A warranty deed is a type of deed that indicates a seller owns a piece of real estate, free of claims against their ownership, and they have the right to sell it to a buyer.
3 Types of Warranty Deeds
- Special Warranty Deed
- General Warranty Deed
- Statutory Warranty Deed
Before you can fully understand a warranty deed, how it differs from a quitclaim deed, and the difference between a general warranty deed and a special warranty deed, it’s important to understand what a deed is to begin with.
A deed is a document that outlines, in writing, the ownership of property. It is signed, attested (certified and/or signed by witnesses), and sometimes sealed. Patents, diplomas, and licenses are all types of deeds, and so is a warranty deed.
Where Did Deeds Come From?
In feudal times, you did not need a document of conveyance (also known as a deed) to transfer property. Instead, real estate transactions were made with a ceremony called “livery of seisin.” If those words sound slightly familiar, it’s because they come from the words “delivery and seizing.”
When a feudal lord would gift land to a vassal, the grantor would present the grantee a clump of earth or a twig as the two stood on the actual land (livery in deed). The two parties could also stand in front of the land while the grantor verbally declared the gift, at which point the grantee would step onto the land (livery in law).
This practice persisted well into modern history, eventually evolving into the “turf and twig ceremony” in colonial times. British colonists, such as William Penn (the founder of Pennsylvania), would perform this ceremony upon their arrival in the New World. It was pretty common for sales to be undocumented in these times. A great example is the infamous sale of Manhattan Island to the Dutch in return for material goods.
As you might have guessed, undocumented real estate transactions would create numerous legal complications in today’s society. Thankfully the “livery of seisin” has evolved into a modern, legal document of conveyance.
What is a Warranty Deed?
A warranty deed guarantees, in writing, that the seller (grantor) owns the property being transferred to the buyer (grantee). As such, a warranty deed is the document that provides a buyer with a sense of security regarding their purchase. It guarantees that the transaction won’t be contested (or if it is, the claims have no merit).
A general warranty deed also protects the buyer from any title defects that originated before the seller’s ownership. This extends throughout the entire history of the property. A special warranty deed provides less coverage. It only protects the buyer against title defects relating to omissions or actions of the seller.
Warranty deeds traditionally come with six covenants for title. Many of these covenants stem from English Common Law, one of the first formalized legal systems in Britain. These covenants are grouped into two categories: present and future.
Present covenants include the Covenant of Seisin. This covenant ensures that the seller has the right to convey the property, further expressed in the covenant of the right to convey, which guarantees the seller has a valid title on the property and is selling it exclusively to the seller.
The Covenant against Encumbrances is a promise by the seller that no encumbrances exist, other than ones previously disclosed. Encumbrances are liabilities against the property that don’t necessarily prevent its transfer, but do diminish its value, such as an easement through the property or a lien against it.
Future covenants include the Covenant of Quiet Enjoyment, which is an assurance that the buyer and their heirs will be able to enjoy the property free of interruption. It guarantees that the property is free of evictions stemming from a superior title prevailing over their ownership.
Covenant of Warranty represents a seller’s promise to protect the buyer against anyone who later claims a superior title. Covenant of Further Assurances binds the seller to rectify any defects in the title that they are granting the buyer.
Despite these covenants, which seem to cover all what-if scenarios, a buyer is still responsible for performing due diligence. They will need to conduct a title search to see if there are any extant defects in the chain of title (that is, currently or in the past) that should be resolved before purchasing the property, lest they later become an issue. Encumbrances, easements, liens, and restrictions will all be uncovered by this title search, but a buyer will still want to get title insurance to protect their intended asset against any unforeseen defects. Moreover, most lenders will require buyers to conduct a title search and purchase title insurance, because they also have a vested interest in the property.
As previously mentioned, the title search will uncover unforeseen restrictions on the property. It’s important to keep in mind that while a warranty in deed can help a buyer secure the right to enjoy usage of their real estate with peace of mind, there may be some things such a warranty cannot prevent.
For example, a public utility company may have an easement on the property, and the right to work on utilities running through that easement. In certain states, environmental legislation may mandate rules around landscaping. In Maryland, for example, homes around the Chesapeake Bay must retain the natural landscape within 100 feet of the waterline. Warranty deeds cannot remove these types of restrictions or encumberments on the property.
