The real estate world opens up a book of several different terms. One of these situations arises when you want to transfer ownership to another individual or entity.
When one person transfers ownership or interest in something to another through a written deed, this is known as conveyancing. The granter is the person who gives the property, and the grantee is the person who receives it.
A sales deed transfers property ownership in the real estate industry. The conveyance of mineral rights is one example of a different type of conveyance.
But what does conveyance mean in real estate? Continue reading through this article to find out a little bit more.
There are specific ways a property holder could transfer ownership of the property to another person.
This is a non-binding agreement between two parties to transfer ownership of property. In the case of a family ownership transfer, the owner retains the property as they saw fit initially.
The documents listed below legally transfer ownership between two parties. They include
An essential step to determining and then answering what does conveyance mean is understanding all the terms associated with conveyance.
When transferring property ownership, specific terms are included in the deeds or other documents that confirm that the property has been transferred successfully.
If you have begun transferring property ownership, you may come across some of the following terms.
These are real estate transactions that have been imposed on the property to facilitate the transfer. They may take place at the local or state level.
📖Did you know: It takes a long time to obtain a real estate license, but it is possible through hard work and determination.
This is a legal representative overseeing the conveyance of the property.
The property owner uses this term in the conveyance document to indicate that the items on the list will be sold or included with the property.
This term indicates that the items on the list will not be sold or included with the property after being sold. These include fixtures in the property.
Fixtures are items that are not attached to the house.
If the seller of the house does not state that certain items do not convey in the document, the buyer may keep them.
💡Key Insight: Are you thinking of selling your house or looking to purchase a new home? If you are, you’ll probably be wondering what the process is. While it can be lengthy, being aware of each step is essential- so we have the article to get you set on the right track.
Refrigerators and curtains are considered fixtures and, therefore, not part of the house. These are deemed the seller’s property, and the buyer has no claim to them if they are not conveyed; however, sellers frequently leave them behind for the buyer.
Having a solid understanding of property deeds and their intended benefits is the next critical concept to help you figure out what does conveyance mean in real estate.
Documenting the transfer of ownership from a grantor to a grantee is accomplished through the use of deeds, which are legally binding documents. As a result, a deed serves as evidence of the property’s ownership.
Depending on the circumstances, it can be legally executed through a ruling or privately conducted through an act between two businesses.
In addition to identifying the grantor and grantee through their signatures, property transfer details are included in the document.
As a result, various deeds can be obtained, all of which fall into a few distinct categories.
Before a deed can be considered legally acceptable, it must contain certain elements.
🧠Bear in mind: State-by-state variations in these requirements are possible.
The common elements of a deed include:
Understanding the difference between a deed and a title is a vital step for anyone keen to dig deeper into real estate terms.
So what does conveyance means, and how many types of deed are there?
Various types of deeds may be used to convey property. Some of them include:
These deeds offer different types of protection to the giver or grantor. It legally protects them from hitches such as problems with the title and maybe classified into two:
In residential transactions, general warranty deeds are used; they guarantee that the seller has the legal right to convey the property and that the property in question is completely free of defects.
Things like encumbrances, which include liens and easements, among other things, are examples of defects that may have an impact on the new owner.
Some covenants for the title included in this deed are:
In contrast, special warranties safeguard the receiver or grantee against any present or future issues regarding their property ownership after it has been purchased and are most commonly used in residential or commercial real estate.
It only applies to a short period, not the property’s entire history, because the previous owner may not have owned it for a long time.
It offers less legal protection than a general warranty deed. However, it assures that the seller is the lawful owner of the property and that there were no encumbrances during the grantor’s ownership of the property.
📝For example: A person may have owned property, but further investigation into the property’s history during its sale revealed that it was subject to some form of encumbrance that the owner was unaware of at the time of purchase.
Frequently referred to as a non-warranty deed, it provides the grantee with the least amount of immunity. It conveys whatever interest the grantor has in the property on which it is recorded.
They will most likely use this clause when the grantor is unsure of the property’s liabilities, such as obstructions, and does not want the penalties to follow or affect them.
