What is a deed?

A deed is fundamentally a legal instrument that conveys title from one party to another, which is why the selected answer is correct. It serves as proof of ownership and establishes the rights of the parties involved in a real estate transaction. The deed typically includes details such as the description of the property, the names of the parties, and the signatures of those transferring the title, ensuring that the transaction is legally recognized.

While a deed does record the transfer of property, which might make the first option seem appropriate, the precise definition focuses more on the act of conveying title rather than merely documenting the transfer. Legal obligations of a borrower are outlined in separate instruments, typically loan agreements or mortgages, rather than in a deed, making the second choice inaccurate in this context. Lastly, while deeds could potentially have tax implications, they are not primarily used for tax purposes, which makes the fourth option misleading compared to the primary function of a deed in real estate transactions.