Warranty deed definition: What is it and how does it work?
When it comes to buying a new home, there are numerous aspects to consider. One crucial factor that might not immediately come to mind is ensuring that no one else can lay claim to the property or demand additional payments for it. This assurance is provided by a document known as a warranty deed. In this blog post, we’ll delve into what a warranty deed is, why it’s necessary when purchasing a home, and how it offers protection to both buyers and sellers.
What is a Warranty Deed?
A warranty deed is a legally binding document that safeguards a buyer by confirming that there are no outstanding debts or legal claims against the property being purchased. Essentially, it ensures that the property has a clear title, guaranteeing that the seller (referred to as the “grantor”) has the legal right to sell the property, and that the buyer (or “grantee”) won’t be burdened with any undisclosed legal complications after the transaction. Should any unforeseen events jeopardize the property transfer, the buyer can hold the previous owner accountable.
Why is a Warranty Deed Necessary?
For those seeking a mortgage, a warranty deed may be a requirement from the lender to secure financing. It’s typically signed before the home sale is finalized. The seller’s signature signifies their authority to transfer ownership rights to the property. In the event someone else makes a claim for payment related to the property, the warranty deed serves as evidence that the responsibility lies with the previous owner, not the buyer.
Types of Warranty Deeds:
There are two main types of warranty deeds: general and special.
- General Warranty Deed: A general warranty deed is the preferred option for homebuyers as it offers the highest level of protection. It assures the buyer that the property is free from any present or past title defects or claims.
- Special Warranty Deed: A special warranty deed provides limited protection to the buyer. It only guarantees that the seller has not negatively impacted the property’s title during their ownership period. This type of deed may leave the buyer vulnerable to past liabilities.
Ownership and Title:
It’s important to note that a warranty deed does not confer official, legal ownership of the property. Instead, it signifies that the previous owner guaranteed that they owned the property outright and that no one else can claim any outstanding payments. The official proof of ownership is represented by the title, not the warranty deed.
Warranty Deed vs. Title Insurance:
While a warranty deed and title insurance share similarities, they serve distinct purposes. A warranty deed confirms that there are no claims to the property, whereas title insurance protects against financial loss associated with ownership issues, shifting the risks to the insurance company.
Obtaining a Warranty Deed:
Real estate lawyers play a crucial role in ensuring a warranty deed is part of the transaction. Sellers should also work with an attorney to ensure the document is in order. Additionally, there are online resources where one can find a warranty deed template. To make it official, the document must be notarized and filed at the county clerk’s office.
Conclusion:
Buying a home is a significant milestone, and it’s imperative to safeguard your rights to the property. A warranty deed provides the assurance that the seller has the legal right to sell the property and that there are no outstanding debts or legal claims. With a warranty deed in place, you can step into your new role as the property owner without any unwelcome surprises.