What Is A Warranty Deed?

When you find the home of your dreams, it opens a world of possibilities for you and your family. It’s hard to separate the joy and romance of buying a home from the reality that you are engaging in a legal exchange of ownership and property rights.

Now is a great time to start learning about how deeds work, but if you are actually facing a claim against the title of your property, you should contact your title insurance provider as soon as possible so that they can handle the claim on your behalf and provide you with legal advice.

Let’s discuss what a warranty deed is, the common types of deeds and other frequently asked questions.

A warranty deed is a legal document used when a piece of real estate is sold and the ownership is transferred from the grantor (seller) to the grantee (buyer). The form usually includes a description of the property and discloses all known encumbrances like easements, outstanding liens or judgments.

When using a warranty deed, the grantor guarantees that the property has no outstanding title problems and that they, the current owner, have the legal right to sell to the buyer.

When you enter the world of real estate, you will find that it has its own jargon – particularly where real estate and law intersect. It’s important to know exactly what each term means, including the other common types of deeds used in real estate transactions.

1. General Warranty Deed

A general warranty deed is the gold standard of property transfers. This type of deed is overwhelmingly used in residential purchases. Most lenders require a warranty deed for properties they finance. It offers buyers the greatest possible protection from future claims against the title.

For example, if two owners ago there were fines issued because of code violations, or the owner failed to pay homeowners association (HOA) fees, as the new owner, you won’t be responsible for paying them after taking ownership of the property.

2. Special Warranty Deed

“Special” sounds good, but a special warranty deed is a less beneficial transfer of ownership to a prospective buyer. It guarantees there has been no encumbrance of the property during the grantor’s ownership of the property. It doesn’t make any representations for anything that transpired before their ownership.

These deeds are commonly used by temporary owners like banks who have acquired properties through foreclosure.

3. Quitclaim Deed

A quitclaim deed is used in transactions where ownership of the property is not in issue, like divorce, inheritance or transfer of ownership to a business or trust. One owner uses the quitclaim deed to renounce a claim they had on 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 create any warranties or guarantees. It doesn’t even constitute proof that the grantor ever had a valid claim to the property. It simply says, “Whatever I had is now yours.” If “whatever” turns out to be nothing, so be it.

4. Deed In Lieu

When borrowers default on their mortgages, they sometimes transfer the property to the lender through a deed in lieu of foreclosure to avoid having a foreclosure on their credit history. This type of deed is significant to lenders because foreclosures take a long time and legal fees make them very expensive. Worse, during the foreclosure process the house can sit vacant, which could attract looters and squatters. It could also suffer damage from property owners who know they are facing eviction.

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 type of special purpose deed and the only type common in residential real estate transactions.

Let’s take a moment to answer some frequently asked questions surrounding the topic of warranty deeds.

How do I get a warranty deed?

You can get a warranty deed from your real estate agent. The warranty deed should include all of the important details surrounding the real estate transaction (names of people involved, appropriate signatures, description of the property, etc.).

Are there different types of deeds?

There are five common types of deeds to be aware of before entering into a specific real estate transaction: general warranty deed, special warranty deed, quitclaim deed, deed in lieu and special purpose deed.

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 if there is a title defect. If a third party filed a claim against your title, you could bring the former owners into the lawsuit.

If the claim is successful, the grantors must cover any liability you incurred and your costs.

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

Yes. Not only is it a great idea to verify the representations contained in the general warranty deed are accurate, but virtually all lenders require a title company to complete a title search where public records will be examined for any issues or errors.

Remember, the house is the security for the mortgage loan. If the house is lost or substantially devalued, there goes the collateral.

With a clear title search and a general warranty deed, do I need title insurance?

Yes, you do. Title insurance covers a wider range of potential claims than the general warranty deed does. The warranty deed covers threats from the sellers’ side, instead of third parties, government regulations or zoning codes.

Getting a general warranty deed is your first layer of protection against title claims. The warranty deed not only gives the grantor the legal right to sell the home, but it also confirms that the property has no title issues or concerns. With various types of deeds for different situations, finding the right one for your specific real estate transaction is important in order to protect yourself and the home buyer.

Now that you have a better understanding of this real estate term, start your mortgage application today if you’re ready to embark on the home buying process.