The Importance of Clear Title with a Warranty Deed

What is a Warranty Deed and How Does it Work?

A warranty deed is a legal paper that safeguards a buyer while purchasing a property. It guarantees the buyer that no outstanding debts or legal issues are associated with the property.
It guarantees that a property has a clear title.

  1. A seller, also referred to as a grantor, has the legal right to sell the property, and the buyer, referred to as the grantee, won't face any hidden legal problems after the sale. If any issue related to the property transfer arises in the future, the buyer can hold the previous owner responsible.

  2. Suppose anyone applies for a mortgage; a lender may request a warranty deed as a part of the approval process. This deed is signed before the official closing of the home sale. The seller's signature on the warranty deed signifies that they have transferred the ownership rights of the property to the buyer.

  3. The warranty deed provides legal protection to the buyer in case of any financial claims after the sale of the property.

Types of Warranty Deeds 

There are 4 types of warranty deeds available between the buyer and seller while selling or purchasing the proerty.

1. General Warranty deed

A general warranty deed ensures the highest level of protection to the buyer. If there is a breach against the general warranty deed, the seller is held responsible even if they were unaware of the issue or if it occurred when they didn't own the property. A general warranty deed guarantees the following.

  • The grantor assures that they own the property legally and can transfer its title in a sale.
  • A seller guarantees that any liens or creditor claims do not burden the property. 
  • There is a promise that the property's title is secure against any challenges from the third party seeking ownership.

2. Special Warranty Deed

A special warranty deed is quite similar to a general warranty deed. Still, the only difference is that it offers protection for a specific period. A special warranty deed that the current seller legally owns the property and that no claims are made against it during their ownership.

  • It doesn't safeguard against claims that might have arisen before the seller acquired the property.
  • Such deeds are most commonly used in commercial real estate transactions.
  • Title insurance plays an important role against potential liens and other claims.
  • A title company conducts thorough research before the final property sale to ensure that there are no potential breaches or issues related to the property.

3. Statutory Warranty Deed

  • It is a legal agreement that transfers the proprietary rights of the property from the seller to the buyer.
  • The grantors compensate the buyer in case any claims emerge against the property in the future. 
  • It doesn’t make it clear whether the property history is clear.

4. Grant Deed

Grant deed offers many of the same protection, such as confirming that no one else has a claim to the land and there are no restrictions or liens. It does not guarantee protection against third-party claims.
It ensures clear ownership but doesn't guarantee against challenges from outside parties.

How Does Warranty Deed Protect Property Buyers?

A warranty deed typically includes essential information such as property address,  parcel number, legal explanation of the property and the date of the transaction, the liens in addresses of the parties involved.
The document needs to be legally valid, and therefore, the warranty deed must be notarized and submitted to the city or county office responsible for maintaining real state records.

How to Ensure a Valid Warranty Deed Transfer

 A warranty deed is needed while buying, selling or transferring the ownership of a real state property. The following steps can help you get the warranty deed.

  1. Copy of property's current agreement: To find the copy of the current property deed, you need to visit the county clerk's office where the real property is located.
  2. Specify the date: Specify the date of the warranty deed. The date helps to preserve the title history of such property.
  3. The grantor section: Fill out the granter section, which includes information about the current owners. It includes the legal name of the granter and his current address. If there is more than one grantor, their names should be added with their respective current addresses.
  4. Grantee Section: Fill in the buyer's information, including the grantee's legal name and current address. If there is more than one guarantee, their names should be added with their respective current address.
  5.  It should also contain the grantees' ownership interest and respective ownership percentage.
  6. Specify the amount: Specify the amount the grantee paid for the real estate property for which the warranty deed is made.
  7. Specify the legal description: The legal description includes the property's measurement, boundaries, and dimensions, which should be written in words.
  8. Survey of the property: It is needed if the size of the property under construction has changed.
  9. Sign the deed: Sign the warranty deed, which must be notarized.

Alternatives of warranty deeds

Conveyance deed: A conveyance deed is an official paper that transfers property ownership from one person to another. It is an essential part of buying and selling a property.
The document contains details about the property, such as its location, boundaries, description, etc. It also includes the names of both parties involved in the transaction, the purchase price, and the other terms and conditions of the sale. The conveyance deed serves as evidence of the handover of ownership from the seller to the buyer.

Conclusion 

A Warranty deed is a real estate legal agreement that ensures the buyer that the seller has a clear title to the property and has no outstanding credits or mortgages. There will be no future claim against the title from the third person. In a warranty deed, two parties are involved: the seller, known as the grantor, and the buyer, known as the grantee. A party can be an a business or an individual. Most lenders require warranty documents for properties while financing.

FAQs

Does a warranty deed mean you own the property?

A warranty deed doesn't serve as proof of ownership of the property. Instead, it signifies the assurance from the previous owner that they possessed full ownership of the property and no one else has a valid claim to it. The official evidence of property ownership is the title and not the warranty deed.

What is a breach of warranty?

Breach of the warranty means violation of warranty either clearly stated or implied in the contract. It happens when the person making a warranty fails to deliver on the promises or assurance regarding the quality or title of the sold item. It simply means they still need to meet the terms of the warranty or guarantee provided in the contract.

What is the main purpose of a warranty deed?

The primary purpose of a warranty deed document is to guarantee against problems with the title. It assures that the property can be transferred without legal issues such as outstanding mortgages, judgments, or other claims against it. It ensures that the property is free and clear of any circumstances and gives both buyer and seller peace of mind.

What is a Title search?

A title search is a procedure to access a real estate property's ownership and potential claim. It is done before the real estate deal is finalized. Typically, title searches are conducted by specialized title search companies; however, individuals and businesses can also conduct them. A title search involves investigating a property history and checking the claims on the title through public records.

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02 Dec, 2023

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