Since purchasing a home is such a significant financial commitment, certain precautions are put in place to protect buyers and give them more peace of mind. One of these precautions is a warranty deed, an important legal document often used in real estate transactions that transfers property from one entity to another.
There are two parties involved in a warranty deed: the seller (grantor) and the buyer (grantee), and each party can be an individual or a business. The deed will include a detailed description of the property while disclosing any known encumbrances or claims against a property that would impact its transferability. When it comes to real estate, the most common encumbrances are mortgages, easements, and outstanding liens.
A general warranty deed will also include the following warranties (or guarantees):
- That the seller owns the title
- That the seller is legally allowed to sell the property
- That the property has not already been sold
Ultimately, the purpose of the general warranty deed is to ensure buyers that they will own the property free and clear, and should there be any issues with the property’s title, then that burden will fall on the seller.
Whether you are the buyer or the seller, there are several types of deeds you may come across in real estate. The general warranty deed offers buyers the most protection and is, therefore, the most common. However, it is wise to familiarize yourself with other real estate deeds prior to your transaction.
Limited Warranty Deeds
A limited warranty deed—also known as a special warranty deed—is a variation of the general warranty deed. Commonly used in commercial transactions or residential foreclosures, limited warranty deeds are less comprehensive than a general warranty deed. Whereas a general warranty deed covers the property’s entire history, a limited warranty deed only covers the seller’s period of ownership.
A quitclaim deed is a faster way to transfer property. However, it does not contain any warranties of title at all. Typically used in non-sale situations such as transfers of properties between family members, a quitclaim deed simply releases a person’s interest in a property.
While purchasing a home is an extremely exciting milestone, it can occassionally pose some risks for buyers. That’s why it’s so important to have a basic understanding of various mortgage instruments, such as the warranty deed, that can offer you protection on your homebuying journey. If you’re looking to purchase a home, Coastal Custom Mortgage offers competitive rates and customized mortgage options to help buyers reach their financial goals. Contact our team of professionals today to get started!