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.
How Do 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.
What Types Of Warranty Deeds Are Offered?
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 Are Warranty Deeds 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.
How Do You 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.
Warranty Deed FAQs
Have more questions about warranty deeds? We have answers.
What’s the difference between a warranty deed and a home warranty?
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.
What’s the difference between a warranty deed and a quitclaim deed?
A quitclaim deed is used when a property is transferred without a sale between parties who have trust in each other. Quitclaim deeds may be used in a divorce settlement or as a way to transfer ownership of a property to a business, charity or trust.
What’s the difference between a warranty deed vs. a deed in lieu?
A deed in lieu, also known as a deed in lieu of foreclosure, is used when homeowners want to transfer their ownership of a property to a lender. As the name suggests, these are often used in agreement by owners and lenders as an alternative to the longer and more drawn out foreclosure process.
If I have a warranty deed, do I still need to do a title search or pay for title insurance?
Even if you have a warranty deed, many lenders will require a title search and title insurance when buying a new home. Even if they aren’t required, a title search can help serve as a backstop to ensure that the title information is up to date and protect you from any potential inaccuracies.
The Bottom Line: Warranty Deeds Can Help Protect Your Title
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.
If you’re interested in applying for a mortgage, our Home Loan Experts can help you learn more about warranty deeds, home warranties and your additional options for property protection.