What is a Warranty Deed for Property?

Buying and selling real estate can be exciting and life-changing. However, during the process, there is a lot of paperwork, signatures, and legal agreements that you must make before the magic happens.

What is a Warranty Deed on a House?

A warranty deed is a lawful document used during the sale of a piece of real property that shows the transfer of ownership between the seller (grantor) and the buyer (grantee). A real estate warranty deed shows both the buyers' and sellers' names and addresses along with a detailed description of the property, any buildings or other structures on the land, easements, encumbrances, or liens and judgments on the property.

Essentially the warranty deed is a promise from the seller that there are no liens or outstanding title problems with ownership, and they have the right to sell it to you without issue.

Types of Deeds

There are various types of warranty deeds used in specific real estate situations. Each type of deed promises a certain level of protection.

The deeds include:

General Warranty Deed

When talking about a warranty deed, most often, people refer to a general warranty deed. General warranty deeds provide a guarantee that sellers have the right to sell the piece of property legally. They own it without any liens, mortgages, encumbrances, or title issues, and no one can come to claim the property after the sale. A general warranty deed protects the buyer when purchasing real estate.

Special Warranty Deed

A special warranty deed is less protection for the buyer, and the grantor/seller promises only that there have been no title issues during the time they owned the property. However, that doesn't mean that title issues don't exist before the current owner. Someone could claim title to the property after the sale. Usually, banks use this type of warranty deed during a foreclosure sale.

Quitclaim Deed

A quitclaim deed is when someone renounces their claim on the property. These types may be used in divorce situations when spouses give up their rights to the co-owned property. These may also be used when one family member transfers real estate ownership to another. Again, there is no promise of protection; it works like a "buy it as-is" situation.

Deed In Lieu

Whenever a property owner cannot pay their mortgage, they may supply the lender with a deed instead of foreclosure, which transfers ownership of the property to the bank, negating the use of foreclosure, which is better for everyone. The purpose of a deed in lieu is to preserve the property owner's credit rating by avoiding foreclosure.

Special Purpose Deeds

The courts use special purpose deeds when they take possession of a property or transfer ownership as part of a will.

How Do Warranty Deeds Work?

A warranty deed protects the buyer of a piece of real property. In many cases, a lender will require that the buyer obtain a warranty deed to lend them money. The promises of a warranty deed ensure that:

• The seller/grantor is the lawfully rightful owner of the property and can sell it legally.
• The real estate has no liens or outstanding mortgages on it.
• The grantor holds a clean title to the property and the legal right to transfer it.
• The title cannot be subject to third-party claims meaning someone would come along and claim ownership later.
• The grantor ensures that the grantee will receive a clean title with the property.

After the sale, if any title issues arise, the buyer has the legal right to sue the seller because they provided a warranty deed promising no problems.

When to Use a Warranty Deed

Most often, warranty deeds are used when the buyer and seller do not know one another to protect the buyer from any title issues down the road. They are also used when the buyer needs a mortgage. Most lenders will require one. You will need a warranty deed if you purchase title insurance to go along with your mortgage. However, with a quitclaim deed, title insurance is not necessary.

How to Get a Warranty Deed

Typically, your real estate agent will handle all of this for you. You can request one from them or download a warranty deed template online if you need to. However, they need to include the buyer and sellers' names, addresses, a complete description of the property, a list of all title defects, and any liens on the property. Finally, you must sign it before a notary public to be legally binding.

The Difference Between a Deed and a Warranty Deed for Property

If you are still wondering what is a warranty deed for property, let's explore the difference between a deed and a warranty deed. A deed is a legal document that transfers ownership from one party to another; it does not imply any warranty or guarantee about the title.

Conversely, a warranty deed for property contains "covenants" or promises that the title is clear and there are no liens, judgments, or other issues that could jeopardize the sale of the property.

The promises made in the warranty deed promise that:

• No one will come along claiming ownership of the property and take it away from the current owner later.
• If someone does come along, the seller will do everything in their power to prove they owned it and had the legal right to sell it to protect the buyer.

The Bottom Line

Real estate transactions can go smoothly or have problems, depending on the situation. Many complex issues can arise during property transfer, and a warranty deed can help avoid problems later.

A warranty deed guarantees that the buyer is purchasing property legally and won't have any ownership/title issues in the future. Always insist on a warranty deed to protect yourself if you buy property from anyone you don't know.