A warranty deed in real estate pledges that the owner owns the house free and clear of any encumbrances. It provides the greatest amount of protection for the buyer. There are two types, which are:
- General – guarantees that there are no problems even before the grantor owned the property
- Limited or special – only guarantees that no problems arose while the grantor owned the home
Lenders require a general warranty before they approve a mortgage. Title companies search through public records and ensure against any claims.
Warranty Deed in Real Estate Covenants
Warranty deeds have six covenants. Three are present and three are future promises. Present only apply to the current transfer, and they include:
- Seisin – an assurance that the grantor is the legal owner of the property
- No encumbrances – seller promise that he/she owns the land free and clear
- Right to convey – the grantor is legally entitled to transfer the property to the grantee
Any owner can enforce future covenants against any previous grantor if they are broken. They include:
- Quiet enjoyment – assures the buyer that their right to possession will not be impacted by a third party’s claim
- Warranty – the grantor will defend against any claims made by a third party
- Further assurances – the grantor will help the grantee perfect the title in the future if necessary
Together, these covenants are the promise that the seller makes to the buyer that they are the owner and will convey a clear title.1
What is a Warranty Deed in Real Estate Used For?
A seller uses a warranty deed when he sells a property to a stranger. In most transactions, the seller gives the buyer one because:
- Lenders require it to get a mortgage
- Title companies insure the deed generally
- It provides the buyer with the most protection
Sellers want as little liability as possible, but in the case of selling a house to a stranger, it is necessary to offer a general warranty deed. Sellers do have the protection of title insurance if someone finds something later.2
Differences between a Warranty and Other Deeds
A deed is a legal vehicle to transfers the title of a property to a new owner, and there are several types depending on the guarantees that the seller (grantor) makes to the buyer (grantee).
A covenant deed conveys title, but it usually has other covenants that restrict the grantee from using the property in certain ways. These can be anything from how to improve the property to its use.
- They do not convey a general warranty
- They are usually used for a specific type of transaction
When you buy a house, you should read the deed and make sure it doesn’t contain other covenants besides the six standard ones. If it does then ask why the seller included them. In addition, always have a title search done, even if you pay cash and don’t need it for the mortgage. It may surprise you and the seller what comes up.3
A quitclaim deed gives whatever interest the grantor has in a property to the grantee. It does not make any guarantees about encumbrances, or even if the grantor owns the house. So why use one? Here are some reasons:
- Transfers between family members
- Transfers into or out of a trust
- Name changes
- Addition of a spouse or children
- Remove the name of a spouse after a divorce
- Correct mistakes
As you can see there are many uses for a quitclaim. Most of them involve altering the title without changing ownership. The only time you might use one to transfer ownership is within the family.2
Getting a Warranty Deed
You can find templates for warranty deeds online or at a realtor’s or lawyer’s office. Possibly the best place to get one is with your county clerk’s office. They are common, and they include:
- A legal description of the property
- The name of the grantor
- The name of the grantee
- Details of the transfer
To make it legally binding you must get it notarized and file it with the county. Once the grantee signs it, he/she takes ownership of the property. This is a simple process, and you can do it without a lawyer.
Real estate transactions are complicated, though. So, we recommend that you have a realtor market the property for you and an attorney represent you through the process.4
A deed does not expire because it is only the vehicle that conveys the title. It has a single purpose to legally transfer the title from one person to another. It is made for a single transaction, so there is no need for it to expire.
The covenants within it do not expire. The three present covenants convey the title at a single point in time, and the three future covenants remain as long as the new buyer owns the house.5
Do not Require a Title Search
You do not have to do a title search to use a warranty deed. When you give one, you guarantee the buyer that you own the home free and clear. If you don’t then the new owner can come after you for compensation.
A title company does a search for problems. If they don’t find any they insure it against any problems that they missed. It’s in your best interest to have title insurance, but it isn’t necessary for the deed.
Lenders, on the other hand, require both a warranty deed and title insurance to finance a house.
Final thoughts on a Warranty Deed in Real Estate
A warranty deed in real estate is the most complete pledge a seller can make to the buyer that the title he/she conveys is clear of any encumbrances. It is the standard deed used when the buyer finances the transaction because lenders won’t approve a mortgage without it.