Warranty Deed: What Is It, And Should You Get One?
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 new owner.
In this article, we’ll explain what a warranty deed is, the benefits of having one and how they work, so when you buy your home, you’ll be fully prepared for possible title issues.
What Is a Warranty Deed On A House?
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 a clear title to the property and that there are no encumbrances, unknown easements, outstanding liens or mortgages against it.
Sometimes warranty deeds and home warranties are confused by first-time buyers new to the real estate process. It’s an understandable mistake as both can be used to protect the property. However, a home warranty is a contract with a service provider that will cover the cost of repairs or replacements for household appliances or major systems, while a warranty deed is a legal document that is used to promise ownership rights to the buyer.
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 three types of warranty deeds that offer different levels of protection to the buyer and risk to the seller. These types of deeds are general warranty deeds, statutory 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 level of protection to the buyer because it guarantees that there are absolutely no problems with the home – even dating back to prior property owners. This quality of coverage is why most lenders will require you to get a general warranty deed when buying your house.
Statutory Warranty Deed
You might also hear about statutory warranty deeds. These are similar to general warranty deeds as they also promise a clear title to the new owner. However, a statutory warranty is usually only available through your state’s statutes and might not spell out the full promise, even though it’s still legally binding.
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. That means the previous owner can’t be held accountable for creditors’ liens or other issues that occurred before they took possession of the home. If you have a special warranty deed, you can seek legal advice from a real estate attorney about securing additional protection.
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 or purchasing insurance from a title company. 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, the name of the parties involved, a legal description of the property being transferred, a list of title defects and the signatures of the buyers. To make it legally binding, warranty deeds must be signed in the presence of a notary public.
The Bottom Line
If you want to take extra precautions, think about getting a general warranty deed. A warranty deed will give you the highest form of protection over your property. It’s best used when you don’t know the person you’re buying the home from or if you want to finance a mortgage or title insurance.
You can consider getting added protection for your home with a home warranty, as well. Making sure your property is fully protected against future issues, whether you have a broken refrigerator or a recently discovered lien, you can have peace of mind that you’re covered.
Speak with a mortgage expert to learn more about warranty deeds, home warranties and your additional options for property protection.