If the grantor has a good title, this deed serves as a general warranty deed. However, if not, this deed states that the grantor will be unable to take legal action contingent upon the deed being signed by both the grantor and the grantee.
These deeds are classified as quitclaim deeds because they primarily protect the grantor. They are most commonly used in court proceedings or when the deed is signed by someone who holds a position of trust or authority.
They may include:
It is issued when a property is sold due to delinquent taxes.
It is used when someone passes away while still possessing a will. It can be used to transfer real estate ownership or title to the grantee of the property or title.
Someone who has successfully satisfied the legal requirement of owning property against the actual owner of that property is granted a sheriff’s deed.
An administrator’s deed may be used when someone dies without a deed. An administrator appointed by the court will use it to convey the property or title to the grantee.
A borrower of a mortgage opts for this to prevent the foreclosure of the property. The foreclosure proceeding fails if the lender accepts a deed in lieu and the loan is terminated.
🔑Key Fact: While a lender would prefer not to enter the foreclosure process in most circumstances, most lenders prefer to foreclose on a home because it doesn’t change the title.
When conveying property, a few issues may arise that hinder the transfer.
These are the requirements for purchasing or selling a home. They may include:
A house marked as contingent in the multiple listing system (MLS), which allows you to check the status of listed houses, indicates that the seller has agreed to an offer but is keeping the sale active in case the buyer does not meet the contingencies.
Some of these contingencies include a house inspection or an appraisal contingency.
Before the transaction is completed, a seller or a buyer may withdraw their affirmation of an accepted offer.
🔥Hot Tip: The key reason home sellers prefer a cash offer is that it prevents issues at the final hurdles, such as backing out or mortgage failure.
The buyer or seller may back out for some of the following reasons:
So, to answer the initial question, what does conveyance mean? It’s simply the act of transferring a property from one person to another.
Typically, the world springs up during real estate transactions where buyers and sellers transfer the ownership of buildings, lands, or, more commonly, homes.
To complete the conveyance, a legal document, such as a deed, must be signed by both the grantee and the grantor.
Next Step: Do you know what a sub-agent is? While they are rare today due to some liability concerns, it is important to understand their role.
A mortgage is a large loan, usually paid off over thirty years to buy a home or property. Mortgages are valuable to people who do not have the cash to purchase outright or only have a small percentage of money upfront.
Your comprehension of mortgages and what they are will depend on your understanding of specific key terms. The key terms you will need to have a good understanding of are:
The down payment is the amount you initially borrow or pay out of pocket to make the first payment on a home or property once you have been approved for the mortgage.
Typically, making a twenty percent down payment is advisable when signing up for a mortgage. Many first-time homebuyers make as little as a six percent down payment.
The loan is the amount you borrow from your bank or lender to cover the remaining portion of the home’s purchase value after the down payment.
As the name suggests, a loan term is the set time you have to pay your mortgage in its entirety. It is in your best interest to make your monthly payments on time to ensure you pay your mortgage off on time.
Also, your credit score will benefit from it, making it easier to obtain mortgages in the future.
The interest rate is the rate or amount it costs you to borrow for the loan.
➗Calculation: For example, fs your take a loan for $100,000 at a 3 percent interest rate, you will pay $3000 in interest annually.
A mortgage has pros or benefits, such as the standard thirty-year fixed-rate mortgage. With the payoff or repayment period being a significant amount of time, monthly payments are minimal.
Another good factor is having a fixed rate; you can rely on equal monthly payments. Taxes and insurance costs will vary over time.
The flexibility of a 30-year mortgage also draws many people to this payment plan. You can also increase your monthly payments if you want to clear your mortgage quicker than the initial loan term.
If you fall into financial hardship, you can fall back on making the original monthly payments without jeopardizing the integrity of your credit score by being late or incurring late fees.
Despite the flexibility a 30-year mortgage can offer, you still need to be aware of and analyze the drawbacks.
