A warranty deed
is a legal document that gives a degree of protection to the buyer of a piece of real property. ("Real property" usually means real estate or vacant land.) It comes with a guarantee from the seller, or grantor, that the property is free and clear of any outstanding financial claims such as liens or mortgages.
It also provides guarantees to the buyer, also known as the grantee, that the property is clear of encumbrances, easements or restrictions. These are legal claims from third parties to use part or all of the land, which could ultimately affect its value. If the grantor does not disclose these claims ahead of time, the grantee may seek legal action against them in the future.
One example of a type of easement is when a public utility company pays a homeowner to run pipes or power lines through their property. Another example is when a driveway is shared with a neighbor.
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Warranty deeds are used for both commercial and residential real estate deals and are common when a buyer is seeking mortgage
financing or title insurance
. This kind of unlimited and unrestricted ownership, otherwise known as fee simple ownership, does not apply to certain properties such as condominiums, mobile parks, townhomes, and planned subdivisions where the land is commonly owned. In these cases, ownership is typically restricted according to the rules of the governing property association or city bylaws.
What to know before signing a warranty deed
Before you sign a warranty deed
, you should conduct a title search of available public records to ensure there are no liens or claims to the property. You can establish the presence of a clear title yourself, through a title company, or with the help of an attorney. Purchasing title insurance will also protect you from any future claims on the property you are about to purchase.
As a legal contract, a warranty deed may need to be signed in front of a notary public or other impartial witness. It must also be delivered to, and accepted by, the new property owner.
At a minimum, a warranty deed must include:
- The date of the transfer of ownership
- The names and signatures of the buyers and sellers
- A description of the property that is being transferred.
Since the legal property owner is recognized as whomever is named on the last recorded deed, the signed deed should be recorded in the appropriate government department of your county. To confirm this has been done, you can check with the office of the county clerk, the escrow agent or real estate attorney from whom you are getting legal advice.
Precisely how a deed is executed depends on state law. Typically, a deed must contain a legal description of the property, be signed and witnessed, and be appropriately delivered.
Types of warranty deeds
While deeds connected to court rulings are considered official in nature, most are classified as private as they concern real estate transactions between individuals and business entities. There are four types of warranty deeds, classified by the level of protection provided to the buyer by the grantor:
- General warranty deeds (highest amount of protection)
- Special warranty deeds (less protection than a general warranty deed)
- Quitclaim deed (least amount of protection)
- Special purpose deed (similar protection to a quitclaim deed)
General warranty deed
A general warranty deed guarantees a property buyer a significant amount of protection against claims and demands against their piece of real estate—and poses the highest degree of liability to the seller. The grantor is responsible for any title problems or breaches that may have occurred during the property's entire history. It doesn't matter if they weren’t aware of the breach or if the problems happened before they took ownership.
This is the most commonly used type of deed when transferring real estate titles, particularly involving residential and single-family properties. The general warranty deed contains several important covenants, or legally binding promises, that are made by the grantor or seller. They include the following:
Covenant of seisin: The grantor or seller is the legal property owner and has the right to transfer its title to the buyer or grantee.
Covenant against encumbrances: The property is guaranteed to be free of any liens or encumbrances other than those previously disclosed.
Covenant of quiet enjoyment: The grantee can enjoy full use of the property without disturbance or interference—and without fear of a third-party claim, foreclosure, or eviction. Essentially, the owner is ensured sole possession.
Covenant of further assurance: The grantor will do whatever is necessary to fix issues related to liens and encumbrances on the title; otherwise, damages will be paid to the buyer to make up for the loss in property value.
Special warranty deed
A special warranty deed offers the buyer less protection than the general warranty deed. It only includes two guarantees:
- The grantor is the rightful owner of the property and can legally sell it
- No encumbrances or claims were present during their period of ownership.
The grantor is not responsible for any liens or encumbrances that took place before they took ownership. This type of deed is most commonly used in transactions involving the sale of commercial property.
The quitclaim deed
, also called a non-warranty deed, offers the grantee the least amount of protection. This type of deed may be used by the grantor to escape any liability if they are unsure of the status of the property title, as no warranties or promises are made. Quitclaim deeds are most often used to transfer property between family members, such as in the case of marriage or inheritance, or in other situations where money does not change hands and the extra level of protection provided by a general warranty deed is not required.
Special purpose deed
Special purpose deeds are another form of quitclaim deeds that offer little to no protection to the grantee. They are commonly used to transfer property as mandated by official court rulings, such as when a person dies without a will or when a property must be sold to pay off outstanding tax debts.
Warranty deed vs. deed of trust
While a warranty deed and a deed of trust are similar, there are a few key differences. A deed of trust can be used when a buyer is borrowing money from a lender for a property. It transfers ownership to a neutral third party—a trustee—until the loan is entirely paid off. Then, the trustee deeds the property to the buyer.