What is a warranty deed?

One of the rewards of buying a home is legal ownership of a property, which comes with paperwork and some unfamiliar mortgage terms. A common question buyers ask as they near closing is what is a warranty deed for property? It's a key document that provides detailed information about the property as it changes hands. It typically includes a description of the property, including any encumbrances, and ensures a clean transfer from the seller to the buyer. Learn more about warranty deeds, how to get one, and the various types of deeds you may encounter when buying a home.

Warranty deeds explained

A warranty deed is a legal document used when a property is sold. The document usually describes the property being transferred and discloses all known encumbrances, including easements, outstanding liens, and judgments. The document is intended to legally assure the buyer, or grantee in legal terms, that the seller, or grantor, has the legal right to sell the property and that the property is free of title problems or other claims.

"A warranty deed is named as such because it includes four covenants that the seller warrants or guarantees to the buyer upon transfer," says Jacqueline Salcines, a real estate attorney in Coral Gables, Florida. "These four covenants stipulate that the seller guarantees they actually own the property and have the legal right to transfer it; the property is free of liens, mortgages, unpaid taxes, or other restrictions – except those disclosed; the buyer's ownership will not be disturbed by third-party claims of title – which means no one is going to show up later claiming this is actually their property; and the seller promises to defend the buyer against all future claims to the property's title."

Do I need a warranty deed?

Warranty deeds safeguard the buyer by guaranteeing a clear title, but they can delay the sale process and cost the seller extra. Even if they have a general warranty deed, home buyers may need title insurance to fully protect their interests and cover a broader range of potential ownership claims.

"In typical home purchases, warranty deeds are usually required when the buyer and lender want the highest level of certainty that ownership is legitimate and undeniable," says Dennis Shirshikov, a professor of economics and finance at City University of New York/Queens College. "Lenders almost always require them when financing a transaction because they are the most protective type of deed for buyers."

How do I get a warranty deed?

If you're selling your home, you can get a warranty deed from your real estate agent, attorney, or title company.

"During the closing process, the seller's attorney or title company will draft the warranty deed," Shirshikov says. "It is then recorded with the county recorder's office where the property is located, after being notarized and signed by the seller."

The warranty deed should include:

• Names of the seller and buyer
• Signatures from each party
• Description of the property

5 common types of deeds

There are five types of deeds commonly used in real estate transactions. Each has its own jargon – particularly where real estate and law intersect. It's important to know exactly what each term means to protect yourself and your investments.

1. General warranty deed

A general warranty deed is the gold standard of property transfers. That's because it offers buyers the greatest possible protection from future claims against the title. This type of deed is overwhelmingly used in residential purchases, and most lenders require a warranty deed for properties they finance.

"With a general warranty deed, the seller guarantees they own the property free and clear and will defend against any claims, past or future," Salcines says.

Imagine a previous owner of a property you bought was fined for code violations or failed to pay homeowners association (HOA) fees. With a warranty deed, you won't be responsible for paying these liabilities.

2. Special warranty deed

A special warranty deed is a less beneficial transfer of ownership. It guarantees there has been no encumbrance of the property during the grantor's ownership of the property. But it doesn't cover anything that happened before their ownership.

"Here, the seller only guarantees that no defects arose during their ownership," Salcines says. "This deed is most common for developers and lenders obtaining title through foreclosure or tax deed sale."

3. Quitclaim deed

A quitclaim deed is used for transactions in which property ownership is not an issue. That includes scenarios such as divorce, inheritance, or the transfer of ownership of a business or trust. One owner uses a quitclaim deed to renounce their claim to the property. In a divorce situation, the spouse who leaves the marital home with no future financial involvement must sign a quitclaim deed to avoid future liability.

The quitclaim does not actually create any warranties or guarantees. It doesn't even constitute proof that the grantor ever had a valid claim to the property. It merely transfers whatever interest the grantor might have. If that's nothing, then that's all the recipient gets.

4. Deed-in-lieu of foreclosure

If a borrower defaults on their mortgage, they may transfer the property to the lender through a deed-in-lieu of foreclosure. This avoids having a foreclosure on their credit history. A deed-in-lieu is valuable to lenders because foreclosures take a long time, and legal fees make them very expensive.

"A deed in lieu of foreclosure transfers a property from the owner back to the bank or mortgage holder," says Andrew Graves, an attorney with Graves Law in Lake Mary, Florida. "The transfer generally forgives the balance of the mortgage, and there are no guarantees of free title."

5. Special-purpose deed

Special-purpose deeds are used in court proceedings or allow those acting in an official capacity to make property transfers without incurring personal liability. A deed in lieu is a special-purpose deed, the only type commonly used in residential real estate transactions.

"An executor's deed in probate or a sheriff's deed following foreclosure are examples of special-purpose deeds that are issued in accordance with court orders or in situations that are legally unique," adds Shirshikov. Other special-purpose deeds include a trustee's deed, a personal representative's deed, and a guardian's deed.

FAQ

Here are answers to common questions about warranty deeds.

How does a general warranty deed protect grantees?

The guarantees and disclosures in a general warranty deed mean the new owner can hold the former owner responsible for any title defect. If a third party files a claim against your title, you could sue the former owners. If your claim is successful, the grantors must cover any liability you incurred along with your costs.

Do I need a title search and a general warranty deed?

It's common to verify that the general warranty deed is accurate by also conducting a title search. Most lenders require a title search to examine public records for any issues or errors. Remember, the house is the security for the mortgage loan. If the house is lost or substantially devalued, the collateral is compromised.

Do I need a title if I have a warranty deed?

Yes. The title serves as the official record of ownership rights. A warranty deed serves as proof of the transfer of ownership. The title determines who is the rightful owner, while the deed transfers ownership.

Can I sell my house with a warranty deed?

Technically, you can sell your house with any type of deed. However, the buyer or the buyer's lender may require a warranty deed to ensure the title is free and clear.

The bottom line: A general warranty deed protects your investment

A general warranty deed protects you from title claims when buying a home. It gives the grantor the legal right to sell the home and confirms the property has no title conflicts.

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