Interest rates tend to be slightly higher with this payment plan because the risk of not getting paid is spread out over a more extended period. Even though you will pay a lower monthly payment, you will pay more in interest, making the overall price significantly higher because of the accumulated interest payments over such a long time.
People tend to overborrow sometimes when they qualify for a bigger loan and have such a long repayment period. A pricier home will come with higher maintenance costs.
Collateral is the term used when referring to an asset a bank or lender uses to secure a loan. Collateral can be vehicles, real estate, or property such as expensive jewelry. The kind of collateral used in a loan depends on the purpose of the loan.
The purpose of collateral is to act as protection for the lender. If you default on your loan, not only does your credit score take a hit, but the lender also loses money.
To prevent the lender from losing money, in case you default on your loan, they hold something of equal or higher value they can sell to recuperate any losses in such an event.
🧠Remember: Loans secured with collateral usually come with lower interest rates than an unsecured loan, as they offer the lender a level of security and safety.
There are several different types of collateral. The various kinds of collateral that exist are:
So, to recap, a mortgage is a form of secured loan in which the real estate or property is the collateral.
When you take out a mortgage, the bank or lender has a lien on the collateral (the home, property, or real estate). The lien on the property is the legal rights or claim or legal rights against the collateral if the borrower defaults to recuperate lost funds.
Once you enter into a mortgage, whether you go through a bank or private lender, one significant aspect they will want to know is the value of the home being purchased (collateral). This is a substantial variable in their decision to loan the money.
To determine the value of a home or property, the lender does not have the authority to make those calls. Most lenders rely on an appraiser to determine the monetary value of the collateral offered for the loan.
📝Key Fact: An appraiser is a trained professional who evaluates specific areas of a house to decide a property’s economic value.
The appraiser will assess the floor plan and appliances, obtain the property’s square footage, and examine the current market trend for houses of a similar caliber in the area.
After the appraisal is completed, their findings will be passed to the lender to review the loan application.
🧠Bear in Mind: If you fall behind on your mortgage payments, the consequences can be severe. Not only will you lose any money invested in the property, but your credit score will be negatively impacted if the bank decides to begin the foreclosure procedure.
You are not alone if you are behind on your mortgage payments. The pandemic has put many Americans and people worldwide in a bad position economically. At the beginning of COVID, many people were laid off from their jobs, causing a housing crisis with evictions and foreclosures going through the roof.
There are several options you have if you fall behind on your mortgage.
You can refinance your home, and you’ll obtain a new mortgage with a new set of terms.
✅Criteria: To refinance, you need to have a 620-credit score. Your debt-to-income ratio cannot exceed 43%.
If the adjustable-rate mortgage is causing your interest rate to change sporadically, refinancing into a fixed-rate loan will help stabilize your payments. Before proceeding with the loan, it is advisable to consider how long it will take to recuperate the upfront cost, which averages $5,000 on refinancing loans.
A mortgage forbearance suspends or reduces payments for a specified amount of time without incurring extra fees or interest.
🔥Hot Tip: Be sure to check how they will report your account to the credit bureaus when you call your lender to inquire about the forbearance program.
A loan modification is an option to consider when reconciling a delinquent mortgage.
While forbearance programs are temporary and subject to change at any time, a loan modification is a permanent agreement that permanently changes the terms of your loan forever.
The bank or lender can choose to extend your current loan term or reduce your monthly interest rates. The end goal of this program is to lower your monthly payments, but you won’t be required to qualify for a new mortgage or pay closing costs out of pocket.
There are several other ways you can assist yourself in lowering your monthly payment.
The first way is to reduce your homeowners’ insurance bill. Many insurance companies give discounts to people who bundle their home and auto policies. You can get quotes from other companies to see if you can get a lower rate or raise your deductibles(link).
A tax abatement allows you to dispute anything with your bill and correct billing errors. The result is a lower tax bill and lower mortgage payments- research and study the tax abatement laws for your local jurisdiction.
A repayment plan can be negotiated if you miss installments, but you will have a higher mortgage payment. Loan terms are one hundred percent up to the lender, and you are at their mercy for the term and rates you get.
