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Transfer of Title to Real Property Chapter 4 Transfer of Title to Real Property Learning Objectives List the methods of transferring title: By descent Four categories of alienation Voluntary, involuntary, during life, or at death List and describe the essential elements of deeds in North Carolina Describe the three primary types of deeds used in North Carolina List the types of special purpose deeds used in North Carolina Describe Excise Tax, defining the rate and calculating the amount of tax Describe the process of title examination Describe title insurance and the types of coverage Describe the importance and process of title recordation Describe the systems of property description used in North Carolina © OnCourse Learning

Transfer of Title to Real Property Chapter 4 Transfer of Title to Real Property Property Description Adequacy of Description: Real property must be described in a legally and professionally acceptable manner. Ambiguity in a real property description will likely result in a cloud on the title to the property. Agents should not use informal street addresses. Methods of Describing Real property: Metes and Bounds –Method most often used in North Carolina Based on distances and direction Metes - distance from point to point in the description Bounds - direction from one point to another in the description © OnCourse Learning

Transfer of Title to Real Property Chapter 4 Transfer of Title to Real Property Property Description Government Rectangular Survey not used in North Carolina. based on longitude and latitude lines divides ranges into townships (1 mile square) divides townships into sections (640 acres) which may be further subdivided © OnCourse Learning

Transfer of Title to Real Property Chapter 4 Transfer of Title to Real Property Property Description Description by Reference: Reference to Recorded Plat: made to a plat (property map) includes plat book number and page number Reference to Recorded Public Documents: (lot and block): more in depth often used for real property within subdivisions Informal Reference: typically a street address never to be used in a deed or deed of trust © OnCourse Learning

Transfer of Title to Real Property Chapter 4 Transfer of Title to Real Property Property Description Property Survey: determination of location and boundaries of a specific tract of land with location of buildings, fences, any other structures, and locations of easements and rights-of-way should be performed by a licensed surveyor or engineer will typically disclose existence of any encroachments © OnCourse Learning

Methods of Transferring Title Chapter 4 Methods of Transferring Title Alienation © OnCourse Learning

Methods of Transferring Title Chapter 4 Methods of Transferring Title Commonly Misunderstood Terms Devise- a gift of personal property by will Bequest/Bequeath- a gift of personal property by will Remise- to give up, release or quit claim Demise- to convey an estate by will to convey an estate for years, to lease or rent Escheat- involuntary alienation after death to the state if there are neither will or heirs © OnCourse Learning

Methods of Transferring Title Chapter 4 Methods of Transferring Title Essential Elements of a Valid Deed Writing Grantor – Conveys the deed Grantee – Receives the deed Property Description: important that the description distinguishes the subject property from all other properties Words of Conveyance: words demonstrating the grantor’s intention to transfer the title to the named grantee © OnCourse Learning

Methods of Transferring Title Chapter 4 Methods of Transferring Title Essential Elements of a Valid Deed Execution Each grantor must sign conveying his/her interest to the grantee. The grantee is not required to sign but must be identifiable. Delivery and Acceptance The valid and executed deed must be delivered by the grantor to the grantee. Grantee must accept the deed voluntarily. © OnCourse Learning

Methods of Transferring Title Chapter 4 Methods of Transferring Title Non-Essential Elements of a Deed Acknowledgment Deed does not have to be acknowledged (notarized) or recorded to be valid and enforceable. Acknowledgement is necessary before the deed can be recorded, but not for the validity of the deed. Consideration The deed does not need to recite the specific consideration (money) given. It does need to provide evidence that something of value is present. Seal Deeds do not have to be sealed in North Carolina to be valid. © OnCourse Learning

Methods of Transferring Title Chapter 4 Methods of Transferring Title Non-Essential Elements of a Valid Deed Recording: gives constructive notice of grantee’s title to all the world provides protection to the grantee from everyone, including subsequent purchasers of the same property from the same grantor Witnessing: In North Carolina, it is not necessary for the grantor’s signature (execution) to be witnessed. Date: Deeds do not have to contain the date to be valid. A gift deed must be recorded within two years to remain valid A date is needed to establish the time of the gift in order to avoid confusion about the two year period. © OnCourse Learning