A warranty will often be accompanied by a title search. These searches are usually performed by companies that specialize in examining public records to confirm the legal ownership of a property, and see if there are any liens or claims against the property, along with any unpaid property taxes that could trigger a tax lien. Often this title search will go back to the legal genesis of the property. For most property in the United States, that is only around 200-300 years of age. But most title searches don’t need to go back more than 50 to 100 years in order to establish a clear title.
In some instances, a title search will be performed by a lawyer or a lender. It’s often required by lenders to obtain title insurance, which will indemnify injured parties should an undiscovered claim appear. The most common ones relate to back taxes, liens from a mortgage or HELOC, and conflicting wills. But aside from these serious outside challenges, title insurance will also protect the buyer against incorrect signatures, flawed records, and unrecorded easements that can limit enjoyment of a property.
3 Types of Warranty Deeds
Special Warranty Deed
A special warranty deed only is a guarantee against any title defects that occurred during the seller’s ownership of the property being transferred to the buyer. It is not a guarantee of any title defect that may have occurred before their ownership.
These types of deeds are most commonly used in commercial real estate dealings, because a business owning a building is usually aware of any title issues that may have obstructed a clear title during their ownership. Sometimes a special warranty deed is referred to as a limited warranty deed because it is limited in terms of the protection it offers the grantee. It only guarantees a clear title during the ownership of the grantor.
Special warranty deeds may also be used in the purchase of a foreclosure. The bank or lender that takes possession of the property after the borrower has defaulted usually just wants to offload these properties at auction or to a cash buyer as quickly as possible. A special warranty deed is sufficient for making sure their brief ownership bears a clear title.
Buyers need be aware of any previous title defects, so it’s especially important to clear up any issues against the property, like back taxes or a mechanics liens. Individuals who have lost a home to foreclosure usually have other financial troubles as well, so conducting a thorough title search and getting title insurance should cover all your bases.
In some instances, the administrator of an estate transaction will use a special warranty deed, especially in cases where they do not know much about the property before the deceased owner’s occupancy. Much like foreclosures, the person purchasing such the home should perform their due diligence with a title search and title insurance. They may even decide to work with a real estate lawyer of their own to make sure no unknown heirs can lay claim to the property.
General Warranty Deed
A general warranty deed is the most commonly used warranty deed in the United States, especially in consumer residential real estate transactions. A general warranty deed and its six covenants listed above—Covenant of Seisin, Covenant of Right to Convey, Covenant Against Encumbrances, Covenant of Quiet Enjoyment, Covenant of Warranty, Covenant of Further Assurances—is the strongest type of warranty and offers buyers the greatest assurance that no title defects will come back to haunt their purchase, even if the title defect originated long before the current owner.
Of course, the surety of the general warranty deed is best accompanied by a title search and title insurance. Many banks and lenders will require a general warranty deed, title search, and title insurance as part of the loan because they are the ones fronting a sizable amount of money on the property. It is viewed as an investment on their part because the mortgage generates interest.
Statutory Warranty Deed
A statutory warranty deed actually makes the same guarantee as a general warranty deed but also guarantees compensation if some claim arises in the future. The only difference with the statutory warranty deed is that it is a shorter form drawn from the state’s statutes. That said, the statutory warranty deed is indeed legally enforceable, and in fact very common in real estate transactions due to the expediency of its immediate availability. In many states, you can download an unsigned deed online.
Deeds Without Warranties
A quitclaim deed does not come with warranties. A quitclaim deed is usually used in transactions that are a legal formality and may not even involve money, such as transferring a property between spouses or family members, or gifting a home to parents or children. In these types of situations, there is usually no need for title insurance and no need for a title search because that was previously taken care of by the grantor.
The upshot of all this simplicity is that a quitclaim deed offers the property as-is. Even though the seller relinquishes (quits their claim of) ownership, there is actually no guarantee of that ownership.
A quitclaim deed can also be used for clearing someone’s name off the property title. For instance, in the case of a divorce, a quitclaim deed can be used to remove one former spouse from the property deed. An insurance company or lender might require this so that no issues arise from a disgruntled spouse attempting to claim ownership in the future. It’s important to note, however, that both spouses will likely still be listed as borrowers on the mortgage.
