Warranty Deeds Explained: General vs. Specific Warranty Deeds

A warranty deed is a legal document that facilitates property transfers between the previous owner of the property (the grantor) and the new owner (the grantee). A warranty deed provides clarity around the sale by confirming the seller’s legal right to sell the property—the title—and other details.

A warranty deed makes several guarantees to the grantee about the new property.

1. 1. Ownership rights: A warranty deed transfers legal ownership of a property from one party to another.
2. 2. Clear title: A warranty deed guarantees the property is free from title defects including outstanding liens, unpaid property taxes, unresolved easements, or other such encumbrances.
3. 3. Legal right to sell: A warranty deed confirms that the seller has full legal rights to the property title and may sell ownership of the property without interference from others. This gives homebuyers peace of mind that no third party will claim ownership of a property after it has been purchased.

Warranty deeds accompany the sale of real property in exchange for money or other real consideration. These property deeds have several key attributes.

• Legal description of the property: A warranty deed formally describes the property, including its street address and description in county records. In some cases, the deed may list the property tax assessor's parcel number (APN).
• Confirmed by a title company: A title company confirms that the title (formal rights to ownership) to a building or land parcel is clear of any third-party claims. Warranty deeds guarantee that a title search was conducted and did not reveal any claims from third parties.
• Required by mortgage lenders: Before offering a mortgage loan, commercial lenders may require borrowers to sign a warranty deed for the property they are purchasing. The lender may also require the borrower to purchase title insurance in the event of any future property claims or lawsuits.
• Must be notarized and filed: Most state laws require that warranty deeds be authenticated by a notary public and filed in the public records of a county recorder.

There are two main types of warranty deeds that change hands between grantors and grantees: a general warranty deed and a special warranty deed.

• General warranty deed: A general warranty deed confirms who has the title at the time of sale and the entire title history of a property. It guarantees that the buyer will encounter no claims, tax liens, or other encumbrances from any period in the property's ownership.
• Special warranty deed: Also known as a limited warranty deed or a grant deed, this type of deed only covers the period during which a seller owned the property. Grant deeds do not guarantee against encumbrances that emerged under prior owners.

Both types of deeds are widely used in the real estate industry, but general warranty deeds provide greater security for the buyer. Warranty deed forms and templates are available online, but buyers and sellers should seek professional legal advice before deeding any property.

Quitclaim deeds—sometimes called quick claim deeds—are rarely used to transfer title in a commercial real estate sale. More commonly, they are used to transfer interest in a property when no monetary consideration changes hands. Examples include transferring real property between family members or to a living trust (often as part of estate planning), correcting errors and title defects from a previous transaction, or adding or removing a person from an ownership group.

Crucially, a quitclaim deed does not prove that a grantor has the right to deed a piece of property. In some cases, grantors deed property that both sides know the grantor does not own (often to clear up title errors). By contrast, a warranty deed can only be issued by the legal owner of a property.

Warranty deeds contain several advantages that make them the preferred legal instrument in real estate transactions.

1. 1. Ownership rights: A warranty deed confirms that the seller has the full legal rights to a property title. This makes them superior to quitclaim deeds, which do not guarantee that a grantor has the legal right to transfer property to a grantee.
2. 2. Clear title: A warranty deed guarantees the sold property will be free from title defects such as unpaid property taxes or outstanding liens from lenders.
3. 3. Accepted by commercial lenders: Large banks or other commercial lenders will require borrowers to confirm they have a warranty deed that backs their ownership of a property. Such lenders are unlikely to accept quitclaim deeds as a substitute.

Warranty deeds come with few disadvantages, yet those that exist are worth noting.

1. 1. Not all warranty deeds are the same: General warranty deeds provide greater protection to buyers than special warranty deeds (also called limited warranty deeds or grant deeds) because they confirm the title history of the property.
2. 2. Fees and taxes: Producing and filing warranty deeds requires fees, most of which are paid by the sellers. These are part of several fees that come along with property transfers, including title fees, escrow fees, and transfer taxes.
3. 3. Does not preclude title insurance: Even buyers with a general warranty deed are advised to purchase title insurance to cover the cost of any future claims against their ownership. Homeowners may never need to make a title insurance claim, but they may still be required to carry such insurance as a condition for a mortgage loan.

All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.

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