Buying and selling land is simple. Ownership is transferred by a written document called a deed. There is no difference between a “sale” deed and a “title” deed; both terms describe the same type of document. A title document for land is a deed.
Texas has a deed form in its statutes. You can find it at Texas Property Code Section 5.022. Generally, you will be a lot better off using the statutory form than downloading a form from the internet. There is a more modern form that was developed by the State Bar of Texas that is commonly used by lawyers.
Both deed forms, at first glance, look archaic. They contain phrases such as “to have and to hold the above-described premises, together with all and singular the rights and appurtenances thereto in any wise belonging.”
If you are drafting your own deed – always a risky proposition – you might be tempted to delete phrases like that. Don’t. Those phrases are backed by hundreds of years of case law and legal custom. They mean something to courts and title companies.
How important is the deed? Consider this: Every action in a land sale leads up to the exchange of the deed. Without a written deed, a buyer takes nothing. The heart and soul of the deed is the phrase “[Sellers] have granted, sold and conveyed, and by these presents do grant, sell and convey…” This is what transfers ownership of the land and sets up the seller’s warranty that it has title to the land.
There are some other documents that are involved in most land sales. An earnest money contract is the written agreement between a buyer and a seller that contains the terms for the sale of the land. The conditions in the contract must be met before the deed is exchanged.
A promissory note is the document that contains the terms for lending the money to fund the sale of the land. In most land transactions, the buyer pays in cash and borrowed money. The company or person lending the money to the buyer requires the buyer to sign a promissory note before it pays the money to the seller.
A deed of trust gives the lender a security interest in the land to secure payment of the promissory note. A deed of trust is the title document that ties the land to the mortgage.
A title policy provides insurance to the buyer that the seller owned the land and that the deed passed that ownership to the buyer.
The actual purchase transaction is called a closing. Most closings are coordinated by the title company that issued the title policy.
The title company holds the deed signed by the seller until the buyer has paid the purchase money.
Once the purchase money is paid, the title company files, or records, the deed in the county records where the land is located, and then gives the original deed to the buyer. If the purchase was funded by a loan, then the title company also records the deed of trust in the county records. The original promissory note and deed of trust are given to the lender.
A deed is valid even if it is not recorded. However, most deeds are recorded. That is because recording the deed gives notice to the world that the buyer now owns the land.
Land sales are simple. The documents are not. Do not go it alone with internet or fill-in-the-blank forms.
Virginia Hammerle is in her fourth decade of practicing law. She is board-certified in civil trial law by the Texas Board of Legal Specialization and an accredited estate planner. Contact her at firstname.lastname@example.org or visit www.hammerle.com. This column does not constitute legal advice.