The process of foreclosing on a home allows the bank to recover money owed from an unsettled loan. The bank can either sell the property or take ownership.
Almost half a million properties were in one stage of foreclosure just last year alone.
🔑Key Fact: The United States has the highest percentages of foreclosure, eviction(link), and homelessness in the world.
By law, the borrower is given 30 days to repay their debt before the foreclosure process can begin.
Foreclosures are a lengthy process, and most lenders would prefer not to go through them. It opens massive windows for mistakes and could leave them with unwanted property for a while.
Below we have summarized the six key steps to the foreclosing procedure; however, remember that process can vary slightly between each state.
If you are looking for more information, take a lot of our posts solely on foreclosure, for further guidance.
Your home is collateral as long as you still owe any money to the bank. There are many things you can do to lower your monthly payments.
If you fall behind on your mortgage, there are steps you can take to alleviate some pressure. Failure to do this will result in foreclosure, which means you will lose your home or property.
Check out one of our previous posts, for some key tips to managing your mortgage and some possible ways to get out of an agreement you cannot afford.
First-time and repeat home buyers may find it challenging to understand the terms and abbreviations used in the real estate industry, making it difficult to sell or buy a property. A sub-agent is one of the unknowns in this scenario.
While we’ve all heard of real estate agents, have you ever heard of sub-agents? If you haven’t, continue reading out guide on What is a Sub-Agent in Real Estate?
A licensed real estate agent or firm that another person or firm has appointed to represent them as sellers in a real estate transaction is a sub-agent in this context. For example, a real estate broker is a subordinate agent and acts in the agent’s place.
Because the sub-agents work under the supervision of an agent, they are responsible for all interactions and transactions with prospective buyers and sellers. Due to this, the establishment of a fiduciary duty becomes necessary.
In the legal world, a fiduciary duty is a promise or requirement that someone entrusted with a mandate over something must act honestly and with integrity on their behalf. This is the relationship between the sub-agent and the agent in this case.
A legal obligation exists between the parties to act in their mutual best interests. Unless otherwise stated, the sub-agent is the fiduciary tasked with the responsibility.
The beneficiary, or principal, is the other party to whom the sub-agent responds.
Key Point: All agents, whether sub-agent, principal-agent, or substituted agent, are bound by fiduciary obligations.
The fiduciaries’ responsibility is to account for their losses if they violate the contract. Even though they played no role in the mistakes, the principal is liable for them.
When two people agree to collaborate on a project, a fiduciary agreement should be signed, and both parties should acknowledge their fiduciary responsibilities in writing.
Additionally, there are fiduciary responsibilities to the buyer or seller, which include the following:
Unless ordered by a court of law, all information exchanged between the two parties should be strictly confidential.
The money and finances belonging to the client entrusted to the sub-agent must be appropriately accounted for and used as planned.
The client and the principal should expect the sub-agent to be obedient and refrain from engaging in illegal activities.
Both the principal and the client must share a sub-agent loyalty. There should be no use of information to their advantage, and no other interests should take precedence over those of the client and the principal.
Before you can answer the question what is a sub-agent, do you know how to determine the difference?
In most cases, you wouldn’t be able to tell whether your agent is subject to the directives of another agent within or outside the same company unless you looked carefully.
There may be tell-tale signs, such as business cards or direct information from the sub-agent, indicating that they are representing or working for someone else, which can be identified.
The most effective method is to sign a contract with the listing agent and agree not to work with their sub-agents. If you have a problem with your sub-agent, you can reassign it to another representative.
An exclusive contract is a type of contract that can be signed to ensure that you work with only one agent from beginning to end throughout the entire process. If there is a point of agreement between the two parties, you both sign the document for a set period to formalize the agreement.
A sub-agent in the real-estate industry
If you are buying or selling a house through a sub-agent, you may not be able to refuse to work with the agent.
Did You Know: There are several benefits to proposing a cash offer on a house? Read more here, where we outline the key advantages for both buyer and seller.
You should always check with the principal company’s regulations to see if the sub-agency is legal.
