A Guide to Warranty Deeds in Real Estate

Mortgage Dove

A Guide to Warranty Deeds in Real Estate

Warranty deeds are crucial in real estate transactions, safeguarding buyers and sellers. This guide explains the ins and outs of warranty deeds, explores common types of real estate deeds, and answers FAQs about their importance. Understanding the world of warranty deeds is essential for anyone navigating the complex terrain of property transactions.


What Is a Warranty Deed?

A warranty deed is a legally binding real estate document that secures the buyer's interests by confirming that the seller possesses an unblemished title to the property, free from any unresolved liens or mortgages, and with no future challenges to the property's title.

In a warranty deed, there are two key parties: the seller, referred to as the grantor, and the buyer, also known as the grantee. Both the grantor and grantee can be individuals or businesses.


How Warranty Deeds Work

A deed is a legal document that transfers real estate property from one entity to another as a seller to a buyer. In the course of a real estate deal, a title company conducts a comprehensive search of both current and historical property ownership records. This thorough investigation aims to identify any potential flaws or complications associated with the property's title throughout its ownership history.

A warranty deed holds the seller, or grantor, responsible for any breach after the title search, even if the breach occurred without their knowledge or during a period before the grantor owned the property. It ensures that the buyer will not be responsible for any past title defects or encumbrances.

The warranty deed is provided to the grantee during the sale's closing. It includes a precise legal property description, adheres to state laws where the property is situated concerning signatures and witnesses, incorporates legally binding language signifying the seller's transfer of the property to the buyer, and documents the financial consideration given for the property.


5 Common Types Of Deeds

As you step into the realm of real estate, you'll quickly discover its unique language, especially in the intersection of real estate and the legal domain. Understanding the precise meaning of each term is of utmost importance, and this includes familiarizing yourself with the other typical forms of deeds employed in real estate transactions.


  1. General Warranty Deed

The general warranty deed stands as the highest standard for property transfers and is primarily favored in residential acquisitions. The majority of lenders typically demand a warranty deed when financing properties. Buyers receive the utmost protection against potential future title claims.

As an example, suppose that two owners before you faced fines due to code violations or neglected to pay homeowners association (HOA) fees. If you become the new owner, you won't bear responsibility for settling these issues once you own the property.


  1. Special Warranty Deed

“Special” sounds good, but a special warranty deed is a less beneficial transfer of ownership to a prospective buyer. It ensures that no burdens or claims have been placed on the property during the grantor's ownership. It doesn't vouch for any events or issues that occurred before the current ownership.

Temporary owners, such as banks that acquire properties through foreclosure, frequently utilize these types of deeds.


  1. Quitclaim Deed

A quitclaim deed is employed in cases where property ownership isn't under dispute, such as during divorce, inheritance, or the transfer of ownership to a business or trust. In cases like divorce, when one spouse departs from the marital property with no future financial ties, they employ a quitclaim deed to relinquish any claims they once had on the property, shielding them from potential future obligations.

The quitclaim does not create any warranties or guarantees. It doesn't even serve as evidence that the grantor ever held a legitimate claim to the property. It straightforwardly conveys, "Anything I possessed is now in your hands." If, in the end, that "anything" happens to be nothing, then so be it.


  1. Deed In Lieu

In cases where borrowers are unable to meet their mortgage obligations, they may opt to transfer the property to the lender using a "deed in lieu of foreclosure" as an alternative to having a foreclosure listed on their credit history. Lenders value this type of deed because foreclosures are protracted processes, entailing substantial legal expenses that can be financially burdensome. To make matters worse, when a property undergoes foreclosure, it may remain unoccupied, making it susceptible to potential break-ins and squatters. Property owners facing eviction might also inflict damage upon it.


  1. Special Purpose Deed

Special purpose deeds serve in legal proceedings or enable individuals in official roles to transfer property without assuming personal liability. A deed in lieu is a specific form of special purpose deed, and it's the sole type commonly encountered in residential real estate transactions.


FAQs About Real Estate Warranty Deeds

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


How do I get a warranty deed?

Your real estate agent can provide you with a warranty deed. 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.).


How does a general warranty deed protect grantees?

The assurances and information provided within a general warranty deed empower the new owner to seek accountability from the previous owner in case a title issue arises. Should a third party raise a claim against your title, you have the option to involve the previous property owners in the legal proceedings. If the claim proves successful, the grantors are responsible for covering any expenses you've accrued and your legal costs.


Is a title search along with a general warranty deed necessary? 
Absolutely. It's not just a smart move to confirm the accuracy of the details within the general warranty deed, but virtually every lender mandates a title company to conduct a thorough title search, scrutinizing public records for any potential issues or inaccuracies.


The Bottom Line

A warranty deed is a critical real estate document that guarantees a property's clean title and verifies the absence of any outstanding liens or mortgages. When coupled with a thorough title search and title insurance, it offers buyers the utmost protection, assuring the absence of title defects and safeguarding against future claims on the property's title.

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