What Is A Warranty Deed And How Does It Benefit Home Buyers?
Jamie Johnson4-Minute Read
November 10, 2020
Buying a new home is exciting. Most people love to shop for new furniture or imagine how they’ll decorate once they move in. But the reality is that you’re engaging in a legal exchange of ownership and property rights, and a warranty deed is an essential part of this transaction.
A warranty deed is the means by which ownership of a property is transferred, whereas a title is an abstract term that defines property rights. This article will explain what a warranty deed is and how it can protect new home buyers.
What Is A Warranty Deed?
A warranty deed is a document stating who owns the property and if it comes with any outstanding liens or encumbrances. A warranty deed will typically state:
- The name of the rightful owner of the property
- That the property is free of any liens, judgments or encumbrances
- That no third parties can claim ownership of the property
Keep in mind that a warranty deed can vary from state to state, so it’s a good idea to check with a licensed real estate attorney. They can advise you on any deeds that exist in your area.
There are two types of warranty deeds you’ll typically encounter: general warranty deeds and special warranty deeds. Let’s look at each type more closely below.
What Is A General Warranty Deed?
A general warranty deed is the most beneficial for the home buyer because it provides the most protection. It’s a guarantee from the current owners (also referred to as grantors) that they have full ownership of the property and have disclosed all encumbrances, liens, easements and judgments.
These guarantees and disclosures mean that the buyers (or grantees) are fully aware of what they’re getting themselves into. A general warranty deed will include the names of all involved parties and a description of the property being transferred. Often, you’ll have to sign a warranty deed in the presence of a notary or witness.
A general warranty deed provides the highest level of protection to the grantees. That’s because, under a general warranty feed, the grantor is held responsible for any breach that occurs, and they’re still held liable even if it happened without their knowledge.
What Is A Special Warranty Deed?
A special warranty deed is less beneficial to the home buyer because it only guarantees there has been no encumbrance of the property during their ownership of it. It doesn’t offer any protection against any claims prior to the grantor receiving the title.
Special warranty deeds are commonly used in commercial real estate and by temporary owners like banks.
How Does A General Warranty Deed Protect Grantees?
Warranties, guarantees and disclosures in a general warranty deed mean that if there’s a title defect, the new owner can hold the former owner responsible. In general, it means the current owner/grantee can sue the previous owner/grantor for any losses.
General Warranty FAQs
Here are answers to some of the commonly asked questions regarding warranty deeds and how they affect home buyers.
If I’m Offered A General Warranty Deed, Do I Need A Title Search?
Regardless of the deed, virtually all lenders will require a title search. During this step, an attorney or title company will search public records and legal records to determine who owns the property and whether there are any liens or judgments against it.
You can also see if the current owner owes property taxes and if there are any loans against the property. A title search will give you a more complete picture of any potential problems with the property.
If The Title Search Comes Back Clean, Do I Need Title Insurance?
Title insurance is going to pay for all costs arising from a title claim. But with a general warranty deed, the grantee would likely have to commence legal proceedings to enforce the deed’s warranty provisions.
This kind of legal action might be costly, and you might not get your costs reimbursed if the grantor is insolvent. For that reason, risk-averse buyers might prefer to couple a warranty deed with title insurance.
Are These The Only Types Of Deeds Available?
Other deeds do exist, like quitclaim or special purpose deeds, which facilitate a variety of special purposes involving property transfers. For instance, a quitclaim is a type of deed that transfers the grantor’s legal rights to a property without any representation or guarantee.
A quitclaim can work out fine if the grantor has the legal rights to the property and there are no liens against it. But if there are any problems with the property, a quitclaim puts the home buyer at higher risk.
For that reason, a general warranty deed will always offer the buyer the highest level of protection.
Summary: A General Warranty Deed Offers Important Benefits
Warranty deeds are documents that transfer the legal rights of a property from one owner to another. When you buy a new home, the general warranty deed certifies that the property doesn’t have any outstanding liens or judgments against it.
If the seller misrepresents their ownership, it gives the buyer the legal right to sue them. Because of this, a general warranty deed will always provide the most legal protections for a new home buyer.
If you have questions or concerns about a warranty deed, it’s always a good idea to consult with a real estate attorney. To learn more about warranty deeds and to get some other home buying tips, be sure to check out the resource center at Rocket HomesSM.
Get the right home loan for you.
What’s A Quitclaim Deed And When’s It Used?
A quitclaim deed transfers whatever ownership rights a grantor has in a property to a grantee, often a family member. Find out when this type of deed is used.
Property Deeds: Everything You Need To Know
Getting ready to buy or sell your house? Learn what a property deed is, what it needs to include, and what type of deed will offer you the most protection.