Warranty Deed

A warranty deed is an essential real estate legal document that guarantees that a property does not have any liens, mortgages, or claims against it during a sale.

This can be used to give the buyer peace of mind that a real estate purchase of may go ahead without any legal or financial headaches whilst making it easier to secure financing.

This form of deed may also be known by a number of other alternative names, which include:

  • Special Warranty Deed
  • General Warranty Deed
  • Deed of Guarantee

To explain what these crucial legal instruments can do, this article looks at the ins and outs of warranty deeds. Discover when these real estate documents can be used and why they may be called upon.

What Do Warranty Deeds Do?

During a property sale, a warranty deed provides assurances that the seller (also referred to as the grantor) has no claims against the property that could affect the transaction with the buyer (or grantee in this case).

This means that the property is not listed as a form of collateral against any loan agreements, mortgages, promissory notes at the time of sale, nor that any third parties could claim a stake or ownership in it.

By providing the grantee with a warranty deed, the grantor guarantees that:

  • They are the rightful owner of the property.
  • There are no liens, claims, or encumbrances against the property.
  • The grantor will assist in any way possible to ensure that the title transfer is carried out without issue.

In making these promises, the grantor makes themselves legally liable in the event any claims arise. Therefore if the buyer is unable to secure the property as promised due to undisclosed liens, they may sue the seller.

When and Why Are Warranty Deeds Used?

Warranty deeds are primarily used during residential property sales where the buyer does not know the seller. They allow a higher level of trust to exist between the two parties to give the buyer assurances that they will acquire the property fully following the sale.

By guaranteeing that the title is secure, the grantee will be able to secure title insurance, a mortgage, or another form of financing and allow the transaction to proceed smoothly.

As a result, many real estate agents can provide and formalize this kind of deed document, although buyers and sellers can also draw-up their own warranty deed templates online too.

Warranty Deeds Vs. Quitclaim Deeds

Quitclaim deeds are quite distinct compared to warranty deeds. The most important difference to note is that warranty deeds are used primarily in sale processes, whereas quitclaim deeds are used to transfer title without a sale.

In most cases, quitclaim deeds are used to allow family members, friends, or business associates to transfer real estate from one person or entity to another without a transaction taking place. However, this is an “as is” sale which does not guarantee against liens or claims against the property.