Methods of Transferring Title Chapter 4 Methods of Transferring Title Types of Deeds General Warranty Deed: Most explicit statement of guarantees (promises) Provides most liability for the Grantor Least risk for the Grantee Covers all claims, even though preceding the Grantor’s ownership of property There are six covenants of a General Warranty Deed: Seisin (Seizin) Right to Convey Against Encumbrances Quiet Enjoyment Warranty Grantees Rights to Recovery © OnCourse Learning

Methods of Transferring Title Chapter 4 Methods of Transferring Title Types of Deeds Special Warranty Deed: warrants against claims arising during the grantor’s period of ownership Quitclaim Deed (Non-Warranty): used when no warranty is expected or necessary often used to clear a cloud on a title provides least liability for grantor and most risk for grantee Special Purpose Deed: Deed of Correction (Confirmation) Deed of Release Deed of Surrender Deed of Gift- need to record within two years Judicial Deeds © OnCourse Learning

Methods of Transferring Title Chapter 4 Methods of Transferring Title Excise Tax Excise Tax (Revenue or Transfer Stamps): Amount based on consideration received by the seller in the sale of the real property by deed. Excise tax is $1 for every $500 (or portion thereof) of the full purchase price. Typically paid for by the seller at closing. © OnCourse Learning

Transfer of Title to Real Property Chapter 4 Transfer of Title to Real Property Title Assurance Assurance is only as good as the person or entity backing it. Covenants of Title in Deeds: General Warranty Deed covenants – most assurance Special Warranty Deed covenants – less assurance Quitclaim Deed covenants – no assurance Title Examination Procedures: Title Examination – used to determine the owner and quality of title. Limited to recorded documents on public record. Attorney’s Opinion of Title – opinion of who is the legal owner. Determines quality of their title. © OnCourse Learning

Chapter 4 Title Assurance Title Insurance Title Insurance is coverage that protects the purchaser or mortgagee from losses due to title defects. Types of Policies: Owner’s Policy: written for the protection of the owner coverage in the amount that the owner paid for the property policy remains in effect for the duration of the insured’s ownership of the property continues in effect after the owner conveys the property to protect policy holder from claims of subsequent grantee © OnCourse Learning

Chapter 4 Title Assurance Title Insurance Mortgagee’s Policy: Mortgagee is insured against defects in the title pledged as security in the mortgage Coverage is limited to the outstanding balance of the mortgage Leasehold Policy: Written to protect a lessee (leaseholder) and/or a mortgagee against defects in the lessor’s title The policy is issued to a mortgagee if the mortgagor has pledged a leasehold interest instead of a fee simple title as security for the mortgage debt. © OnCourse Learning

Chapter 4 Title Assurance Title Recordation: Title Insurance Title Recordation: Recordation is not required in North Carolina Recordation provides “constructive notice” to third parties The Conner Act: Certain real estate documents are not valid against third parties until recorded. Makes North Carolina a “pure race” state. © OnCourse Learning

Chapter 4 Title Assurance Title Insurance Documents Required to be Recorded: Good rule of thumb is if a document has to be in writing according to the Statute of Frauds it has to be recorded under the Conner Act. Residential contract of sale is short term and does not need to be recorded. Recordation Procedures: Document recordation is done at the Register of Deeds office in the county where the property is located. Copies of each instrument are placed in a book in the chronological order in which they are received. After recordation, the original document is returned to the owners or the owner’s designee © OnCourse Learning

Chapter 4 Title Assurance Title Insurance Marketable Title Act: The Statute of Limitations for most title defects is 30 years The Torrens System: Titles for real property are registered in a manner similar to motor vehicles. A change in the status of the property requires that the old registration certificate be destroyed and replaced with a new one. Advantage – eliminates possibility of someone claiming title by adverse possession © OnCourse Learning