A quitclaim deed can also be used to clear up defects in the title, such as liens, claims, or documents that can cloud the title. This is especially the case in the instance of a foreclosure or estate sale. Instead of letting lost documents or ambiguities later create challenges against your ownership, it’s best to be proactive and initiate a quitclaim deed. On a similar note, the quitclaim deed can also be used to rectify erroneous information in the title, such as a misspelling of the title holder’s name.
Bargain and Sale Deed
A bargain and sale deed is similar to a quitclaim deed in terms of its expediency and its lack of coverage beyond guaranteeing that the grantor holds a property title—so it is another non-warranty deed. It is commonly used in foreclosure proceedings, but only in select states, including Washington, Wyoming, Colorado, New York, and Vermont. Unlike the quitclaim or statutory warranty deed, the bargain and sale deed does guarantee that the grantor holds title, but there are no guarantees against encumbrances or previous title defects. Generally speaking, the grantor or trustee of a foreclosure, tax sale, or estate sale might prefer a bargain and sale deed because it minimizes their liability. If the bargain and sale deed does come with additional covenants that guarantee more protection for the buyer or grantee, it is called (fittingly) a bargain and sale deed with covenants. Most consumers, even in the aforementioned states, will not be involved in sales that involve a bargain and sale deed, but a real estate developer who purchases distressed properties and then rehabs them for resale will probably be familiar with this type of deed.
How to Get a Warranty Deed
When a home sale goes through the closing process, the buyer is often presented with a hard copy of the general warranty deed. It’s a good idea to hold onto this document and keep it in a safe place. However, if you should ever need a copy of it, or a replacement, you can secure one from the County Recorder’s Office of the county in which the property resides. Your mortgage company or the lawyer who assisted with the sale (if applicable) might also have copies on file. It is likely that you may be charged a nominal fee to procure a copy of the warranty deed, whether it’s a general, special, or quitclaim warranty.
As far as creating a warranty deed goes, it can either be drafted by a lawyer, or in the case of a statutory warranty deed, downloaded online. If you have specialty considerations, such as soliciting the services of a real estate asset management company to represent your ownership, you may consider eschewing the cookie-cutter document provided by the state and hire competent legal counsel to draft a warranty that will best serve your circumstances.
Most states will require several pieces of information on the deed itself, including but not limited to: the name of the grantor and the name of the grantee, a clear statement that title is being transferred between them, a legal description of the property (such as in terms of metes and bounds), and a signature of the grantor and the date. Moreover, in most states, the warranty deed is required to be signed by two witnesses, and each of those signatures in turn must be notarized.
What is the Difference Between a Warranty Deed and a Quitclaim Deed?
Again, a quitclaim deed should not be confused with a warranty deed—either special warranty deed or general warranty deed. Remember that the quitclaim deed assists in transferring a property as-is, without any kind of guarantee that the grantor actually holds title effectively. In contrast to this, the special warranty deed and the general warranty deed both hold greater protections for the grantee. The special warranty deed guarantees that at least the grantor holds clear title, even if there may be previous encumbrances against the property or potential liabilities, while a general warranty deed contains almost absolute guarantee that the title is clear of all encumbrances going all the way back to the legal genesis of the property (though it is still best, and most likely required to get title insurance and perform a title search).
On this note, it might also be helpful to distinguish the deed from the title itself: what’s the difference between a deed and title? The difference boils down to this: a title is an intangible description of ownership, while the deed (whatever kind of deed it may be) is a document that pinpoints ownership in writing, signed, sealed, and delivered. Think back to our introduction and the discussion of how deeds evolved: at first a title was not recorded in writing, but only an oral tradition initiated by a ritual, such as handing over a clump of earth and a twig or stepping onto a property. These days, at least in most western countries, titles are captured in writing with a deed, and have been since the Middle Ages.
Warranty Deeds Facilitate the Transfer of Property Titles
A warranty deed is a document that facilitates the transfer of title over a piece of property. This type of deed, whether it is general, specific, or statutory, comes with guarantees that protect the buyer or grantee from encumbrances such as liens against the property, which could later challenge their ownership.
The most all-encompassing form of warranty deed is the general warranty deed, which comes with its six covenants. In most states, a statutory deed is the standard document used in real estate sales, and the language is drawn from the state’s statutes. A special warranty deed is the least comprehensive, guaranteeing nothing more than clear title during the grantor’s ownership.
Finally, there are other deeds, like a bargain and sale deed and quitclaim deeds, that make no guarantees, even as they facilitate transfer in ownership from grantor to grantee.
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