What is a warranty deed?

A warranty deed is a legal document to protect homebuyers

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When you’re buying a new home, it is fun to pick paint colors and search for that one couch that fits your space just right. Not as fun, but more important, is understanding the jargon that comes with your new purchase. One term you will come across will be the warranty deed, which is a legal document that protects you as the buyer from any potential legal issues that could arise with the property in the future.

Here’s what you need to know about warranty deeds and how to protect yourself as a buyer before signing mortgage docs.

Key insights

  • The warranty deed provides a guarantee to the buyer that they have the legal right to own and use the property.
  • Warranty deeds are a critical part of any real estate transaction and should be carefully reviewed to ensure accuracy and validity.
  • There are other types of deeds, such as a special warranty deed, but they do not come with as much protection.

What is a warranty deed on a house?

“A warranty deed can provide peace of mind and protect the buyer's investment in the property. It ensures that the seller has the legal right to sell the property,” said Velody Foye-Byrd, a real estate investor and the founder of Eagle Home Partners.

This legal document contains promises made by the seller of the property, such as:

  • No other person or entity has any claim on the property or right of possession
  • All taxes and liens have been paid on the property
  • There are no defects in title to the property

A warranty deed is an essential part of any transaction involving real estate, as it helps to protect both parties involved. However, “it's important to note that a warranty deed doesn't guarantee the condition of the property itself,” said Foye-Byrd. “Buyers should still conduct a thorough inspection of the property and review any disclosures provided by the seller to ensure that the property is in good condition and meets their needs.”

Types of warranty deeds

There are several types of deeds available for transferring ownership of a property. Understanding each type of deed will ensure you are selecting the right protection for your specific situation.

Due to the extensive protection it offers to buyers, the general warranty deed is a popular option in real estate transactions. It guarantees that the seller is the property owner, that the property is free and clear of any liens or encumbrances and that the title will withstand any third-party claims of ownership.
Special warranty deeds are not as thorough as a general warranty deed. A special warranty deed only includes two guarantees: that the seller has received the title and that the property is not encumbered (contested).
Quitclaim deeds are commonly used to transfer property to a family member rather than sell it. These types of deeds facilitate the rapid transfer of land; this might be used during a divorce or when a family member gives property to a relative as a gift.
A deed of trust is a binding legal document between three separate entities. In this type of transaction, a lender and borrower make an agreement to transfer a property to a neutral third party that will act as the trustee.
A bargain and sale deed falls somewhere between specialty and quitclaim deeds in terms of the protections it offers. This type of deed includes a warranty that the seller has the title to a piece of property. However, the seller does not promise the property is free and clear of any third-party claims.
Statutory warranty deeds are short-form versions of a general warranty deed. These deeds are available in some states and don't include a comprehensive list of promises. Instead, the promises are outlined in state statutes, which makes them legally enforceable.
Grant deeds are one of the simplest forms of deeds used today. It promises that the property is free of liens and that the buyer will have the right to transfer or sell the property.

» MORE: When is the best time to buy a house?

How to get a warranty deed

Warranty deeds are used when a buyer is seeking financing for either title insurance or a mortgage. No matter which type of deed is used, it will include key information such as:

  • Date of the transaction
  • Parties involved
  • Property description
  • Buyer signatures

There are several ways to get a warranty deed started. You can request a blank one from your real estate agent or download a template online.

Remember, a warranty deed must list the transaction date and parties involved. It must also contain a thorough description of the property being sold and the signature of each buyer. Every warranty deed must be signed with a notary present.

» MORE: How to negotiate your mortgage closing costs

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    What is the difference between a deed and a title?

    While sometimes used interchangeably, a deed and title are two different things. A deed is a legal document that transfers ownership of a property from one party to another, while a title is a legal concept that defines ownership, including any legal claims or liens on the property. When you buy a property, you receive the deed as evidence of your ownership, and the title is transferred to your name in the public records.

    If I have a warranty deed, do I need title insurance?

    Yes. Although a warranty deed provides some protection to the buyer, title insurance is still recommended when purchasing a property. A warranty deed guarantees that the seller has the legal right to transfer ownership and that there are no liens or encumbrances on the property, but it does not protect against unknown defects in the title or against any claims that may arise in the future.

    Do I need a title search and a warranty deed?

    Yes, it is recommended to have both a title search and a general warranty deed when purchasing a property. A title search is a process of examining public records to verify the current and historical ownership of the property, as well as any liens, claims or encumbrances that may affect the property's title. It is important to conduct a title search to identify any potential issues with the property's title, which could affect the buyer's ownership and use of the property.

    Bottom line

    A warranty deed is a legal instrument that provides the highest level of protection for both buyers and sellers in real estate transactions. It not only protects against defects in title but also provides liability protection to both parties from any future claims that may arise from the property's past.

    When you ensure that all parties involved understand what protections are offered by the warranty deed, any potential issues or disputes can be avoided, and a successful sale can happen.

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