A warranty deed is a deed in which the seller, also known as the “grantor,” guarantees to the buyer, also known as the “grantee,” that he holds clear title to the property, and that he has a legal right to sell it. A warranty deed is the most common type of deed used to transfer real property from a seller to a buyer in exchange for money or other assets. To explore this concept, consider the following warranty deed definition.
Definition of Warranty Deed
- A deed that contains a warranty as to the condition of the title.
What is a Warranty Deed
A deed is a legal document that transfers ownership of real property from one person or entity to another. There are several types of deed, each of which serves a different need of the parties involved in the transfer. The primary deed types include the quitclaim deed, the grand deed, and the warranty deed. The warranty deed is the most comprehensive, as it not only transfers the seller’s ownership of the property, but also makes an explicit promise to the buyer that the property is free of liens or other claims of ownership. Additionally, a warranty deed provides a guarantee to the buyer that, should the seller be wrong about the title condition, he will compensate the buyer.
General Warranty Deed
A general warranty deed is the standard type in which property is transferred between a seller and a buyer. Just as the name implies, the buyer is given a full warranty from the seller that states that the property is not subject to any pending legal actions. This type of warranty is ideal for buyers who do not want to risk facing title challenges anytime in the future. With general warranty deeds, the seller is promising four things:
- They have the right to convey the property
- They can and will defend the title against claims
- They guarantee that they own the rights to the property
- There are no encumbrances against the property unless it is specified in the deed
Statutory Warranty Deed
Some states use the term “statutory warranty deed” to refer to a general warranty deed. A statutory warranty deed conveys the real property with the same covenants from the seller, including a promise that (1) he is the owner, (2) no one else possesses or has a claim to the property, and (3) that no one will interfere with the transfer. General and statutory warranty deeds work best in transactions where the buyer need assurances regarding the title to the property.
Special Warranty Deed
A special warranty deed, also called a “limited warranty deed,” does not provide a buyer with the same protection as a full or general warranty deed. This type comes with a very limited warranty regarding the condition of the property’s title, and is most often used to provide more protection for the seller than the buyer should title problems arise. In a special warranty deed, the seller promises only that there have been no problems with the title during the period of his ownership. It does not make any promises, or hold the seller liable, for any encumbrances to, or other problems with, the title prior to his ownership.
Example of the Difference Between a General Warranty Deed and a Special Warranty Deed
In 2014, Tom purchases a building from Jim, transferring the property with a general warranty deed. A year after the purchase, Tom discovers that a lien had been placed on the property by the county tax authority in 2010, and the debt had never been paid. Jim had not purchased the property until 2012, two years after the lien had been placed, and had not been notified of the problem with the title. Because Jim provided a general warranty deed to Tom, Jim is responsible for fixing the title defect, which would entail settling the tax debt, and obtaining a lien release from the tax authority.
The actual issue with the property’s title occurred before Jim even owned the property. If Jim had provided Tom with a limited warranty deed, rather than a general warranty deed, he would not be responsible for fixing this costly error, as he would have promised only that no problems or liens to the property had occurred during his ownership. In this case, Tom would have to clear the property title himself.
Some deeds provide no warranty as to the title or property. Such non-warranty deeds, including “quitclaim deeds,” simply convey whatever right, title, and interest the seller owns in the property to the buyer. Unfortunately, the seller is not guaranteeing that he owns any right, title, or interest to the property to transfer. For example, Jose could settle a debt with his neighbor Samuel by signing a quitclaim deed to the Golden Gate Bridge. This transfers Jose’s interest in the Golden Gate Bridge, which is none. A non-warranty deed, or “quitclaim deed,” is risky, especially if the seller and buyer do not know each other well. Because the seller made no warranty whatsoever regarding the title, the buyer has no legal recourse, and likely cannot recover damages.
When to Use a Warranty Deed
While a quitclaim deed, or non-warranty deed, is a quick and easy to transfer real property title, it is generally used only to transfer property between family members, into a trust, or to one spouse in a divorce. In any type of real estate purchase, it is important to use a warranty deed, where the buyer receives at lease some form of warranty as to the property’s title.
Warranty Deed Form
A warranty deed can be complicated if the person creating it is inexperienced with real estate transactions. Many people enlist the assistance of a real estate attorney, or real estate professional to ensure there are no problems with the warranty deed. Anyone may obtain a warranty deed form from a title company, some real estate professionals, or certain online sources, and it is not required that any party use a professional. The information contained in a warranty deed form may vary slightly by state, but they generally contain certain information, including:
- Physical address of the property
- Legal description of the property
- County and state in which the property resides
- Name and address of both buyer and seller
- Name and address of the party to which the original deed will be sent, whether the buyer, seller, trustee, or attorney
- Name and address of the party to whom property tax information will be sent
A warranty deed form may also contain additional terms such as:
- Whether or not the seller will reserve any interest in the property and, if so, the percentage of rights reserved
- Whether the seller will retain an ownership interest until the time of his death
The completed warranty deed must be signed by the seller before a notary public, at which time it becomes a binding agreement. Finally, the deed must be filed with the county recorder of the county in which the property is located.
Although many people consider the protection provided by a general or limited warranty deed to be sufficient, nearly all lenders require the buyer to purchase title insurance for the duration of the transaction. This protects the financial interests of the buyer as well as the lender in the event a problem arises with the property’s title. While it would seem that title insurance is especially beneficial when the property is transferred by quitclaim or other non-warranty deed, buyers should be cautious, as some insurance companies void a title insurance policy if the buyer accepts a quitclaim or non-warranty deed.
The services of a title company are commonly used in real estate transactions. The job of the title company is to perform a title search to ensure there are no encumbrances, and that the seller has the right to sell the property. The title also collects all of the sale documents, as well as any monies changing hands, until the transaction is complete, then ensures all documents are properly filed with the county, the monies are properly distributed, and that everyone receives their copy of the transaction.
Any person can do a title search, however, as deeds and other property documents are a matter of public record. Real property records are kept at the county recorder’s office, recent documents scanned in and kept electronically, older documents often requiring a search of hard copies. To do a title search, an individual should take with them the property address and, if available, the Assessor’s Parcel Number, which helps more quickly identify the property’s records.
Related Legal Terms and Issues
- Assessor’s Parcel Number – A numbered assigned to a parcel of real property by the local tax assessor.
- Assets – Any valuable thing or property owned by a person or entity, regarded as being of value.
- Binding – Having power to bind or oblige; imposing an obligation.
- Damages – A monetary award in compensation for a financial loss, loss of or damage to personal or real property, or an injury.
- Grantor – A person that creates a will, trust, or who transfers interest in real property to another.
- Grantee – A person that receives an interest in real property according to a deed.
- Real property – Land and property attached or fixed directly to the land, including buildings and structures.
- Title – A claim to ownership of land or other property.