If you’re wondering how the government and other people will know your house is actually yours, then you’ll want to understand how deeds work. There are several types of deeds, but the ones you’ll want to seek out are known as warranty deeds because they can help protect you and your rights as a homeowner.
Warranty deeds guarantee that the property being transferred has a clear mortgage title. They also ensure the grantor will defend that guarantee if someone (other than the grantee) claims the title of the property being transferred. Even if the grantor isn’t aware of any issues with the title, they can still be held responsible, which is why the warranty deed is so beneficial to the grantee.
Before getting into the specifics of warranty deeds, let’s define what a deed means in real estate. A deed is a legal document that records the transfer of property from one owner to the next.
As a homebuyer, a warranty deed is the best possible type of deed since it offers the seller’s guarantee that the property is free of any liens or unknown encumbrances, and that they legally own the home and the right to sell it.
But how do warranty deeds work, what types of warranty deeds exist and what happens if you want to buy a property that doesn’t come with a warranty deed? Read on to find out more.
What Is a Warranty Deed on a House?
A warranty deed on a house is a legal document showing the transfer of ownership from the grantor (the current owner/seller of the property) to the grantee (the new owner/buyer of the property).
Warranty deeds are an important part of the home buying process for two reasons. First, they help protect homeowners against anyone who might have a claim to the title on the home. Second, the lender providing a mortgage for a property may require a warranty deed to finance the deal.
The warranty deed contains certain information, including:
- A legal description of the property
- The names and mailing addresses of the grantor and grantee
- The date of the transaction
- The amount of money being exchanged for the property
- A list of any known encumbrances, like easements, judgments or liens
Once the warranty deed is complete, the seller has to sign the document in the presence of a notary.
The deed is the physical document that transfers ownership of a property, while the title is the legal right of homeownership and accompanying bundle of rights.
How Does a Warranty Deed Work?
A warranty deed works by giving the home buyer protection from any title issues that might arise in the future. This guarantee is given by the grantor – the seller of the home – who attests they are the legal owner of the property, that no one else can claim ownership of the home and that the property doesn’t have any outstanding liens, judgments or other encumbrances.
What Are the Two Types of Warranty Deeds?
There are two distinct types of warranty deeds: general warranty deeds and special warranty deeds.
General warranty deed
A general warranty deed is a form signed by the seller of a property and is the deed type most commonly used to transfer real estate. A general warranty deed is a promise the seller legally owns the property, the property is free from any other claims of ownership by a third party and there aren’t any outstanding debts or other encumbrances on the property.
The distinguishing characteristic of a general warranty deed is that it offers these guarantees dating back indefinitely. Even if there were a dozen owners of the property before the current seller, a general warranty deed places the responsibility of a clear title on the grantor.
The comprehensive coverage a general warranty deed provides offers comfort to homebuyers and lenders alike, which is why most lenders require a general warranty deed before approving a mortgage.
Though general warranty deeds are common, not all deeds are transferred with this level of detail and coverage. If you can’t obtain a general warranty deed – don’t worry – there are other options available.
Special warranty deed
A general warranty deed is king among the deed types, but a special warranty deed can still be a solid choice for protecting your homeownership rights.
A special warranty deed offers the same assurances as a general warranty deed but only during a specified period of time. While general warranty deeds cover issues dating back to all owners of the property, special warranty deeds only provide protection during the time the seller owned the home.
If you’re concerned that a special warranty deed doesn’t provide adequate protection for your property’s title, consider purchasing title insurance.
Buying owner’s title insurance can help protect you from costly title problems, like liens, third parties claiming title to your home or clerical errors on the deed.
What Other Types of Deeds Are There?
Of course, a warranty deed isn’t the only option available. Depending on your situation, you may find it necessary or advisable to use a different type of deed. To help you keep your deeds in order, here’s a breakdown of some of the other deeds you may encounter.
The main difference between a warranty deed and a quitclaim deed is that a warranty deed guarantees the title’s quality, while a quitclaim deed transfers the owner’s interest in the property to another party without any protections in place.
A grantor of a quitclaim deed doesn’t assume any responsibilities for title issues and is merely surrendering the rights of ownership to the grantee. Quitclaim deeds are typically used to transfer property between family members or to correct title errors.
Deed of trust
A deed of trust is an alternative to a mortgage but is only allowed by some states. Like a mortgage, a deed of trust includes a borrower’s promise to repay the loan and uses the property as collateral to secure the loan.
Unlike a mortgage, which only involves the lender and the borrower, a deed of trust includes both these parties, in addition to a third-party trustee who holds the title to the property.
Some people might think a warranty deed and a deed of trust are interchangeable, but they’re completely different. A warranty deed protects the interests of the homebuyer, while a deed of trust protects the interests of a lender. A real estate transaction might involve a deed of trust, a warranty deed, both or neither.
Special purpose deed
A special purpose deed is similar to a quitclaim deed. However, it is often used for official purposes in court proceedings rather than between family members. Special purpose deeds might apply for the sale of property at a sheriff’s auction or in transferring property after a person dies.
Deed in lieu
A deed in lieu allows borrowers to voluntarily surrender their home to the lender to avoid foreclosure. If you were at risk of foreclosure, a deed in lieu might be able to help you walk away from your mortgage and avoid being responsible for the deficiency.
Statutory warranty deed
A statutory warranty deed is like an abridged warranty deed and is governed at the state level. The statutory warranty deed and warranty deed achieve the same outcome, but the statutory warranty deed may not explicitly list all the conditions of the warranty deed.
A grant deed is very similar to a special warranty deed and provides limited protection for the grantee. A grant deed usually only guarantees that the grantor has the legal right to sell the property to the grantee and that the title was clear during the time the grantor owned the home.
When Do You Need a Warranty Deed?
How do you know if you need a warranty deed? Ask yourself the following questions. If you answer yes to any of them, you’ll most likely want to get a warranty deed.
- Your lender requires it
- You don’t know the seller
- You’re purchasing title insurance
- You want the assurance that accompanies a warranty deed
If you’ve determined you need a warranty deed, keep reading to see how you can get one.
How Do You Get a Warranty Deed?
The steps to getting a warranty deed are relatively straightforward.
- Get the warranty deed form: You can usually get the form from your local real estate agent’s office or a real estate attorney. You may even be able to find warranty deed template forms online.
- Fill out the form: Complete the form and include all necessary information, like a legal description of the property, the names and addresses of the grantor and grantee and the date of the transaction.
- Sign and notarize the form: The grantor must sign the warranty deed form in the presence of a notary, who stamps the document to make it official. In some states, the grantee might also sign the form.
- File for recording: The final step in getting a warranty deed and making it legally binding is to file the completed document with the county department of records or another office responsible for maintaining property records.
Claiming Property Rights Takes More Than Calling “Keeps”
Transferring real estate from one owner to the other relies on both a deed and a title. In most real estate transactions, the buyer will get a warranty deed from the seller, ensuring the seller has the legal right to sell the property and guaranteeing the buyer it’s free from certain problems, like liens, judgments or third-party claims to the title of the property.