judgements against

property owner.

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Adverse Possession

aka Involuntary Transfer

O Open – well known to others C Continuous – uninterrupted for 7-20 years E Exclusive – not shared with another A Adverse – possessor intends to claim as own N Notorious – without permission of the owner Action to Quiet Title Transfer by Descent aka Intestate Succession Act Statute of Descent and Distribution =

+ No Will

=



Administrator or Administratrix

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Statute of Decent and Distribution cont



Transfer of Title by Will

Will = mentally competent owner conveys real and personal property; takes effect only after death. Real Property  Device  Devisee Personal Property  Legacy/Bequest  Beneficiary * Survivorship rights cannot be affected by a will

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Title and Public Records

• Public records open to anyone
• Establish ownership, find notices of

encumbrances, and lien priority, judgments, marriage status ….

• Find in recorders of deeds, county clerks,

county treasurers, city of clerks, collectors and clerks of court

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Recording: act of placing documents in public record to serve as public notice. First in time, first in right Or first served principal

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Constructive Notice:

• 1. Properly Recording so

anyone has access to find

• ut
• 2. Physical possession

Readily Available to the World

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Actual Notice:

aka direct knowledge

Someone as been given the information and actually knows it

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Priority The order of when documents or liens are recorded. First in time, first in right, first served principal. Unrecorded Documents Some liens are not recorded until past due

(ie real estate taxes and special assessments, inheritance taxes)

Chain of Title – a record of properties

• wnership from beginning of time

Gap or cloud on the title…might need a “suit to quiet title”

5 Criteria of a Marketable Title 1.Free from any significant liens and encumbrances 2.Disclose no serious defects 3.Be free of doubtful questions of law 4.Protect a purchaser from the hazard of litigation or any threat to quiet enjoyment 5.Convince a reasonably well-informed person it could be resold

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Title Search

Examination of all public records that might affect title Lawyers, paralegals or title companies can perform a search, but only a lawyer can “give an opinion of title.” Real estate agents are prohibited from saying anything about the condition of a title. Abstract of Title

• Condensed history of owners
• Usually only go back 30-60 years
• Found in Register of Deeds by names of

grantors and grantees, not by parcel

• Breaks solved by suit to quiet title

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Marketable Title Act

• If a chain can be traced back 30 years

with no other claims recorded, the title becomes marketable. Conflicting claims before 30 years are extinguished.

• Eliminates obsolete defects in the chain
• f title

Title Insurance

• Insures the owner and/or mortgagee against

loss by reason of defects in the title

• Owner’s title = purchase price; permanent

protection

• Lender’s title = loan amount and ends with

payoff ALTA – AMERICAN LAND TITLE ASSOC.

• No protection against things found in title

search

• See page 99 for other protections
• One-time premium, paid at closing
• Pay out is value of property up to mortgaged

amount

• See 5.3

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Process of Getting Title Insurance

Title Insurance – insures against financial loss from defects in title Grantee should get title insurance because if a claim arises later, the grantor may be dead or not have any money Title Recordation Title insurance and title examinations must be recorded to be enforceable.

• Serves as constructive notice
• Physically possession is actual notice.

Potential buyer can verify if the seller can convey good title

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Any instrument affecting any estate or interest in land must be recorded in county where property is located – in NC = Register of Deeds North Carolina Connor Act pure race statute Some documents are not valid unless recorded. Whoever files first wins! Gives protection against claims from third parties.

Deeds Mortgages Purchase Contracts Assignments Options Leases of 3+ years CC&Rs Installment Land Contracts

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Torrens System of Land Registration Similar to registration of titles; rarely used in NC

Eliminates searching public records – all proof in one spot

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Does NOT reveal federal or state taxes. Relies on physical title document

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NC EXCISE TAX Prior to 2000, actual stamps were affixed to deed to prove you paid Based on sale price of property $1 for every $500

• Always in whole dollars
• Method of financing has no impact
• Some NC counties have Deed Transfer

Taxes

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(Perquimans, Camden, Chowan, Currituck, Dare, Pasquotank, and Washington)

Excise Math Fun! Always round up to nearest $500

$89,250  $89,500

$89,500/500 = 179

179 X $1 = $179 excise tax

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Questions

If a municipality exerts its power of eminent domain to acquire a certain property, what happens?

• a. The owner must pay higher property taxes or give up

the property

• b. The owner must cede an easement without receiving

any compensation

• c. The municipality annexes the property
• d. The owner must sell the property in exchange for

market-value compensation

• d. The owner must sell the property in

exchange for market-value compensation

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The valuable consideration necessary to make a contract valid must be a. Money b. Something tangible c. Something of value traded in exchange for something of value

• d. Something of equal value with whatever is

received in exchange

• c. Something of value

traded in exchange for something of value A person wishes to convey any and all interests in a property to another without assurance of the property’s marketability. This party would most likely use which of the following types of deed?

• a. A sheriff’s deed
• b. A special warranty deed
• c. A partition deed
• d. A quitclaim deed

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• d. A quitclaim deed

To be marketable, title must be….

• a. Insured
• b. Free of all defects and encumbrances

(discloses & undisclosed)

• c. Abstracted by an attorney
• d. Guaranteed by a title certificate
• b. Free of ALL defects and encumbrances

(discloses & undisclosed)

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