Owning a home or piece of land is a pretty important investment. As a buyer or seller of real estate, you want to protect yourself against future problems or claims with the title you transfer or obtain. Although there are various types of title deeds that transfer ownership of a property, the warranty deed is the most common way for unfamiliar parties to transfer a title. It guarantees, or "warrants" that the seller, or grantor, has cleared all encumbrances, or "clouds," on the title. Should a defect of the title be discovered later, a grantor may be liable and title insurance can help.
Warranty Deed Purpose
A warranty deed in the sale or transfer of real estate serves three significant purposes. First, it gives the grantee – the party receiving title – the assurance that the grantor rightfully owns and has the right to transfer the title. Second, it warrants that there are no outstanding debts or mortgage claims to the title by third parties such as institutional lenders, individual lenders, the government,taxing authorities or trades persons. Finally, a warranty deed promises that no other parties have a stronger claim to the title. For example, that the property has not already been sold to someone else.
General Warranty Deeds
A general warranty deed offers the most extensive guarantee and is the standard form of transferring title to a buyer. The warranties in a general warranty deed cover the property's entire history, as opposed to the limited period in which the seller owned the property. Sellers who provide a general warranty deed pledge to fight all earlier claims to title, even if they occurred before their ownership, or to compensate the buyer if claims to title are discovered in the future.
Read More: Does a Will Override a Warranty Deed?
Special Warranty Deeds
The warranties made in a special warranty deed are limited to the time frame in which the seller held title. The sellers or grantors are responsible only for debts that accrued during their ownership, and claims or problems caused during the time they owned the property.
How Warranty Deeds Vary by State
In some states, such as Florida and California, the terms "general warranty deed" and "warranty deed" are interchangeable. A special warranty deed is known as a "limited warranty deed" in certain states, such as Georgia. A special or limited warranty may also be referred to by other names, such as a "grant deed" in California.
A warranty deed guarantees the new owner that the title being transferred is free and clear of any defects or encumbrances. For example, it guarantees that prior mortgages or liens have been paid or settled and won't affect the new owner's interest in the property.
Karina C. Hernandez is a licensed real estate agent since 2004 in San Diego. She has written legal articles pertaining to housing and real estate for multiple internet channels over the past 10 years. She has a B.A. in English from UCLA.