Buying a house is a huge financial decision, so it’s important that certain precautions are taken to ensure your protection. A warranty deed is one precaution home buyers should be aware of, as it provides the greatest amount of protection to the buyer.
What Is a Warranty Deed?
A warranty deed, also known as a general warranty deed, is a legal real estate document between the seller (grantor) and the buyer (grantee). The deed protects the buyer by pledging that the seller holds clear title to the property and there are no encumbrances, outstanding liens, or mortgages against it.
How Warranty Deeds Work
Warranty deeds provide the purchaser of the property with the highest form of protection, and are often used when a buyer wants to get financing for a mortgage or title insurance.
A warranty deed guarantees that:
- The grantor is the rightful owner of the property and has the legal right to transfer the title
- The property is free and clear of all liens and outstanding claims
- The title would withstand third-party claims to ownership of the property
- The grantor will do anything to ensure the grantee’s title to the property
If title problems arise after signing a warranty deed, the buyer can sue the seller as they’re legally responsible for any breach of warranty or guarantee.
It’s also important to point out that there are two types of warranty deeds that offer different levels of protection to the buyer and risk to the seller. These two types of deeds are general warranty deeds and special warranty deeds.
General Warranty Deed
A general warranty deed is the most common type of warranty deed in the United States. It offers the highest protection to the buyer because it guarantees that there are absolutely no problems with the property – even dating back to prior owners.
Special Warranty Deed
A special warranty deed or limited warranty deed only guarantees that no title problems occurred during the time the seller has owned the property.
When Warranty Deeds Are Used
Typically, a warranty deed would be used when you do not know the person you’re buying a property from. Warranty deeds may also be required when applying for a mortgage and when title insurance is used. This differs from the quitclaim deed because title insurance is not needed for this type of deed. A quitclaim deed is used when a property is transferred without a sale, for example, from one family member to another.
How To Get A Warranty Deed
You can obtain a warranty deed through your real estate agent’s office or download an online template. All warranty deeds must include the date of the transaction, name of the parties involved, a description of the property being transferred, and the signatures of the buyers. To make it legally binding, warranty deeds must be signed in the presence of a notary public.
If you want to take an extra precaution and add more protection to your property, think about getting a warranty deed. A warranty deed will give you the highest form of protection over your property, and is best to use when you don’t know the person you’re buying the property from, or if you want financing for a mortgage or title insurance. Speak with a mortgage expert if you are interested in learning more about warranty deeds and your options for property protection.