Hot Tip: You should also ensure that you follow the proper procedures in your transactions.
Don't worry, there are not many people who know the answer to what is a sub-agent simply because they are really uncommon.
Transactions involving a sub-agent are virtually unheard of these days for various reasons. Even though it may be more convenient to have someone assist you with your transactions, this may not always be the best option.
The sub-agents responsibility is to report to the agent, who is responsible to the principal. The hierarchy must be followed when a sub-agent is used in a transaction.
As a result, the principal does not have direct control over the sub-agent, posing a significant risk to their company’s reputation if something is discovered to be a mistake or omission. In addition, this is risky because the law is frequently involved in preparing legal documents and the transfer of ownership between the two parties.
Definition: Vicariously liable is when a person who hires an agent is held responsible for that person’s actions.
If a homeowner or buyer prefers not to work with a sub-agent, they can select their own agent to work with.
The homeowner may still conduct transactions through communication or confirmation with the original agent, even if a sub-agent is assigned to them in certain circumstances.
Sub-agencies are not permitted in some states. Uncertainty can arise when dealing with an agent representing someone else in the business world.
Because the earnings are based on commissions, the sub-agent may decide to raise the prices to create a profit window for themselves.
There is also a duty on the part of the sub-agent to the principal-agent.
The authority granted to an appointed agent to act on behalf of the principal-agent in the transaction is referred to as a real estate agency. When the agent reports to the principal, they are considered to be under their authority.
The principal may be a representative of the agency or the agency itself. Moreover, because they represent their employer’s brand, real estate agents are held liable by the company they work for.
A sub-agent is a delegation from an agent, whereas a substituted agent is a delegation of a specific task another agent carries out on behalf of the principal.
Extra Information: Do you dream of becoming a real estate agent? Check out the guide for some extra tips and figure out just how long the process takes!
How do they come about?
We will look at the Latin maximums to better understand the difference:
"Qui facit per alium facit per se."
Put another way; it means that someone who does something through another is responsible for the other person’s actions.
As a result, if an agent reports to the principal, a contract completed under the principal’s name subjects the principal to any lawsuits or suits brought against the principal, even if they did not complete the contract.
"Delegata potestas non potest delegari."
When translated, this means that no delegated powers can be transferred to another party under any circumstances. This is true unless the agency allows it to happen or it’s a common occurrence in their business environment.
The following is an example from the real estate industry: a real estate agent is accountable to the sales agent as a sub-agent. However, the sub-agent has landscaping and interior designers responsible to them. In contrast, a substituted agent is accountable to the principal, which is the real estate corporation.
When attempting to determine the answer to What Is a Sub-Agent, there are various factors to consider.
A sub-agent is subordinate to an agent. The agent commands the project over which the sub-agent has been entrusted with responsibility. All directives are communicated to the sub-agent through the agent for which the sub-agent works.
The principal cannot give directives to the sub-agent directly; instead, the commands must be routed through the agent.
Whereas a substituted agent is directed and assigned by the principal in all aspects of the job.
An agent can only appoint a sub-agent per the nature of the rules of the real estate company in question. It is only possible if the agency permits delegation of authority to third-party agents.
A substituted agent is appointed by the principal when the agent in charge of completing the project requests that the principal appoint a different agent.
This is most common in situations where the agent cannot complete the project due to a lack of necessary skill sets, such as when a real estate attorney is required to handle legal issues in the transaction.
The sub-agent is compensated by the agent with a commission on the final payment that has been agreed upon. This is funded by the agent’s portion of the commission.
The principal is responsible for paying the substituted agent directly.
In contrast to the substituted agent, the sub-agent can’t sue or be sued by the principal directly.
However, if there is a legal violation against the principal or the sub-agent, the rules may differ.
In the event of a dispute or miscommunication, a substituted agent is liable to the principal, whereas the original agent is not.
A sub-agent is delegated agency responsibilities by another person tasked with performing the responsibilities but who was not delegated the responsibilities by the clients.
When a third-party acts on behalf of another party at their request, this is a sub-agency.
