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What Is A Warranty Deed And How Does It Benefit Home Buyers?

Jamie Johnson4-Minute Read
August 31, 2022

Buying a new home can be very exciting. Many home buyers love to shop for new furniture or imagine how they’ll decorate once they move in.

But before you get to do that, you’ll need to do some paperwork. The reality is that, as a buyer, 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 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 legal 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

How Does A Warranty Deed Work?

A warranty deed offers protection by creating a binding legal contract when ownership is transferred from one person to another during the closing process. In most cases, the lender will require a warranty deed to be signed before approving the loan for the property.

Once the home sale is complete, the seller can be held liable for the buyer’s financial losses if they don’t hold a clear title. This liability means that if an issue occurs when transferring property ownership, the buyer can charge or sue the seller because they broke the contract terms.

How To Get A Warranty Deed

There are a few ways that you can obtain a warranty deed:

  • Go to the county recorder’s office
  • Use your real estate agent
  • Download an online template

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 as you begin the process. 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 greatest amount of 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.

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.

What Is A Special Warranty Deed?

A special warranty deed is less beneficial to the home buyer because it only guarantees no encumbrance of the property during their ownership of it. It doesn’t offer any protection of any claims against the title prior to the grantor receiving the title.

Special warranty deeds are commonly used in commercial real estate and by temporary owners like banks.

Warranty Deed FAQs

Here are answers to some 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 complete picture of any potential problems with the property.

If the title search comes back clean, do I need title insurance?

Title insurance will 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 real 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.

The Bottom Line: 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 Homes℠.

Jamie Johnson

Jamie Johnson is a Kansas City-based freelance writer who writes about a variety of personal finance topics, including loans, building credit, and paying down debt. She currently writes for clients like the U.S. Chamber of Commerce, Business Insider, and Bankrate.